Back-office services firm Convergys Corp. plans to enter the domestic call centre business in India and use revenues from local customers as a long-term hedge against the weakening dollar. “Growing local business is a natural hedge to tackle the volatile currency. We have done that in Canada and are doing it now in India,” said David F.Dougherty, President and CEO, Convergys. The back-office firm has nearly one-sixth of its 75,000 global delivery staff located in India, where a stronger rupee has seen the firm’s operating costs grow as much as 11-12% in the past year, in line with the rupee-dollar movement.
Convergys joins the list of back-office firms such as Mphasis Ltd, an EDS company, and Firstsource Solutions Ltd that are looking at the domestic market to expand and use this as a hedge against further appreciation of the rupee. Global firms such as IBM Corp. and Accenture Ltd derive a substantial portion of their revenues from the Indian market, which acts as a sort of natural hedge to cover their local costs, which are in rupees. Dougherty said the company was exploring both organic and inorganic growth options to build delivery capabilities in local languages to address the Indian call centre market.
Convergys was in various stages of discussions with a “lot of firms”, he added, without disclosing details. Convergys sees a robust pipeline of opportunities in India for its billing solution from telcos offering wireline and wireless services, Dougherty said. Recently, Convergys signed up state-owned Bharat Sanchar Nigam Ltd for its billing solution. Convergys, which earns around 75% of its revenues from customers in telecom, and banking and financial services businesses such as Vodafone and Citibank, is looking at servicing firms in the same businesses in the Indian market.
The company reported revenues of $716.4 million (Rs2,909 crore today) for the first quarter to March and a net profit of $35.9 million. The demand for back-office services, including sales of credit cards, managing service centres and call centres, and payrolls processing, is on the rise as companies in sectors such as telecom, banking services, aviation and hospitality try to cut costs, improve efficiencies and serve customers better by outsourcing such functions. The domestic market for back-office services was worth around Rs4,700 crore in the year to March. According to a study by software lobby group Nasscom and strategy consulting firm Everest Group, the potential domestic market would be $15-20 billion by 2012.
Convergys, Dougherty said, was seeing good momentum in terms of new deals from customers in the US, the largest market for IT and back-office services, which is in the grip of a slowdown induced by a credit crisis. “Despite all the challenges in the economy, companies are looking to outsource more to cut their costs,” Dougherty said, adding that the company was seeing new orders from customers such as Bank of America, American Express and Wachovia.