There is a bad news in store for the domestic IT and BPO market. According to market intelligence firm, IDC India, the local IT and BPO market is expected to grow at 13.4 per cent in 2009, the slowest since 2003. This will come largely on the back of slower IT consumption in some key verticals including retail and financial services. In fact, the Indian domestic IT and BPO market is slated to see 16.4 per cent CAGR in the coming five years leading to 2013, compared with 24.3 per cent growth recorded between 2003 and 2008.The forecast also suggests that key structural changes taking place on the back of a global economic slowdown would propel a new ‘market order’ in the domestic IT and BPO industry. IDC said that the next phase of growth would be different from the earlier phase, in which the domestic market had witnessed unprecedented growth, nearly tripling the market size from Rs 34,000 crore in 2003 to Rs 1,01,031 crore in 2008, a CAGR of over 24 per cent.

The new growth Phase (2.0), expected to evolve from 2009 onwards, will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services — infrastructure, applications and connectivity — would need to orchestrate and re-orient completely in order to support their mass adoption. (more…)

Tata Consultancy Services (TCS) is about to win two large BPO contracts as a consequence of its acquisition of Citigroup’s BPO captive,  Citigroup Global Services (CGSL), a company official said on Wednesday. India’s number one IT exporter also announced the completion of the CGSL transaction. The transaction is estimated at $ 512 million and includes a revenue commitment of $ 2.5 billion from Citigroup.

TCS chief operative officer (COO) and executive director, N Chandrasekaran, said an integration team had been formed back in October so as not to lose time. “We will hit the ground running in terms of sales efforts. We’re not going to be reporting only CGSL numbers…Our game is all about integration,” he said. Along with CGSL, TCS BPO will now have around 20,000 employees and the firm expects an annual run rate of $ 600 million in BPO revenues. The TCS stock was down nearly 1% to Rs 478 on the BSE on Wednesday.

The two possible BPO contracts are potential multimillion multi-year contracts. Mr Chandrasekaran said the deals would be “noteworthy” if TCS managed to close them. Through the acquisition of CGSL, TCS has obtained end-to-end financial processing and capability to run core-banking processes.

On the currently challenging business environment, Mr Chandrasekaran said client specific problems continued and certain clients were not growing but that other deals were getting closed and the deal pipeline was good. “In this market you should expect pricing pressure but we are being very disciplined about margins,” he said. Source