The Build-Operate-Transfer model of business process outsourcing (BPO) is falling out of the favour of large Indian companies. Many large BPO firms that grew by developing outsourcing units for foreign clients, running them for a while before transferring them to the customers, are now shying away from such contracts.

The model, very popular some years ago, is no longer attractive to these mature outsourcing firms, because it dents their revenues when the units are transferred. “There are still customers that want BOT contracts but there are not many takers for it among the large BPOs,” says [Firstsource Solutions] CEO and managing director of a BPO company [Ananda Mukherji told ET]. The last BOT contract that Firstsource entered into was in 2003 with Lloyds TSB Bank. But not all companies are so lucky.

In one of the most recent instances, Aviva, which had entered into BOT contracts with three Indian vendors — 24X7, WNS Global Services and EXL Services — chose to exercise the transfer option with both WNS and 24X7, and is likely to exercise it even in case of EXL. Aviva took over the infrastructure and people of the 300-strong finance and accounting operation WNS was running for it in Sri Lanka for three years. The 24X7 operation in Bangalore was mostly voice-based and involved the transfer of around 1,600 employees. The overheads in a BOT contract are also higher because the people and processes are eventually transferred to the client, there is some amount of duplication involved when the third-party player is building a new line of business.

The primary reason for firms to enter BOT contracts is to build a new line of business and acquire skills and expertise in an area. So it is very useful for smaller companies that are trying to add new lines of business and also build volumes. “Depending on the stage of the evolution, these contracts can be beneficial,” said EXL chief operating officer. “Today, we don’t really need these contracts because we’ve reached a certain size and scale.” EXL, COO said, would not enter into any new BOT contracts unless there is a strong case for it in terms of the new skills being added and unless there is also a third-party contract attached with the BOT contract. If EXL’s BOT project with Aviva is transferred to the client, the Indian company may take a short-term knock in its revenue, but still would have gained from the experience in a new business line. Aviva was its first large customer in the insurance segment, in which EXL has nine clients today. “We a have a very good relationship with Aviva.

The contract helped us get volumes and stability in insurance,” said Kapoor. The earliest Aviva can exercise the transfer option is January 2008. Under the terms of the contract, the life and general insurance processes EXL runs for it from Pune will be transferred along with people and infrastructure. In addition, EXL also has some pure third-party contracts with Aviva that it will continue to serve.