The Joint Venture between Firstsource Solutions and Dialog Axiata will be consummated with the former investing in and acquiring for USD 1 million a 74% stake of Dialog Business Services Limited, the recently formed BPO venture of the Dialog Axiata Group, which will be renamed Fisrtsource Dialog Solutions Limited. Dialog Axiata would hold the remaining 26%.
Dialog Axiata is Sri Lanka’s leading telecoms operator offering the much sought “Quadruple Bundle” of telecommunications, information and entertainment services. The Dialog Axiata group provides 2.5G/3G GSM mobile telephony, CDMA fixed wireless telephone services, 3.5G HSPA mobile broadband internet connectivity, Wi-Max fixed wireless broadband internet access and satellite based pay television services. In addition, Dialog also operates one of the most sophisticated telecommunications infrastructure networks in the country, offering access to other telecoms operators as well. Recently, Dialog also launched a pilot 4G LTE network on a limited scale.
Firstsource Solutions is a leading global provider of customized BPO services to the Healthcare, Telecoms and Media and Banking and Financial Services industries with revenues of USD 450 million. Its clients include Fortune 500, FTSE 100 and Nifty 50 companies. Firstsource Solutions has a “rightshore” delivery model with operations in India, U.S., UK and the Philippines. The company is also the largest listed pure-play BPO venture in India. Firstsource Solutions employs over 26,000 professionals globally and has operations and corporate presence in the United States of America, United Kingdom, India, Australia, New Zealand and Philippines. Its clients include Fortune 500, FTSE 100 and Nifty 50 companies.
The global BPO industry is estimated to generate revenues of USD 200 billion in 2011 and is expected to grow at around 10-15% a year in the foreseeable future. India is the industry leader with around a 6% share of the global market, followed by China which accounts for some 3%.
Sri Lanka’s BPO industry is estimated to generate export revenues of approximately USD 350 million in 2011, which has been growing at over 20% per annum. The industry employs over 15,000 people, with the workforce also growing by over 20% a year. Sri Lanka’s BPO workforce has been stable with very low employee attrition rates, estimated at around 10-15%. Colombo remains highly cost competitive with relatively less upward pressure on industry wages than many established global outsourcing destinations. A recent World Bank study has also revealed that Sri Lanka’s labour costs in the BPO industry ranked amongst the lowest in comparison to many other outsourcing destinations, with total costs per employee being lower by as much as 30%.
Against this global and local BPO industry backdrop, Sri Lanka envisages raising revenues to an estimated USD 1 billion within the next four years. In achieving this objective, Sri Lanka has received tremendous industry visibility by being ranked among the Top 50 Global Outsourcing destinations by AT Kearney and Colombo being placed among the Top 20 Emerging Cities for outsourcing by the Global Services Magazine. Among the several leading global BPO companies operating in Sri Lanka are HSBC, Aegis, WNS Global Services, Aviva, Motorola, IFS (Industrial and Financial Systems), Amba Research, RR Donnelley,Quattro, Virtusa, eCollege, Valista, Millennium Information Technology and Innodata Isogen.
The Government of Sri Lanka is also backing the BPO industry as a key means of providing employment, especially in suburban and rural areas. This is part of the Government’s stated aim of making Sri Lanka an Information and Communications Technology (ICT) hub. As a first step, the Government established One Thousand ICT centres throughout the country with the view to improving awareness in IT. This, programme has been successful in creating a computer literate younger population that can be further trained at tertiary level for employment in the BPO industry.
Taking the cue from the Government, Sri Lanka’s telecommunications service providers have also begun building infrastructure to support the BPO industry. In particular, Dialog Axiata is laying a growing network of Fibre Optic Cables, which is likely to ultimately encompass a large part of the country. Further, Dialog Axiata has also replaced its core telephony infrastructure with low cost, highly efficient Next Generation Networks (NGNs) to meet anticipated demand in both voice and data transmission.
It is in the above highly enabling BPO industry environment that Firstsource-Dialog Solutions will commence operations. From the inception, Firstsource-Dialog Solutions will manage Dialog Axiata’s customer contact management operations across its mobile and fixed wireless telephony, Pay Television and wireless broadband internet businesses. Importantly, the Dialog Enterprise Contact Management centre is the first and only facility in Sri Lanka to have been awarded International Industry Standard COPC certification, in addition to receiving several regional awards over the past few years.
More importantly, Firstsource-Dialog Solutions would also gain from a lower cost structure relative to its rivals given Dialog Axiata’s expertise in the telecommunications industry, thus enabling the BPO venture to be price competitive in the attracting new business. Higher business volumes in turn will also enable the current operating expense structure of the venture to rationalise, enabling faster improvement in profit margins.
Given Firstsource Solutions’ global industry expertise and experience and Dialog Axiata’s local labour market knowledge, business operational excellence and ICT expertise, Firstsource-Dialog Solutions has all the ingredients to flourish, with the potential to even be the largest BPO operation in Sri Lanka in time to come.
