Offshore IT/BP player Genpact continues to stretch its lead over rivals in Q213 (see Exl downgrades FY13) with double-digit revenue growth and improving double-digit margins.
In the quarter ended 30 June, revenue was up 14.4% to $543.8m and operating margins expanded 110 basis points to 14.6% vs. 13.5% last time. This compares to smaller rival Exl, which achieved a much more modest 7.4% growth, and 11.1% margin in Q2.
Genpact’s revenue diversification away from former parent GE is improving too. GE revenue declined 1% in the quarter and is now 23% of revenues. At the same time, Genpact has been growing its number of larger deals. Revenue from global clients (i.e. excluding GE) was up almost 20% in the quarter, and it now has 55 client relationships each contributing revenues of $5 – $15m per quarter, up from 41 this time last year.
Genpact's largest division, business process management, grew 18% to c$408m (which we suspect was largely organic), led by a number of verticals including BFSI, CPG, life sciences, healthcare and business services. IT services meanwhile, grew 25% to c$136m, however this was boosted by February’s acquisition of healthcare ITS player JAWOOD (see here). Excluding JAWOOD, organic growth from ITS was still a very respectable 8-9%.
So what is Genpact’s secret? Since its acquisition of finance-focused IT services player Headstrong in 2011 (see here), Genpact has been seeking more complex, global deals that bring together its process expertise, operations capability, smart decision analytics and IT services to target specific process areas like F&A, procurement and increasingly vertical processes like healthcare. In the investor call, CE N.V. 'Tiger' Tyagarajan said deals like this tend to have ‘more differentiated value propositions that…drives much better value for clients and, therefore, commands the right kind of price and margin’.
Global IT/BP rivals Accenture, IBM and Capgemini are also targeting this space. So Genpact is going to need to continually innovate to maintain differentiation from the pack. So it is good to see it investing in new areas that can help drive further efficiencies for clients, like IT process automation, via its partnership with Ayehu announced last month (see here, and Is business process automation: a BPO industry game changer?).