NelsonHall recently attended a Genpact analyst forum in Boston, where we were keen to learn more about the changes in its strategy that Genpact announced in February to effect a major transformation of its business (see our blog “Genpact: Slow Progress on Transformation Strategy in 2013 - Unveils Next Phase of Plan: http://research.nelson-hall.com/blog/?avpage-views=blog&type=post&post_id=139#sthash.u2IRYAcO.dpuf) . Its theme for the forum was ‘Generating Impact by Designing, Transforming and Running Global Operations: The Art of the Possible 2014’.

Following a strategic review, where it used McKinsey to advise on how to achieve the next phase of its growth (it is looking to move from a $2.5bn organization to a $5.5bn one), Genpact decided to focus on a smaller group of sectors, service lines & geographies. Following the Pareto rule, the nine sectors it selected (from 23 it was servicing in total) cover roughly 80% of its existing business.  Its target sectors are:

• Retail banking
• Capital markets
• Insurance
• Healthcare
• Life Sciences
• Retail
• CPG
• Manufacturing
• High Tech

We would argue that these still cover a huge range of sub-sectors, and it is difficult to find what has been left out beyond the public sector (in which Genpact did not operate) and energy and utilities. Nevertheless, this deepening focus on verticals, which is evident in many BPO service providers today, is clearly a positive move. Genpact is looking to expand its expertise within each sector and is hiring SMEs, for example its F&A insurance lead, hired from a client, used to previously work for Genworth.

After four years of attempting to expand in emerging markets in Latin America, India, China & the Middle East, Genpact has found that companies in these regions are typically not yet ripe enough for transformational engagements.  Genpact will continue to assist clients looking to enter or expand in these regions, but will not invest or pursue new clients within them. Japan, where it believes appropriate opportunities exist, remains in consideration.

As analytics became a key capability, Genpact is now looking to advise clients on what they should be doing to seek improvement and which analytic models will be of use.

Part of the new ‘Design, Transform & Run’ model includes differentiating through industry-specific processes. And there have been several developments already since February. For example:

• The recently announced partnership with Oliver Wyman to jointly offer risk management services to the financial services sector provides Genpact with risk consulting expertise  (see http://research.nelson-hall.com/search/?avpage-views=article&searchid=24796&id=202604&fv=2)
• The acquisition of Pharmalink announce in early May provides domain expertise in regulatory services in the pharma sector (see http://research.nelson-hall.com/blogs-webcasts/nelsonhall-blog/?avpage-views=blog&type=post&post_id=172) 

Genpact’s decision to acquire Pharmalink reflects its recognition of a broader BPO trend: that many BPO clients (assuming they are satisfied with the quality of the existing services being provided) are willing to increase the level of business they outsource to their service provider to include specialist services should these services be offered at reasonable rates.  

Genpact hopes investments such as these will make it a more attractive choice for both existing clients who have benefited from the traditional labor arbitrage model and also organizations that are experiencing major changes in their business models and are looking to outsource to support a targeted business transformation.

There is a clear intention at Genpact to shift from a position where its reputation has been based on process excellence (its GE heritage) – to a newer generation of BPO services where industry-specific services that involve the application of IP and analytics are part of the mix.

We should expect to see further partnership announcements, and maybe further niche acquisitions to support what will be a major development in its portfolio and positioning.

NelsonHall will be updating its Key Vendor Assessment on Genpact in June.