Business processing outsourcing

BPO stands for business processing outsourcing. It is a process of hiring a different

company to handle business activities. Out sourcing is generally to enter a contract
with some other company in order to do some particular function. Well every
company does some outsourcing and the job that is outsourced is considered non-
core to the organization. The outsourcing of BPO’s has increased from payroll to
benefit management and recently they involve many functions done by other
company and are considered non-core to the company. Outsourcing includes
outsourcing of financial and administrative processes, HR jobs, customer service
and call centre. The big names in the BPO fields are US companies like IBM and
European and Asian companies like Genpact.TCS, Wipro, and Infosys etc.
Generally they hire companies which are based on some other country so as to find
cheap labor .India is a very well known location for BPO activities. As the work
done here are mainly based on IT enables and automation so the BPO is also
sometimes called as ITES i.e. information technology enabled service. Generally
BPO industry is very profitable as outsourcing of back office business to cheaper
countries like India, china, Mexico; South Africa will help the company to follow a
cut cost policy. they can also concentrate on their core business and can deal with
the customer satisfaction, all this will help the company to compete well with the
competitors, generally the US companies like IBM profits about 8$ billion by
outsourcing to the cheaper countries like India.

It helps the company in

• cut operational cost

• save cost
• improve accountability
• provide better service
• Increase productivity.
• Concentration on the core business
However BPO industry has some disadvantages also, they are

• Burden of extra capacity

• High unit personal cost
• Tight business margin
• Not to have enough financial condition to sustain the payback

IBM BPO

IBM managed business process service provides a combination of people,

technology and outsourcing models which generally gives better value to the
business provided by IBM. It generally serves the area like

• Finance and management

• Human resource

• Customer relation Management

• Procurement and supply chain management

Also the BPO industry of IBM helps the company to improve in managing its
own core processes and

• Achieving cost saving

• Driving business model change

• Enabling strategic transformation

IBM Daksh

During 2006 when the whole market for BPO industry was sinking due to the US
backlashes, high attrition rate, bad quality of the call centers, during this time IBM
spent $150 million to buy the firm Daksh. By this step they have proved that even
today there are economical benefits in outsourcing. Just when the anti-BPO wave
was entering this incident has splash water on the matter. Moreover IBM’s this
decision has also given us the look of a entirely new age of business. In 2006 the
outsourcing company’s has established a business of 1,500 corer. But the estimates
made by the Value Notes the business is going to increase to a value of $1.2 billion
by 2012.the number of vendors are also increasing, and the employees working in
the industry has increased. This will rise again by 2012.

Cause of demand for BPO jobs

The business process outsourcing in India is increasing day by day. It is matter of 4

to 5 years that BPO industries have emerged in India. There were about only 500
BPO in India around 2004 which has increased exponentially to 9-12 billion by
2006 and has made jobs for 400000 people. To do a call centre job a person don’t
require that much of degree to do the job. A graduate can get 3 times more money
than any other job offered and in doing so the company has to pay only 29 cent per
transaction. So it’s helping both the person equally

Attrition in BPO industry

India has millions of English speaking graduates who can serve well in a BPO but
still India ranks high in attrition rate. it is very difficult to calculate a companies
attrition rate firstly because
• The calculation depends on the company that is different company calculate
attrition in different way. Some call centers of UK exclude the people in the first
year of their employment and also those who leave the job to go out of this
industry

• Secondly many companies hide their actual attrition rate. They do this
because they don’t want to lose the trust of the vendors due to attrition, internally
the firm may have an attrition of about 70 % but officially they announce only 30
to 40 %

Even if the picture described above gives a very good picture about the BPO
industry benefiting the employer and the employee equally, the BPO industry is
suffering from high attrition rate of about 30-40%, but this data is according to the
official record, so the actual attrition rate can be as much as 80-90 %.till today
nobody was interested with this attrition but now they have realized that this high
attrition rate can actually cause the company major losses. NASSCOM has
reported that the BPO industry can have a shortage of 262 thousand professionals
by 2012.and obviously this high rate of shortage of employers will cause the
company to run in man power shortage.

Well attrition is also to some extent necessary for the company’s growth as, when
old people leave and new one comes they come with new ideas which helps new
innovations to flow across the countries and helps to some extent in globalization.
But when this attrition crosses its limits then it becomes a factor to be surely
considered by the company. Among these causes there are

• It increases the investment employed on employees. Generally it takes

money to train the employees and it also includes investment of time for giving
training to the candidates.
 There is lot of issues considered while recruitment is done for the
employees like the agent level recruitment. The company pays more or less 500
rupees to the recruitment agencies. Beside this direct expenses money is also spent
on administrative and training services .so the employee leaving the job before 6
months in actually making the company run in losses and also the attrition cost is
1.5 times the annual salary.

• Another reason for attrition is generally applicable to Indian market that is

India does not require high skilled laborers to do the job of a call centre i.e. India is
running low end business process. India is successful in BPO industry because it
can provide high quality work at lower price. Where the other competitors like
china and Philippines gives the same quality of work at higher price. So if the
Indian company wants to remain successful they need to keep their cost low for
this they hire low skilled laborers. For a BPO job a normal person with 4 months of
training can do the job efficiently than a highly qualified person. The problem with
low skill laborers is that, they do these jobs temporarily and leave it when they get
better offer in other industry.

• The BPO industry is generally based on youngsters who take a call centre
job as a part time job and always keep open other career alternatives. They get
good money at a young age but due to the work pressure, long working hours they
don’t agree to stay in this industry for permanent basis. Also there are some social
reasons like no one take call centre jobs in India to be sage as it has odd working
hours, employees have to give whole night service and also there is no job security
and lots of monopoly goes on. Especially girls fell uncomfortable regarding the
working hours and so they leave the job when they get better options.
Poor working condition in BPO

The international labor organization (ILO) says that in BPO’s order to meet high
turnover rate, and target performance, the working condition becomes hectic and
heavy which causes high staff turnover. So in whole the poor working condition
threatens the profitability of the firm globally. John Messenger, the senior
researcher of the International labor organization said that "BPO employees face
heavy workloads backed by performance targets combined with tight rules and
procedures. All this is enforced via electronic monitoring. This type of high-strain
work organization is well-known to produce high levels of job-related stress."

"Monotonous and unpleasant tasks (such as dealing with difficult customers over
the phone) constitute a tailor-made recipe for stress-related hazards," said
Messenger.

Even to control this type of exhaustion the international labor organization is trying
to take protective measure for the employee’s specially working late night. There
health and safety should be taken into account.
IBM attrition rate recently

India is leading in the attrition rate which is more or less 40-50 % in the BPO and
IT industry and mainly 20-25% in all other businesses. India has always paid
attention in making new technology and processes but it should pay attention in
maintaining better human resource and on their training.

The management market that controls the operation of hiring, performance

management is expected to be a $30 billion market by 2010,this is according to the
studies of IBM.IBM has 10 % of share in this market but other leading companies
like Deloitte, Hewitt and Cap Gemini have small shares. “Rajesh Namibia the vice
precedent and general manager of IBM says that IBM has the lowest attrition rate
in the industry and they make the people understand that career is important than
money”. They give better career opportunities to the employers so that they don’t
leave the company.

Researcher has shown that the average working life of an employee in a BPO is 11
months whereas in UK the employee stays for at least 3 years. The Indian IT and
BPO business is taking its worst picture. The graph below shows that the average
attrition rate of the biggest BPO companies was 40% which when compared to the
Silicon Valley shows an attrition of 20-23 %.that is there each employee averagely
works for 3 to 5 years.

Nowadays the HR management is paying attention to the career of the employees

working in the company and they are trying to give good working environment to
the employees working in the company. This has resulted in the following issues

• The employee satisfaction in the descent years has increased to 9 %

• Attrition rate has decreased to 5 % from before

• The employees roughly 60 % now find good career option while working in
BPO’s

• Average salary hike is decreased

• Though gender diversity is maintained still female count of employees

working in call centre has gone down

• VCustomer has topped the list for the consecutive year while IBM Daksh
remains the second biggest employer.

From the above introduction we understand very well that man power is the main
power of BPO industry and their welfare is very important to curb attrition for this
we require good and proper HR

• Raising the salary of the employees which has made the attrition little less

• Smart people management tool are used nowadays: that is the leading BPO
and ITES companies are providing the employees with some better additional
benefits besides giving them high salary so that they can keep their employees
happy so promote job retention.

• The company’s are also providing luxury benefits such as housing schemes,
low rate loans, pick and drop facilities, and attractive food during the lunch or
dinner

• The organizations are putting codes of ethics so as to prevent employees

from straying

So at last we can say that proper management policies that is proper HR policy can
actually make better use of man power .and if the organizations look into these
matters seriously and treat employees importantly then India will remain as the
source of high quality IT talents.