Instead, they want to earn more revenues per employee. Data analytics, transformation deals, onsite employees, adding technology platforms to processes has been increasing the revenue per employee of market leaders like Genpact and EXL Service in the recent times. At the same time, there are some players like Aegis which have remained concentrated on domestic and call centre work and have been increasing employees also simultaneously to increase revenues.
Genpact, the countrys largest BPO is a perfect example of how high value services can deliver more value per employee. While Genpacts revenue per employee had marginally decreased to $31,100 in 2010 compared to $31,200 in 2009, it jumped to $34,100 in 2011. Analysts feel that a reason for Genpacts increased revenue per employee can be the Headstrong acquisition which added IT business to its portfolio and IT gives higher revenue per employee than BPO.
Genpact president and CEO Tiger Tyagarajan feels that there is a bigger picture behind this. For a long time, we have focused on moving up the value chain. I remember when we started the company in 1998 our revenue per employee used to be approximately $22,000. We are in a business where analytics is growing at 50% and it is a very high value and revenue per employee work. It delivers higher revenue than $34,000. That is the reason our average revenue per employee is growing. Acquisitions too have contributed to Genpacts higher income on each employee. Last year, the company had acquired media and business research firm EmPower Research and Headstrong.
Tiger further notes, I am sure that if the US onshore work grows like the fastest growing geographies, our overall value for each employee will go up. We had acquired Headstrong which gets 65% of the revenue onshore, our revenue per employee thus went up. When work is complex, value is higher and thus the pricing is here.
Similar is the case with EXL Service. From 2009 to 2010, the employees and the revenues of the company both increased at a rate of 33%. Whereas from 2010 to 2011, while the headcount increased at 44%, the revenues increased at 50%. This shows that BPOs are now earning more on each employee.
Says Rohit Kapoor, president and CEO at EXL Service, Our analytics business has been growing at more than 50% per year. It has more than 600 people which also includes recruits from IIMs and IITs. The revenue per employee in our company has been increasing because of analytics and adding new BPO platforms.
Kapoor also attributes this to the increasing transformation business of the company. If my oustsourcing business has 17,000 employees , it delivers 80% revenue and the transformation business which has only 1,000 employees delivers 20% revenues for the company.
Explaining a broader picture, E Balaji, MD & CEO of Ma Foi Randstad says, All the BPO companies want to increase their margins and want to do higher value work. They are looking for better skills to deliver higher realisation for each employee. Earlier IT companies did it and now even BPOs are following the same trend.
However there are BPOs like Aegis which might have reached the billion dollar mark but are still dependent on heavy headcount to deliver higher revenues. So reflects in the headcount-employee correlation of the company. In 2011-12, the revenues have crossed $1 billion and the employees too have reached 60,000.
Sangeeta Gupta, vice-president at Nasscom explains, BPOs did start with voice-based work but now a few of them have shifted to complex work like legal or analytics where the billing rates are higher. Even transformation deals increase revenues per employee as the pricing for such work moves from FTE based pricing to transaction based. She also mentions that companies that do mostly domestic work and only call centre activities have much lower billing rates and thus have to increase employees to increase their revenues. Their revenue is dependent on employees.
The direct employed headcount in the BPO sector stood at 8,26,000 in FY 2011 and is expected to reach 8,76,000 in FY2012. Hope that the revenues increase at a faster rate in the future.