Serco gets a BPO boost

Written by Diksha Dutta | Diksha Dutta | Updated: Jul 2 2012, 09:13am hrs
The UK-based services major bagged Intelenet in its kitty last year. It now plans to accelerate its offshore delivery and reach $1 billion in BPO revenues by year-end

The biggest BPO acquisition of last year has an interesting story to share. In June 2011, UK-based services company Serco acquired BPO firm Intelenet Global Services for $635 million. And now is the time for after effects. Serco has created a BPO division called Serco Global Services (SGS). On the other hand, the onshore business for Intelenet has grown to 60%, which was 30% last year. It has entered the public sector and global markets now, whereas last year Intelenet was majorly India-centric.

Still aspirations are high for Serco Global Services. There are plans to reach $1 billion in revenues by December 2012. It wants to double the size in the next three years. It foresees a mix of 50:50 in onshore and offshore delivery in the near future. Focus of course will remain on the public sector.

Sandeep Agarwal, who comes to Serco from Intelenet shares that Intelenet went through two stages of rebirth in its journey till now. In 2007, we knew that we had to reconfigure and have a rebirth in order to elevate. Then again in 2011, when we got acquired by Serco, we knew it was the time to reinvent.

Agarwal is now the chief transformational officer, Serco Global Services. But old days are not forgotten by him. He tells us how Intelenet reached from $100 million revenues in 2007 to $350 million in 2011 at the time of being acquired by Serco. From 2007 to 2010, the journey was very interesting. Without acquisitions, we reached from $100 million in revenues to $300 million. Just from being an India delivery centre, we expanded to the Philippines, Mauritius, US and the UK as delivery centre, he says.

Agarwal explains that in 2007, Intelenet was only present in banking, financial services and insurance (BFSI) and telecom verticals with BFSI giving 70% revenues. But by 2010, there was a diversified vertical split. It became 40% for BFSI, travel and hospitality comprised 25% and healthcare 10%. This was due to the constant urge to expand and be competitive in different sectors. The first benchmark gain for Intelenet was when it got bought by private equity firm Blackstone in 2007. Recalls Agarwal, A lot of Blackstone portfolio companies gave us business. By 2011, 25% of our business came from Blackstone portfolio companies.

Intelenet after Serco: $350 mn to $1 bn

The Serco-Intelenet deal was inked exactly after India's largest BPO Genpact acquired IT services firm Headstrong for $550 million. And it was the reverse with Intelenet a services company acquiring a BPO. Analysts backed this with the reason that Serco wanted to have an offshore delivery center presence and a strong India footprint.

The first thing Serco wanted to do after the acquisition was to segregate its back-end work from the total services business and Intelenet helped it do that. Says Agarwal, Serco is a huge services business with $ 9 billion revenues and when we got acquired, the company asked us to segregate the back-end business. We realised that 40% of Serco's business was back-end. We have been separating back-end from services for Serco for the last 6-7 months. By year-end, our SGS business will reach $1 billion in revenues. SGS, which is the new division, also includes BPO capability brought in from a small acquisition in Australia, Excelior, made a few months ago, and Infovision, a BPO with local India operations, which Serco acquired a few years ago.

But on what all bets will SGS reach this $1 billion At present, Serco has a lot of onshore presence, a bit of it will be shifted offshore. The UK public sector will be the focus and global presence is the priority for SGS. Illustrates Agarwal, Serco does a lot of government work and thus we have a strong onshore presence. We want to bring some work offshore as well, considering Intelenet had a strong India delivery. In 2011, 70% of Intelenet's work was offshore and 30% was onshore. Today, we are 60% onshore which includes US, UK, the Philippines, Dubai and 40% offshore. Probably we will be 50:50 onshore and offshore in the near future.

The way Intelenet has increased its scale from $100 million to being a part of a $1 billion SGS is phenomenal. Undoubtedly, scale is becoming the single most important thing in the BPO industry and Intelenet seems to have played all its cards right at the right time.