The BPO demand environment took center stage this week as Genpact and EXLService reported results. Our takeaway was that the demand environment for BPO is healthy. There are a number of data points to confirm this. Solid quarterly results from the BPO players. Positive commentary regarding BPO provided by larger IT services firms and outsourcing consultants. We remain positive on the fundamentals noting that as BPO continues to gain steam the enthusiasm will get built into stock prices. We encourage those interested in the space to play the long term fundamentals. We remain focused on trends that are emerging, including the race up the value chain as companies move from services and/or software to solutions. The catalysts are cost cutting, regulatory (financial services & healthcare), and new technologies (cloud, analytics, and mobile). Our BUY-rated names are IBM (IBM), Accenture (ACN), Cognizant (CTSH), Syntel (SYNT), Virtusa (VRTU), Genpact (G), and ExlService (EXLS).
Joseph D. Foresi