In my recent visit to the US, I generally heard positive sentiments being expressed about Indian-headquartered service companies, although some voiced concern about the ability to scale-up considering the widely talked about Indian talent shortage.
With impressive headcount increase being made by western majors in Indian facilities, some foresee that the Indian services growth rate moving forward may even be flattened. Some were concerned that rates being offered by offshore majors may be high and the competence depth may not be there. While I may disagree with such views, the fact remains that these views came from seasoned veterans and deserve definite attention and consideration. There may be some hidden truths therein.
I can only point to a well-analyzed report comparing service players performance from Wachovia's Ed Caso and his team published last month. As I wrote while covering the report, Accenture's offshore billing rates for consulting and BPO operations are closely guarded and therefore comparison becomes difficult. The billing rates and utilization for enterprises across categories make interesting reading - however I am aware that there is scope for enterprises to tend to marginally play around these two figures for balance. On all conventional financial metrics –- growth, margins — offshore firms have established new records.
Average attrition levels at offshore firms are far less than that reported by the likes of Accenture – an important trend to watch. Talk of traditional global players having mastered the global delivery model gets decimated by the fact the average billing rates for firms in the commercial firms category stand approximately three-to-four times more than that of the Indian headquartered firms. The upside potential for expanding GDM capabilities and for the offshore firms to increase market share is apparent based on this.
Three things in a way summarized the scene better:
- Accenture’s sale is more than the combined sales of all the ten offshore firms listed therein – the list includes the top five offshore players.
- Surprisingly, I found that in the four quarters preceding Dec. 2005, Accenture recruited more people than the likes of Infosys (however adjusting for attrition, offshore firms may be seen as doing marginally better).
- Infosys market cap stands higher than that of Accenture (as seen from public data). These financial data are indeed very real and truly reflect the strength of the players therein – the report is also helping with a trend analysis by presenting in a nice, comparable format.
One will have to factor in some qualitative metrics like comparison of maturity of service offerings, vertical and geographical strengths and penetration productivity levels, relationship management indices, average experience of employees within the enterprises etc to get a better understanding of the concerned enterprises.