genpact: Deal talks are now about cost cutting, says Genpact CEO

Till about six to seven years ago, up to 70% of the BPM client spending would be skewed towards cost saving with the remaining going into growth, risk and resilience management solutions. Over the last three years, this equation has flipped due to pandemic-fuelled demand, NV Tyagarajan told ET.

“If I now look at our demand view today versus 12 months back, one of the biggest changes that has happened is many of our clients and their industries are worried about a slowing world in terms of growth,” he said.

Clients are also worried about inflation even though it might be lower than one month back. “But it is still higher than the past and interest rates are higher. Therefore, costs become much more important today than it was one year back,” the head of the NYSE-listed company said.

The company wasn’t surprised and had proactively advised clients to look at costs due to the agile nature of the software business, he added.

Large deals are now getting broken into smaller ones by clients, as there is much more scrutiny on the payback of spending — a trend previously seen during times like the global financial crisis of 2008 and the 2020 pandemic, Tyagarajan said.

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“We are seeing large engagement getting broken down into its component parts, and a very agile movement through each of the component parts to deliver a return for every cycle of that spending,” he said.
The comments come at a time when
global technology spending is expected to be “moderate”, owing to high inflation and recessionary fears in markets like the US, though it would still record an increase of 11% next year, IT sector experts told ET earlier this month.

Industry watchers said that discretionary spending, which accounts for 15-20% of a typical IT annual budget, would be under severe pressure, while mission-critical IT services projects would continue.

Within this, business process outsourcing (BPO) solutions are among the faster growing segments with sizeable growth in both annualised contract value and the number of deal wins, according to data for the July-September quarter from ISG.

The BPM sector is seeing demand for niche solutions in the US, engineering, research and design in Europe, Middle East and Africa and digital customer experience solutions in the banking, financial services, insurance and telecom segments.

Genpact was founded in 1997 as a unit of US-based conglomerate General Electric and was one of the first companies out of India that kicked off the BPO revolution. It was then called GE Capital International Services and was based in New Delhi. In 2021, Genpact was ranked No.9 among the top 50 global BPM firms, according to a report by research firm Everest.

The company believes its data-tech-AI (artificial intelligence) segment, which accounts for 45% of total revenue, will continue to grow in the mid- to high-teen levels in the next five years.

“If you look at data tech AI, that is where the digital transformation and the cloud journeys, the need of clients for accessing data to build insights to better prediction engines and aid in taking better decisions (happen),” he said.

The data-tech-AI sits at the core of four of the company’s fastest growing service lines: supply chain, sales and commercial support, risk, and financial planning and analysis, he said.

Till about six to seven years ago, up to 70% of the BPM client spending would be skewed towards cost saving with the remaining going into growth, risk and resilience management solutions. Over the last three years, this equation has flipped due to pandemic-fuelled demand, NV Tyagarajan told ET.

“If I now look at our demand view today versus 12 months back, one of the biggest changes that has happened is many of our clients and their industries are worried about a slowing world in terms of growth,” he said.

Clients are also worried about inflation even though it might be lower than one month back. “But it is still higher than the past and interest rates are higher. Therefore, costs become much more important today than it was one year back,” the head of the NYSE-listed company said.

The company wasn’t surprised and had proactively advised clients to look at costs due to the agile nature of the software business, he added.

Large deals are now getting broken into smaller ones by clients, as there is much more scrutiny on the payback of spending — a trend previously seen during times like the global financial crisis of 2008 and the 2020 pandemic, Tyagarajan said.

Discover the stories of your interest

“We are seeing large engagement getting broken down into its component parts, and a very agile movement through each of the component parts to deliver a return for every cycle of that spending,” he said.
The comments come at a time when
global technology spending is expected to be “moderate”, owing to high inflation and recessionary fears in markets like the US, though it would still record an increase of 11% next year, IT sector experts told ET earlier this month.

Industry watchers said that discretionary spending, which accounts for 15-20% of a typical IT annual budget, would be under severe pressure, while mission-critical IT services projects would continue.

Within this, business process outsourcing (BPO) solutions are among the faster growing segments with sizeable growth in both annualised contract value and the number of deal wins, according to data for the July-September quarter from ISG.

The BPM sector is seeing demand for niche solutions in the US, engineering, research and design in Europe, Middle East and Africa and digital customer experience solutions in the banking, financial services, insurance and telecom segments.

Genpact was founded in 1997 as a unit of US-based conglomerate General Electric and was one of the first companies out of India that kicked off the BPO revolution. It was then called GE Capital International Services and was based in New Delhi. In 2021, Genpact was ranked No.9 among the top 50 global BPM firms, according to a report by research firm Everest.

The company believes its data-tech-AI (artificial intelligence) segment, which accounts for 45% of total revenue, will continue to grow in the mid- to high-teen levels in the next five years.

“If you look at data tech AI, that is where the digital transformation and the cloud journeys, the need of clients for accessing data to build insights to better prediction engines and aid in taking better decisions (happen),” he said.

The data-tech-AI sits at the core of four of the company’s fastest growing service lines: supply chain, sales and commercial support, risk, and financial planning and analysis, he said.