The politeness of the French is evident. The future is yours, says Hubert Giraud, CEO, Capgemini Global BPO Services, as he settles down to a chat with eWorld. Giraud heads the BPO division of the French IT major. He has been with the company, whose 2009 revenues touched Euro 8.37 billion, since 1998. Capgemini’s presence in India was strengthened with its acquisition of Kanbay Systems in 2006. For the first time ever last year, the company saw its India headcount overtake that in France. BL Narayan, Vice-President and Head of BPO in India for Capgemini, joined us. Excerpts from the conversation:

Europe, we are told, has a three-six month lag, following the US, both during a slump and a recovery. Your view?

HG: Clearly 2009 has been awful everywhere, it was a nightmare. The first half (H1) was even frightening. Nobody knew what could happen.

I would say the turning point was around summer last year, where suddenly there was no more freefall. Things stopped (going down), stabilised at a very low level for a lot of industries and sectors and countries, but it was a sort of relief. In H2 and mostly after summer, we saw early signs of new activities, like companies talking about mergers and acquisitions, selling and buying assets, with volume of activity recovering a bit. In industries such as consumer goods, as people have to still buy beverage and food, activity was pretty stable. I would not say the mood was very good, but it was pretty stable. In the last couple of months, we are seeing an improvement, so there are regions where things are back to the pre-crisis levels, like your country here or China or Latin-America is booming. Then you have parts of Africa, and then the two big areas — North America, and Europe. I would say North America is pretty constricted, with some areas still not in very good shape and you feel that they still have to clean up the house and there is still, you know, not a very good mood. But some of the sectors are doing better and overall the feeling is on positive side even if there are huge issues.

Europe is still in a gloomy phase, much more than NA. There is no more fear of the future, but now we have to pay all these mountains of debts and there are macroeconomic issues, issues with the budget and tax and all that. So, in terms of creating a good climate for business, we are still not as good as other parts of the world are. This said, the beauty side of globalisation is that you have a lot of subsidiaries everywhere and you see that Asia is booming, the Latin American market is booming. We are still on our toes to gain in those markets.

What is spectacular is the rapidity of the change. You can move from pretty nice growth in 2007 to a certain freefall — everything collapsed in a few months, not even in terms of a year, but in a few months! We saw panic in the beginning of ‘09 and then in some accounts — I don’t know if it’s the sun or what (smiles) — people again are back with some positivity. Though H1 2010 overall in the Europe and North America will not be excellent we can see early signs of improvement here and there. H2 should be much better.

From an offshore perspective, in a global delivery model context, in 2000- 2001 when the slowdown happened, there was an enormous offshore boom in 2003. Do you see that happening again?

HG: Ten years after the first slowdown, offshore is not anymore the debate — it is nothing new now. It is a fact of life, for all the big global companies. In early 2000, offshore was just a place where you can manufacture, or serve needs at a lower cost. You took out what was existing and transferred it elsewhere for less cost.

Now, offshore is a place where you can develop business and create value. Hence, India is no more just the back-office. It’s the front office too. It’s not just a transfer of work. It’s also sort of power transfer, which is just the beginning. I don’t know where it would go, but I think there is a fundamental change in trend.

Will recovery be led by BPO rather than IT itself? After all, offshoring companies have about 15 per cent share of the CIO’s wallet, but only about 2-3 per cent share of the COO’s.

HG: The market is evolving. We don’t say that technology is declining or whatever. It’s a huge market, and the offshore part is still growing, by about 30 per cent per year.

All these years, on the one, IT directors and on the other side, you have these CXOs. These guys want not only the best in class systems, but also the best processes. And here comes BPO. We, (as an industry) will work on your processes to offer you a much more efficient and effective process at a lower cost. But for long, there has been a disconnect between making IT better and making the process better. My vision for the coming years is exactly what you said: more and more, the process will become important in a decision and more linked with the technology. That’s why new developments in technology, example, platform-based BPO, where you need to be excellent in process knowledge but also need to deliver the technology underlying that.

In 2006, you had set yourself a target of 35,000 people in India by 2010. Now it’s about 20,000. Even given the slowdown, are you growing slower than anticipated?

HG: As a manager in this company, I am always asking for more from everybody. What happened in the last two years has made a really big difference in the market conditions and therefore, the forecast we had given would have taken a hit. But we are back on the growth track. BPO continues to grow fast. But I think clearly the expectation for India globally is still on a very positive note and big growth (is expected) in the coming 5-10 years.

BLN: For Capgemini, India reached a headcount of 23,000 employees.

HG: During the 40 years of Capgemini’s existence, France has been the Number one country and this year India is now Number one. That is important for us.

We see customers opting for value- or end-result-based pricing. Is this sustainable? Won’t clients want to shift back to earlier forms of pricing when they realise the vendor has been raking more than usual?

HG: There are always interesting conversations when one of the parties thinks the other is making too much money (laughs). That’s life. In times of slowdown, customers prefer traditional methods of pricing due to the certainty that comes with it. But other pricing models are making a mark, too.

Any statistics? T&M vs fixed price vs value based pricing?

BLN: Newer contracts tend to look at these new models very seriously and have certain clauses with options for transaction pricing. There is also a shift in certain aspects of Business process outsourcing into outcome-based pricing.

That is the key areas now, we are just taking the key values, so it’s happening, but it’s not a complete swing from one to another. It’s gradually getting to some sizeable quantum; it is not something that is so significant yet.

Has Kanbay been completely integrated right? Any other gaps you are looking to fill because it’s been sometime now since that acquisition. Anything that interests you in India, in terms of M&A?

HG: Yes, the beauty of our industry is that it’s enormous. There is no limit. And the problem of management is to fix some limits. I put some priorities, and one of the points on the Kanbay acquisition, was exactly that, in a way we were saying that — we don’t do enough in the financial services industry, let’s find a way to accelerate. We have a good set of people there, but it’s not going fast enough, so what can we do to set that right? In BPO, we just acquired a supply services company, dedicated for procurement, IBX, we did those two months ago, and it’s a company from Sweden that has an excellent platform to deliver services.

What’s the size of your BPO delivery centre here, in India?

HG: We are 3,500, for BPO. I hope BL and his team will go up to 5,000 people by the end of the year. So, it’s a time of spectacular growth.

But from a delivery point of view, if you look at the European market, is language an issue here in India?

HG: In IT, you know everything if you know technology. In BPO, it is a bit more complicated and all BPO providers must have the ability to deliver services in multiple languages. So, no single country can deliver in all the languages. Therefore, in the past five years in BPO, we have created really a web of centres around the world, to be not too far away from the main markets, that’s the reason why we have a centre in China, a lot of centres in India, a big centre in Poland to cover Europe, big centres in Latin America.

We are also able to decouple the voice part of the process from the data part. Clearly India is a great place for the data part. For some languages, we have to go Poland.

What about people from, say, Germany and France wanting to move to India?

BLN: We do have people from Poland and Germany who’ve relocated. The trend is increasing, So far we’ve been growing in all these locations, so there were opportunities everywhere, but when you see the (dis)proportionate growth happening in India, the natural tendency will be to look for more people in centres and just another trigger for what Giraud just mentioned, that we are trying to, there is a pronounced shift of running any of these engagements from India.

Talking about disproportionate head count, what were you last year this time?

BLN: To give you a sense on India, we were about 1,000 people in 2006, and in three years time, we have more than tripled. So, that’s the sort of rate of growth that we are growing in now

But, it’s been stable in the last one year?

BLN: Oh yes, we’ve continuously grown. Our annual headcount growth here has been in the 35-40 growth range.

How about the Indian BPO market? The Government spending will also include great opportunities for the BPO.

BLN: As an industry and opportunity, it is beginning to take shape, and we are seeing a lot of interest here. I think it will take some time, because the economics of it, the commercial dimension of it, you don’t get to do price arbitrage. So, it has to be driven by efficiency, more by bringing in certain other value-adds, which otherwise we are missing out by doing it in your own way.

The local market of Indian companies who are beginning to invest heavily; they are acquiring companies everywhere. They need help in managing the accounting, for example, of the acquisitions they do. That’s another emerging sector here.

The Government spends are fairly huge. It is getting into large programs, not only IT enabled but also in process support. We are carefully evaluating this; we have not sort of jumped into this.

That would mean companies headquartered overseas but also having India operations.

BLN: That’s been our large focus till now and we are looking at certain pockets of this in terms of where we can drive this through value delivery.

So, we are looking at avenues of not just transaction processing but can be to something in supply chain for instance. Those aspects actually give business value.

We are not in voice; we are not focussed in voice at all. We do voice where it is related to a process. But we don’t actually just do call centre work, it is not our focus. Our focus is on accounting. Our bread and butter is finance & accounting.

HG: Procurement is another big area where we want to develop services. Indirect procurement is not very well managed for companies, most of the time. And therefore, they want to outsource that more and more.

You had to lay off some people sometime in 2008.

HG: No, we didn’t.

This 600 count that happened…?

HG: HR, IT financial services and some in technology services. We are close to 9,000 people in BPO totally and growing very fast.

BLN: We also have focus in the engineering services space, especially in the aeronautical space. It’s a non-F&A process.

We do the complete maintenance of the aircraft in terms of manuals and things like that. So, it’s sort of technical indication where you need to explain what to do for the maintenance people.

Source:http://www.thehindubusinessline.com/ew/2010/03/22/stories/2010032250100300.htm