WHAT IS

Business Processing Outsourcing?

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BPO [Business Process Outsourcing] has been the latest mantra in India today. As the current sources of revenue face slower growth, software companies are trying new ways to increase their revenues. BPO is top on their list today. IT services companies are making a quick entry into the BPO space on the strength of their existing set of clients. We hope to address all issues related to BPO in India on this portal. We will attempt to explain what it takes to setup a BPO facility in India. Actually, setting up a call center is capital intensive. An ordinary BPO center that takes care of pure back office operation [e.g. payroll, data entry] will not be as expensive as a call center. The philosophy behind BPO is specific, do what you do best and leave everything else to business process outsourcers. Companies are moving their non-core business processes to outsource providers. BPO saves precious management time and resources and allows focus while building upon core competencies. The list of functions being outsourced is getting longer by the day. Call centres apart, functions outsourced span purchasing and
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disbursement, order entry, billing and collection, human resources administration, cash and investment management, tax compliance, internal audit, pay roll...the list gets longer everyday. In view of the accounting scandals in 2002 [Enron, WorldCom, Xerox etc], more and more companies are keen on keeping their investors happy. Hence, it is important for them to increase their profits. BPO is one way of increasing their profits. If done well, BPO results in increasing shareholder value. Typically, a customer calls the call center [usually a toll-free number]. After pressing numerous numbers [1 for English, 2 for Spanish, 3 for bank balance!] the operator will answer your query by accesing the database. Call centres address sales support, airline/hotel reservations, technical queries, bank accounts, client services, receivables, tele marketing, market research. If a bank shifts work of a 1000 people from US to India it can save about $18 million a year due to lower costs in India. According to Mckinsey, giant US pharma firms can reduce the cost of developing a new drug, currently estimated at between $600 million
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and $900 million by as much as $200 million if development work is outsourced to India.

Benefits derived from BPO can be summarized as follows:

1. Productivity Improvements 2. Access to expertise 3. Operational cost control 4. Cost savings 5. Improved accountability 6. Improved HR 7. Opportunity to focus on core business India has one of the largest pool of low-cost English speaking scientific and technical talent. This makes India one of the obvious choice to outsource to. Dell, Sun Microsystems, LG, Ford, GE, Oracle all have announced plans to scale up their operations in India. Others like American Express, IBM and British Airways are leveraging the cost advantage India has to offer while setting up call centres. Several foreign airline and banks have too set up business process
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operations in India. Indian revenues from BPO are estimated to have grown 107 per cent to $ 583 million and this particular area employs 35,000 people in the year ending March 31, 2002. Many European and US companies have realized that they should focus on their main business and outsource their Human Resource Department, accounting department etc. Bingo! it is here exactly India fits in! Today US corporations have embraced BPO wholeheartedly. Managed Care Companies, which is more popularly known as Healthcare payers, are increasingly outsourcing business processes due to changing and challenging business environment and technological and legislative changes. There is a good opportunity for Indian BPO vendors in this space. BPO vendors will need to have good domain knowledge, process know-how and competence with technological solutions to cater to these Manage Care Companies.

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BPO Industry in India

-A Report
Business process outsourcing (BPO) is a broad term referring to outsourcing in all fields. A BPO differentiates itself by either putting in new technology or applying existing technology in a new way to improve a process. Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider that
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in turn owns, administers and manages the selected process based on defined and measurable performance criteria. Business Process Outsourcing (BPO) is one of the fastest growing segments of the Information Technology Enabled Services (ITES) industry. Few of the motivation factors as to why BPO is gaining ground are:

Factor Cost Advantage Economy of Scale Business Risk Mitigation Superior Competency Utilization Improvement

Generally outsourcing can be defined as - An organization entering into a contract with another organization to operate and manage one or more of its business processes. Different Types of Services Being Offered By BPO's 1. Customer Support Services Our customer service offerings create a virtual customer service center to manage customer concerns and queries
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through multiple channels including voice, e-mail and chat on a 24/7 and 365 days basis. Service Example: Customers calling to check on their order status, customers calling to check for information on products and services, customers calling to verify their account status, customers calling to check their reservation status etc. 2. Technical Support Services Our technical support offerings include round-the-clock

technical support and problem resolution for OEM customers and computer hardware, software, peripherals and Internet infrastructure manufacturing companies. These include

installation and product support, up & running support, troubleshooting and Usage support. Service Example: Customers calling to resolve a problem with their home PC, customers calling to understand how to dial up to their ISP, customers calling with a problem with their software or hardware.

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3. Telemarketing Services Our telesales and telemarketing outsourcing services target interaction with potential customers for 'prospecting' like either for generating interest in products and services, or to up-sell / promte and cross sell to an existing customer base or to complete the sales process online. Service Example: Outbound calling to sell wireless services for a telecom provider, outbound calling to retail households to sell leisure holidays, outbound calling to existing customers to sell a new rate card for a mobile service provider or outbound calling to sell credit or debit cards etc.

4. Employee IT Help-desk Services Our employee IT help-desk services provide technical problem resolution and support for corporate employees. Service Example: of this service include level 1 and 2 multichannel support across a wide range of shrink wrapped and
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LOB applications, system problem resolutions related to desktop, notebooks, OS, connectivity etc., office productivity tools support including browsers and mail, new service requests, IT operational issues, product usage queries, routing specific requests to designated contacts and remote

diagnostics etc. 5. Insurance Processing Our insurance processing services provide specialized

solutions to the insurance sector and support critical business processes applicable to the industry right from new business acquisition to policy maintenance to claims processing. Service Example: New Business / Promotion: Inbound/outbound sales, Initial Setup, Case Management, Underwriting, Risk assessment, Policy issuance etc. Policy Maintenance / Management:

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Record Changes like Name, Beneficiary, Nominee, Address; Collateral verification, Surrender Audits Accounts Receivable, Accounting, Claim Overpayment, Customer care service via voice/email etc. 6. Data Entry Services / Data Processing Services Service Example: Data entry from Paper/Books with highest accuracy and fast turn around time (TAT)
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Data entry from Image file in any format Business Transaction Data entry like sales / purchase / payroll.

o o o o o o

Data entry of E-Books / Electronic Books Data Entry : Yellow Pages / White Pages Keying Data Entry and compilation from Web site Data Capture / Collection Business Card Data Entry into any Format Data Entry from hardcopy/Printed Material into text or required format
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o o o o o o o

Data Entry into Software Program and application Receipt and Bill Data Entry Catalog Data Entry. Data Entry for Mailing List/Mailing Label. Manuscripting typing in to word Taped Transcription in to word. Copy, Paste, Editing, Sorting, Indexing Data into required format etc.

7. Data Conversion Services Service Example: Conversion of data across various databases on different platforms
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Data Conversion via Input / Output for various media. Data Conversion for databases, word processors,

spreadsheets, and many other standard and custommade software packages as per requirement.
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Conversion from Page maker to PDF format. Conversion from Ms-Word to HTML format
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o o o o o o

Conversion from Text to Word Perfect. Conversion from Text to Word to HTML and Acrobat Convert Raw Data into required MS Office formats. Text to PDF and PDF to Word / Text / Doc Data Compilation in PDF from Several Sources. E-Book Conversion etc.

8. Scanning, OCR with Editing & Indexing Services Service Example: High speed Image-Scanning and Data capture services High speed large volume scanning OCR Data From Scanned page / image Scan & OCR paper Book in to CD. ADOBE PDF Conversion Services. Conversion from paper or e-file to various formats

o o o o o o

9. Book Keeping and Accounting Services Service Example: General Ledger Accounts Receivables and Accounts Payable
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o o

o o o

Financial Statements Bank Reconciliation Assets / Equipment Ledgers etc. Form Processing Services:

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Service Example: Insurance claim form Medical Form / Medical billing Online Form Processing Payrol Processing etc. Internet / Online / Web Research

o o o o

11.

Service Example: Internet Search, Product Research, Market Research, Survey, Analysis.
o

Web and Mailing list research etc.

Business Process Outsourcing: The Top Rankers

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WNS has emerged as the top BPO in India, pushing Wipro Spectramind to the second position, according to a survey done by NASSCOM. The basis of ranking is the revenues generated by the BPO companies in 2003-04, as per US GAAP. A list of top fifteen BPO companies in India is given below. 1. 2. 3. 4. 5. 6. 7. 8. WNS Group Wipro Spectramind Daksh e-Services Convergys HCL Technologies Zenta ICICI Onesource MphasiS

9. EXL 10. 11. 12. 13. 14. Tracmail GTL Ltd. Customer HTMT 24/7 Customer Sutherland Technologies
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The parameters for the survey was: Employee Size (Operation level executives), Percentage of last salary hike, Cost to company , Overall Satisfaction Score, Composite Satisfaction, Company

Culture, Job Content / Growth, Training , Salary and Compensation , Appraisal System, People, Preferred Company: (Percentage of respondents of a company who named their own company as the preferred one), Dream Company: (Percentage of respondents in the total sample who preferred a particular company).

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Evolution Of BPO
Indian became a prominent destination for outsourcing in the services sector in the 1990s. Outsourcing to India started with the IT industry, which has responded to the changing market requirements
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by increasing the scale of operations and capability to handle complexity. The Indian software industry, according to Kris Gopalakrishnan, COO, Infosys Technologies Limited, has gone through the following four stages of development: 1. 1970s to early 1990s: There was a shortage of skills and cost was the prime driver for outsourcing to India. Companies focused on expanding their skill sets during this period. 2. 1994 to 1998: This was the most crucial time for IT outsourcing in India. The post liberalization reforms helped already existing companies speed up expansion. New companies also got support in the form of incentives from the government. The important tasks outsourced to India during this period were medium and large application projects on legacy migration and enterprise wide IT and problems related to Y2K syndrome. Companies focused on acquiring diverse skills and execution capabilities, along with achieving client delight trough

productive and quality delivery of projects. 3. 1999 to 2001: While projects related to Y2K syndrome were outsourced on a large scale to India, companies started
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acquiring additional competence especially in enterprise resource planning and customer relationship management during this stage. The industry gave importance to a variety of business aspects such as achieve excellence in quality of output delivered, making investments in R&D, ensuring business continuity and financial stability, gaining world-class project management capabilities, expanding services to IT consulting by gaining domain skills and developing

infrastructure for further growth. 4. 2001 to present: The industry now caters to large application development and maintenance needs of corporate across the world. Indian companies chalk out IT strategies for large corporations, and focus on providing end-to-end solutions. Indian companies are now in the process of aggressively gaining expertise for carrying out high end work such as R&D, architecture and business integration. BPO in India has grown rapidly as compared to software services as the advantages offered by the country (low cost and abundant talent pool) were well known and tested in IT
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outsourcing. Most of the infrastructure required was already in place and companies needed to set the processes right to get BPO going in India. According to Mohanbir Sawhney, Professor, Kellogg School of Management, evolution of BPO in India has witnessed three prominent phases. These waves are: 1. Large multinational companies set up their captive centers in the country. American Express, GE and Citibank were among the pioneers which were followed by numerous banks, financial services, manufacturing companies, etc. These companies performed their back-office operations and customer services through these offshore captive centers. 2. The captive centers were followed by the establishment of startup BPO operations by experienced professionals. Such companies were often backed by venture capital. 3. IT majors such as IBM ventured into Indian BPO market to tap the opportunity. These companies had experience in managing offshore IT operations which helped them in gaining an easy entry into the BPO market.

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Table 5: Attractiveness Index for Offshore Location Rank Country Attractiveness Index

India

7.12

China

5.61

Malaysia

5.59

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Czech Republic 5.58

Singapore

5.45

Philippines

5.45

Brazil

5.44

Poland

5.33

Hungary

5.29

10

Thailand

5.20

Though China is next to India as an attractive destination, it lags behind India in a number of parameters. Table 6 compares the two countries for their suitability for IT outsourcing based on factors such as talent pool, government support, education, etc. Clearly, India has a larger talent pool which is proficient in English and which produces better quality work using superior infrastructure. The Chinese government is, however, taking
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steps to improve Chinas value proposition for an offshore hub in services. It is focusing on providing excellent higher education to its youth by starting about 100 technological institutions similar to the IITs. The Chinese government has also made English compulsory in schools to increase the number of English speaking people.

CONCLUSION
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The BPO industry is drawing significant attention and India, by virtue of its dominance in this sector is at the center of this attention. The shift of the Indian economy towards more service orientation suggests that in the long term, India will continue to be a major player in the global BPO industry.

Despite the growth that this industry is witnessing, there are certain areas that require greater attention going forward from service providers to ensure that the industry remains firmly on the growth

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path. This survey was conducted with the objective of analyzing some of the key trends that will drive the future direction of the industry. We have endeavored to highlight some of the key risks that the industry faces and will face as the industry evolves. We have also discussed the corresponding risk-mitigants that service providers and

companies are focusing on, to manage the risks. We hope that this survey provides service providers with a deeper understanding of the industry they operate in and acts as an important input to potential customers considering outsourcing their processes to India.

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