To develop the strategic opportunity for collections services from India one needs to understand the following developments:

The changing dynamics of the major collections services market in the US market.
The experience of the Indian service providers over the last 5 years.
The mind set and capabilities of the Indian service providers.

Indian Service Provider - Experience
While Indian service providers have demonstrated good capability of handling collection programs of all types, including credit cards, retail finance, telecommunications, utilities and healthcare across the early stages of collection, the total number of agents is not large to date - around 5,000 collection agents.

It is interesting to note that while the more established, stand-alone specialist companies like Epicenter Technologies and Global Vantedge (with equity investment by OSI) have been around for over three years, they have still to go above 1,500 employees. Where as the recent entrant Zenta Group (a joint venture between NCO Group, US, and Hiranandani Group, India), is ramping up above 2,000 employees this year.

At the same time other partnership model that have been around for more than two years, between US and Indian companies. NCI with Tracmail and D&B Receivables with HCL Technologies BPO are still to ramp-up above 300 collection agents.

So what are the reasons for the slow development of collection services?

Commitment By The US Partner
While NCO Group works with Zenta Group as though it is an extended arm of their US operations and provides both operations management and client processes support on a day-to-day basis, the other partnerships are more arm length and hence the full capabilities of the US partner have not been brought to bear on the Indian operations.

Front-end Presence
Having front-end delivery presence provides a critical dimension to this business both in engaging clients and also building strong delivery capability. Zenta Group started slowly in the first year but having established their delivery capability, thanks to the expertise of NCO Group, they are now growing at a rate not seen in this industry to date.
Domain Expertise
In the early stages of the contact center boom in India, the stand-alone companies either did not pay attention or did not realize the time and effort required to manage the knowledge transfer. They were too eager to acquiring volume of business rather than building robust hiring, training and process driven capabilities that is unique to each process and different for the type and stage of paper being collected.

Attention to Detail
The bane of many start-up contact center processes in India, including collection services, has been the lack of attention to detail and sufficient lead-time being provided to build the right team and create a comprehensive delivery capability. Once these bad habits were formed it has taken double the effort and cost to rectify them.

US Collections: Market news

Over the last three months the following news reports* provide one a quick view of the recent events and future developments. 9th February 2005 - The army of debt collectors poised to come after late payers is growing. Collection agencies nationwide have tripled their income in the past 10 years and boosted staff levels by 50 percent in the past five years, according to industry figures. 6th February 2005 - U.S. consumer credit outstanding rose $3.1 billion in December, capping a year of straight monthly increases after a large upward revision to November's data. The U.S. Bureau of Labor Statistics has indicated that consumer credit outstanding is expected to grow faster than average through 2012. 4th February 2005 - The year 2004 was a record year. There were 55 merger / acquisitions in the Accounts Receivable Management (ARM) industry, representing a record breaking $1.5 billion in deal value. This surpasses the days of heavy M&A activity in 1998 and 1999 that were fueled in large part by consolidators backed by private equity firms. 17th January 2005 - Van Ru Credit Corporation, one of the nation's largest independent receivables management companies, today announced the opening of its first international call center. The new facility will accommodate up to 200 employees and is located in a modern office park outside San Jose, the capital of Costa Rica 8th December 2004 - For the first time, an India-based business process outsourcing (BPO) company acquired a U.S. debt collection agency. In October 2004, ICICI OneSource acquired Accounts Solutions Group, a third party collection agency based in western New York State for a valuation of around $ 25 million. * Source: The Credit and Collection Daily Newsletter, a Kaulkin Media Publication. To date, joint ventures and start-ups have been the preferred method among the larger agencies and BPO companies to develop offshore collection capabilities and most of these efforts were focused on first party collection services. We strongly believe that the ICICI OneSource purchase of ASG will not be an isolated event and that similar India BPO-U.S. ARM transactions will occur in 2005 and beyond.