Business Process Outsourcing?

What is business process outsourcing? Business process outsourcing otherwise know

as BPO is the process of leveraging technology vendors 

in various third world or developing nations for doing a job which was once the
responsibility of the enterprise. Or simply put, it is the process of shifting an internal job
process to an outside/external company which might have a completely different
geographical location.

Generally the processes being outsourcing as part of BPO are backend jobs like
call/help centers, medical transcription, billing, payroll processing, data entry and the
like. Most of these jobs are outsourcing by first world nations like USA and UK to third
world nations like India, Philippines, China, Malaysia and some eastern European
countries.

These nations have a good pool of English speaking youth who receive accent and job
related training before they are inducted at a salary which is much lesser than what their
counterparts in first world nations would demand. This allows first world organizations to
get higher profits and provide better services by lowering the prices and by recruiting
more labor than they could possibly do otherwise. In addition to benefiting the first world
nations, business process outsourcing has also benefited third world nations by
generating much needed jobs. 
What is BPO?
BPO as expanded sounds as Business Process Outsourcing and can be aptly defined
as the act of utilizing the services of a third party by a company in order to perform its
back office operations that might be payroll administration, customer help desks/ call
centers, tele- marketing, accounting, billing; the list is endless.

Business Process Outsourcing (BPO)

is outsourcing of business functions generally performed by white collar and clerical
employees to achieve various benefits such as cost savings, better quality and ability to
focus on core competence. BPO involves outsourcing processes that are not core to a
company, however, are essential for smooth operation of the company. The customer
transfers the complete responsibility of these functions to the vendor who guarantees
certain service quality standards. Such processes include customer service, payroll
processing, inventory management, etc. 
The global market size for BPO is estimated to be around USD 382.5 billion in 2004
according to market intelligence firm IDC. The research firm expects robust growth in
the BPO industry with more and more companies reaping the benefits of BPO all over
the world. The BPO market size is expected to reach USD 641.2 billion by 2009 with a
Cumulative Annual Growth Rate (CAGR) of 10.9 percent from 2005 to 2009.
BPO has evolved over the years, beginning with time-sharing data processing in the
1960s; according to technology research and consulting firm ebs. Over these years, like
outsourcing, BPO has moved from being transactional (task oriented) to being strategic
(process oriented).
Business Process Outsourcing includes the following areas and a lot
more

 Back office operations

 Customer Relationship Management
 Call Centers and telemarketing
 Tele-servicing and product support
 Payroll maintenance
 Finance / Accounting/billing
 Human Resources
 Logistics Management
 Supply Chain Management
 Medical transcription
 Back Office Operations
 Insurance Claims Processing
 Legal database maintenance

The BPO Industry

The BPO industry has flourished at a frantic pace in the last few years and companies
have ended up with huge savings by being a part of the industry. By outsourcing their
back office business processes to cheaper nations like China, India, Philippines,
Mexico, South Africa etc companies can cut costs, better concentrate on their core
businesses and strengths, ensure better customer satisfaction and in a way get an edge
over their competitors. A report suggests that US firms have saved nearly $8 billion
through outsourcing to third world nations like India.

Industry size

India has revenues of 10.9 billion USD from offshore BPO and 30 billion USD from IT
and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO
Industry, but a commanding 63% share of the offshore component. This 63% is a drop
from the 70% offshore share that India enjoyed last year, despite the industry growing
38% in India last year, other locations like Eastern
Europe,Philippines, Morocco, Egypt and South Africa have emerged to take a share of
the market. China is also trying to grow from a very small base in this industry.
However, while the BPO industry is expected to continue to grow in India, its market
share of the offshore piece is expected to decline. Important centers
in India are Bangalore, Hyderabad, Kolkata, Mumbai, Pune, Chennai and New Delhi.
The top five Indian BPO exporters for 2006-2007 according to NASSCOM
are Genpact, WNS Global Services, Transworks Information Services, IBM Daksh,
and TCS BPO.
According to McKinsey, the global "addressable" BPO market is worth $122 – $154
billion, of which: 35-40 retail banking, 25-35 insurance, 10-12 travel/hospitality, 10-12
auto, 8-10 telecoms, 8 pharma, 10-15 others and 20-25 is finance, accounting and HR.
Moreover, they estimate that 8% of that capacity was utilized as of 2006.

BPO Benefits and Limitations

Benefits of BPO

 Increase productivity
 Cut operational costs
 Provide better service
 Save costs
 Improved accountability

The BPO boom seems to be increasing everyday with more and more companies
deciding to follow the race, making conditions really viable for a positive growth in the
BPO industry. you can make money online through bpo. 

An advantage of BPO is the way in which it helps to increase a company’s flexibility.

However, several sources have different ways in which they perceive
organizational flexibility. Therefore business process outsourcing enhances the flexibility
of an organization in different ways.
Most services provided by BPO vendors are offered on a fee-for-service basis This can
help a company becoming more flexible by transforming fixed into variable costs. A
variable cost structure helps a company responding to changes in required capacity and
does not require a company to invest in assets, thereby making the company more
flexible. Outsourcing may provide a firm with increased flexibility in its resource
management and may reduce response times to major environmental change.
Another way in which BPO contributes to a company’s flexibility is that a company is
able to focus on its core competencies, without being burdened by the demands of
bureaucratic restraints. Key employees are herewith released from performing non-core
or administrative processes and can invest more time and energy in building the firm’s
core businesses. The key lies in knowing which of the main value drivers to focus on
– customer intimacy, product leadership, or operational excellence. Focusing more on
one of these drivers may help a company create a competitive edge.
A third way in which BPO increases organizational flexibility is by increasing the speed
of business processes. Using techniques such as linear programming can reduce cycle
time and inventory levels, which can increase efficiency and cut costs Supply chain
management with the effective use of supply chain partners and business process
outsourcing increases the speed of several business processes, such as the throughput
in the case of a manufacturing company.
Finally, flexibility is seen as a stage in the organizational life cycle. BPO helped to
transform Nortel from a bureaucratic organization into a very agile competitor A
company can maintain growth goals while avoiding standard business bottlenecks. BPO
therefore allows firms to retain their entrepreneurial speed and agility, which they would
otherwise sacrifice in order to become efficient as they expanded. It avoids a premature
internal transition from its informal entrepreneurial phase to a more bureaucratic mode
of operation.
A company may be able to grow at a faster pace as it will be less constrained by large
capital expenditures for people or equipment that may take years to amortize, may
become outdated or turn out to be a poor match for the company over time.
Although the above-mentioned arguments favor the view that BPO increases the
flexibility of organizations, management needs to be careful with the implementation of it
as there are a issues, which work against these advantages. Among problems, which
arise in practice are: A failure to meet service levels, unclear contractual issues,
changing requirements and unforeseen charges, and a dependence on the BPO which
reduces flexibility. Consequently, these challenges need to be considered before a
company decides to engage in business process outsourcing
A further issue is that in many cases there is little that differentiates the BPO providers
other than size. They often provide similar services, have similar geographic footprints,
leverage similar technology stacks, and have similar Quality Improvement approaches.
Threats

Risk is the major drawback with Business Process Outsourcing. Outsourcing of an

Information System, for example, can cause security risks both from a communication
and from a privacy perspective. For example, security of North American or European
company data is more difficult to maintain when accessed or controlled in the Sub-
Continent. From a knowledge perspective, a changing attitude in employees,
underestimation of running costs and the major risk of losing independence, outsourcing
leads to a different relationship between an organization and its contractor.
Risks and threats of outsourcing must therefore be managed, to achieve any benefits.
In order to manage outsourcing in a structured way, maximizing positive outcome, and
minimizing risks and avoiding any threats, a Business Continuity Management (BCM)
model is setup. BCM consists of a set of steps, to successfully identify, manage and
control the business processes that are, or can be outsourced.
Another framework, more focused on the identification process of potential
outsourceable Information Systems, identified as AHP, is explained.
L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems
companies face, ranging from unclear contract formatting, to a lack of understanding of
technical IT- processes.
BPO Trends
The BPO industry is a developing sector and is being studied by analysts and
researchers all over the world. Analysts tracking BPO have observed the following
trends in the industry:

 The BPO market worldwide is expanding with new services getting added to the
list of business processes that are outsourced and new locations coming up as
potential offshore destinations, India being the most preferred destination for
offshore BPO.
 Cost savings is one of the most important drivers now. Information security,
execution capability and financial stability are important considerations while
selecting a vendor.
 According to IDC, customer care and logistics are mature segments, while
procurement and training are emerging markets and are expected to have a
growth of more than 10 percent in the next five years.
 Gartner has also observed the latest trend of offshore insourcing , in which firms
establish their own offshore captive centers. These captive centers are generally
shared service centers and allow the firms to retain control over the processes.

Table 1: Evolution of BPO

Year Process
s

1960 Time sharing

s

1970 Data processing

s

1980 Entire IT operations

s

1990 Shared business services

s

2000 B2B partnerships via Internet

s
2000 Process outsourcing via Internet
s

2000 IT-enabled offshore services

s

World's Best BPO Vendors

Owing to the huge opportunity that lies in BPO, large corporations have ventured into
the business and have set up BPO operations all over the world. There is a strong
competition among these multinationals and many organizations such as the
Outsourcing Management Institute, the Chief Resource Officer Institute, DataQuest and
BPOrbit release BPO rankings each year. The Black Book of Outsourcing by Doug
Brown and Scott Wilson provides a list of world's best BPO vendors for the year 2004-
2005. The parameters used for ranking these vendors include customer satisfaction,
employee satisfaction, reviews of global consulting firms, performance with respect to
other vendors and client performance ratings. The top 10 BPO vendors have been listed
Table 2.

Table 2: World's Best BPO Vendors

Num Vendor

1 IBM Global / Daksh

2 Accenture

3 Hewlett Packard

4 MphasiS

5 Ernst & Young / Capgemini

6 Wipro Spectramind

7 ICICI One Source

8 eFunds Global Outsourcing

 9 Convergys

10 Affiliated Computer Systems

BPO Business Models

Over the years, different models have been used for conducting business in BPO. The
regular outsourcing models of on-shoring, near-shoring and offshoring are seen in BPO
as well. TPI, a sourcing advisory, has observed that in addition to on-shoring, near-
shoring and offshoring, BPO operations are also conducted through the following
three business models :

•  Transactional BPO: Transactional BPO handles one aspect of a process only. The

customer has to carry out a significant part of the process in-house and hence the
customer owns the risk of the process. Also, outsourcing many aspects of the process
in a transactional mode leads to complex fragmentation which can pose as a threat to
productive delivery.

•  Niche BPO: A niche BPO carries out 3-4 aspects of a process. A niche BPO, which
also makes certain investments in the customer's process, aims at improving the
efficiency of the process. The vendor in a niche BPO works in close coordination with
the buyer, sometimes seeking the services of the customer's employees. Both the
vendor and the buyer share the risk of the process.

•  Comprehensive BPO: A comprehensive BPO handles both transactional and

administrative tasks in a process and takes 70 percent responsibility of the output. The
vendor purchases the buyer's assets and also hires most of its employees.
Comprehensive BPO has bulk deals lasting for 7-10 years.

Types of BPO Services

BPO services are generally categorized into horizontal and vertical services. These
have been explained below:

1. Horizontal BPO: Horizontal BPO involves function centric outsourcing. The

vendor specializes in carrying out particular functions across different industry
domains. Examples of horizontal BPO are outsourcing in procurement, payroll
 processing, HR, facilities management and similar functions. Automatic Data
Processing (ADP) is an example of a horizontal BPO vendor. ADP focuses on
providing services in horizontal functions such as payroll, HR, benefit
administration, tax solutions, etc. However, according to Gartner, companies
should focus on providing vertical services as the market matures.
2. Vertical BPO: A vertical BPO focuses on proving various functional services in a
limited number of industry domains. Healthcare, financial services, manufacturing
and retail are examples of vertical BPO domains. EXL Service Holdings is a
vertical BPO having focus on industry domains such as healthcare, business
services, utilities and energy and manufacturing.

Table 1: Horizontal and Vertical BPO

BPO Best Practices
With time, every industry starts following certain best practices as it develops and
matures. The best practices followed in the BPO industry include:

 Companies outsource critical but non-core business processes that are not
strategic to the firm's vision.
 An inefficient process is not outsourced to a third party vendor without any re-
engineering.
 Companies gather support from its employees before taking the outsourcing
plunge. The first step towards this is early communication of the outsourcing
decision to the employees and even the shareholders.
 Sourcing advisors are consulted for negotiating a deal.
 Vendor is selected based on various criteria such as quality commitment, cost,
transparency of operations, data security, etc.

BPO Drivers and Inhibitors

The advantages offered by outsourcing in general are valid for BPO as well, and these
advantages act as internal drivers for BPO. In addition to these internal drivers,
companies are lured to choose the BPO option due to the following external drivers:

 Robust IT and telecommunications infrastructure: The developments in IT

and telecommunications infrastructure has enabled companies to transfer data to
any place in the world instantaneously at very little cost. This infrastructure also
allows them to increase their ROI and shareholder value.
 Pressure to lower costs: Companies are facing huge competition from their
competitors to provide better services, and at the same time lower their costs.
Companies are constantly innovating the way they are conducting businesses
and BPO allows them to partner with external specialized vendors for efficient
operations. Offshore BPO is cheaper than onshore BPO and many companies
are now moving their operations to offshore locations, India being the most
preferred destination.
  Little infrastructure for automation: The IT revolution has not achieved
success in automating business processes and most of the business processes
still need human labor for productive delivery. In such a scenario, resorting to
BPO, which provides human labor at a lower cost, enables companies to
maximize their ROI.

The perceived risks of outsourcing act as a big inhibitor for BPO. Some of these risks
have been described below:

 Loss of control: Companies perceive the risk of losing control over the
operations of their processes. Also, if the (trained) employees in the vendor firm
leave the job, the buyer may be at risk.
 Financial instability of the vendor: If the vendor becomes financially unstable
in some years, the buyer will have to search another vendor; the operations
being at risk, if it does not search the new vendor fast.
 Loss of expertise: Customers may lose the expertise and knowledge of carrying
out the outsourced processes with time.
 Data security: Data confidential to the customer may be prone to theft if the
vendor firm does not have stringent security policies.

What constitutes BPO?

BPO deals mainly with non-core processes of an organization. Some of these
processes have been briefly explained below.

 Administrative support: Outsourcing of administrative support functions

includes data entry, document conversion, forms processing, document
scanning, indexing, secretarial tasks support, etc.
 Customer relationship management: Customer service outsourcing includes
outsourcing of functions such as customer support, order taking, customer
 service, product support, technical help desk, collections and market research.
Refer to the report on Customer Service Outsourcing for more details.
 Document processes: Document process outsourcing includes outsourcing of
customer facing, technical, marketing and communications, financial accounting,
and regulatory compliance documents.
 Finance and accounting: Finance and accounting outsourcing includes
services such as internal auditing, time and expense management, travel
expenses, credit and debt analysis, collections, invoicing, accounts payable,
accounts receivable and billing-dispute resolution.
 Human resources and training: Human resources (HR) is one of the most
critical assets of a company and companies need to carry out various tasks such
as recruitment, training, attrition/retention, database management, contract-
worker management, etc., for their employees. Carrying out these tasks through
an internal HR department is costly and diverts the attention of the management
from its core business issues. Hence, companies are now resorting to HR
outsourcing big time.
 Intellectual property research and documentation: Outsourcing in intellectual
property research and documentation includes filing and drafting of patent
applications, prior art research, licensing support, and patent portfolio analysis.
 Legal services: Legal process outsourcing (LPO) involves consulting, research,
transcription, documents management, billing, translation and other
administrative and secretarial support services required for various legal
functions such as commercial litigation, arbitration and mediation, appeals,
government contracts, legal risk evaluation, etc.
 Medical transcription: Medical transcription is writing down medical records
dictated by physicians and other healthcare professionals. These records include
patient history and physical reports, clinic notes, therapeutic procedures, clinical
course, diagnosis, prognosis, discharge summaries, etc.
 Payroll maintenance and other transaction processing: This segment
includes payroll, payment, check, credit card and stock trade processing.
Forester research predicts transaction processing to be a large segment within
the BPO industry soon, with a market size of USD 58 billion in 2008. Some
vertical processes such as mortgage, loans and insurance claims processing are
also being outsourced.
 Product development: Companies need to constantly innovate to remain
competitive in the market. With the increasing specialization of expertise required
to carry out product development, companies choose to outsource their R&D
functions to vendors who have expertise in a given field. Over the past few years,
numerous MNCs have initiated offshoring R&D to other countries including India
which is emerging as a hub for R&D outsourcing.
  Publishing: Publishing outsourcing involves outsourcing of publishing functions
such as book design, book digitization, e-publishing, drawings and graphics,
indexing, journal administration, etc.
 Research and analysis: Companies require data and its analysis for making
informed strategic decisions. These companies have started outsourcing their
research and analysis requirements to vendors who specialize in typical research
and analysis work such data analytics, financial analytics, market research,
secondary research, primary research, industry overview, competitive
intelligence, etc.
 Sales and marketing (including telemarketing): Sale and marketing
outsourcing involves delegating parts of sales and marketing functions such as
cold calling, email pitches, telephone surveys, lead generation, lead qualifying,
appointment setting, sales team management, etc.
 Security: Companies have to search for new technologies and employ qualified
security professionals to keep their data secure from theft. Maintaining these
resources and implementing a fool-proof security policy is a difficult task which
can be better handled by experienced third party security agencies. Security
outsourcing involves management of investigative services, physical security,
electronic security systems, computer and network security, etc.

Supply chain management: Outsourcing in supply chain management involves

logistics, procurement, warehouse management, contract management, supply chain
relationship management, etc.
BPO India - Present and Future
The BPO boom has helped developing countries like India in a major way by creating
quality job opportunities in turn benefiting the Indian economy. 

So what is it that makes Bpo India stand out in the crowd?

The Indian Edge

India in the recent years has shown huge developments in the areas of communication,
power and software developments. India exports software to 95 different countries and
stands second in the world as far as software exports are concerned. In addition India
has ISO 9000, CMM quality certified software firms that have a reputation of providing
quality services. India stands out of the rest in terms of better IT and technological
infrastructure, low cost, skilled manpower that is readily available, friendly taxation and
other laws, a stable government, a fast paced economy and quality certified software
firms.

Where in India?
IT city Bangalore seems to be a hot destination for BPOs swiftly followed by similar
technologically advanced cities like Chennai, Hyderabad, Mumbai, Delhi, Kolkata and
Pune. All these cities in India are technologically advanced and have a good
infrastructure with almost 278 quality certified BPO vendors.

Improving situations
India as a major outsourcing destination mainly handles low value added, activity
related back office services such as data entry, call center, tele-calling, tele-marketing
and so on; but the situation seems to be improving every day with companies moving
up the value chain by entering knowledge services.

Companies such as Office Tiger and WNS Global are already moving in this direction
with both companies setting up knowledge service divisions. This coupled with
advancement in communication facilities and improving infrastructure is enabling India
to enter into the high end services providing sector that will strengthen even further in
the years to come enabling global players to outsource high end service based jobs to
India. 

Benefits of outsourcing to India

Selecting the perfect outsourcing destination plays the most important role in deciding
your success or failure! But you need not panic, as there 

are a few countries that stand, way out of the rest that might aid your decision making.

Where to outsource?
The Outsourcing spectrum may highlight various outsourcing destinations like China,
Philippines, India, Mexico, South Africa, Ireland, Brazil, Canada etc where one can
outsource. But it doesn't take much time for anyone to come to a conclusion that India
tops the rest and does so with utmost ease; at lease for the time being. An obvious
question being WHY? Well we can't give you a comparitative analysis but rather we
would like to give you some hard facts about India and why there are so many
companies who don't blink an eye-lid before betting on this developing Subcontinent.

Why outsource to India?

The benefits of offshore outsourcing and particularly software services outsourcing to
India are many. To begin with India is a nation that is brimming with youthful energy and
holds huge talents in the sectors of information technology and other related fields. India
gives you the advantage of english speaking youth who are both hard working and
talented and has the best institutions that produce highly talented brains. Being an IT
focused country, India has a technological edge over others and exports software to 95
countries world wide and can provide you with hi tech infrastructure for IT and other
related technological services. In addition India being the largest democratic country
has a stable government with extremely labor and investor friendly laws. No wonder big
companies like IBM, Microsoft, Oracle, Cisco, Prudential, Hewlett Packard, ATT
Wireless, TransUnion, First Consulting Group (FCG), Dell Computer Support, Bell
South, EDS, GE Capital, GE, IBM, Schlumberger, Qwest, Rand McNally along with 230
fortune 1000 companies outsource to India.

Low manpower costs, high quality of service, talented workforce, best infrastructure and
advanced technology make outsourcing to India your best bet. This has been proved by
the statistics of erp outsourcing 2003 india along with IT outsourcing India. Who said
finding the perfect outsourcing destination was difficult? 
Negative effects of Outsourcing
Over the past 20 years outsourcing as a phenomena has developed at a very fast pace.
The growth of IT, aiding globalization and thereby generating multinational 

societies has given rise to situations where cut throat competition tends to take the
better of us. One face of this competition is the frenzy of research and development, to
cut costs and provide better services, which has manipulated itself into outsourcing. The
situation seems more threatening every added day as more companies follow suite to
the actions of their rivals.

Outsourcing - The Real Facts

Outsourcing is seen by many economists as a win-win situation but is not always so. It
has lots of downsides that most of us can't possibly conceive and only have to leave it
to time. The present major downside of outsourcing is the fact that policies of the first
world nations like UK and US for outsourcing are nothing but sloppy. There is no fair
playing ground for companies big and small and the only alternative that they are forced
to believe is to outsource. Imagine the plight of an organization that is quite happy
without outsourcing and feels the punch when the rival starts grabbing all the profits by
lowering the price.

All of us need services and that too at a lower cost. Here the products and services that
come cheaper and with high quality get better sales that those with only quality. The
concept of a fair playing ground is that an organization must not be affected much
irrespective of the fact whether it wants to outsource or not. This is where the
governments fail and this is where the fault lies.

Impact of Offshoring Jobs

With outsourcing the jobs are sure to go. The third world countries do get benefited
because of this, but what about the people in the first world nations. They do feel unrest
and no assurances are going to keep them from frowning about their precious job that
was taken away. Here again the policies are to blame. Offshore outsourcing backlash
on communities was bound to happen not because the jobs are getting outsourced, but
because the way the jobs are being outsourced offshore today. People are not able to
grasp the implications with a pinch of salt that is way too salty.

The Outsourcing Trap

The false image of outsourcing created today because of sloppy policies has lead to
many outsourcing failures leading to heavy losses. Poor governance, lack of
communications, cultural misfit, lack of knowledge and lack of good policies are
responsible for major companies getting their feet burned due to outsourcing. Negative
effects of outsourcing offshore are only bound to increase further in case the limitations
on offshore outsourcing are not clarified.

Outsourcing has lots of drawbacks that are still not clear and will emerge eventually as
time passes. The drawbacks can be in the form of a firm actually increasing its spending
structure without its knowledge, emergence of new competitors and loss in the
product/service competitiveness.

Beware of the Supplier - Future Negative Implications

Outsourcing service providers or suppliers are the ones that offer services to small and
medium sized organizations. Big shots don't need these suppliers as they set up their
own outlets. But the small and medium sized companies depend completely on these
suppliers to outsource their processes. Most of these suppliers handle many processes
from different organizations and in many cases, may even be providing services to
organizations that are rivals or direct competitors of each other. This gives rise to a
situation of the information being leaked. Though it has some negative effects at its side
, you can work at home opportunities.

As the supplier has complete control over processes of an organization he may leak it to
the potential competitor who offers better rates. This kind of situation is more than
inevitable. This can lead to organizations loosing its customers entirely to their
competitors; a situation that outsourcing gave rise to.

One more situation that can develop is the supplier himself getting all the inside
information can start his own services. This gives rise to a newer and stronger breed of
competitors who have the ability to collaborate with competitors or set up individual
branches with better services.

Other Drawbacks of Outsourcing

At this point it will be logical to highlight some very rampant drawbacks of outsourcing.

Firstly there is a situation today where employees have started fearing job losses. This
gives rise to lower motivation and thereby decline in services. After all who would like to
serve an organization that he feels is going to sack him for all his services. An employee
can give the company 100% if and only if he feels that he is an integral part of the
organization and not some dummy to be sacked when ever the company feels like. One
more point here is that a sacked employee could even join hands with competitors and
bring to light the weaknesses of the company.
Outsourcing can also lead to the alterations of well established job processes that can
lead to unnecessary delays and conflicts. Lack of coordination between people having
different cultural backgrounds and different time zones can also lead to time losses.

Looking at all these drawbacks, outsourcing really does not seem to be the magic
answer for cutting costs. On the contrary outsourcing is way more complicated and can
lead to drastic situational developments in the afterward. The governments of first world
nations at this point need to analyze this situation and help develop a fair playing
ground for organizations taking into consideration the negative effects of outsourcing
offshore. 
 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-

intensivebusiness processes to an external provider that 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.
 India’s capabilities in BPO

•Low labor costs ($1.5-$3/hr) for high quality, adequate supply of English speakers due
to large-urban locations leading to realization of scale economies (average call center is
1000+ employees), project management skills, adequate and cost-effective
communications and other infrastructure, strong flow of global venture capital,
andtechnological sophistication, MNC presence; all-in costs of $5.50-$12/hour,
compared with US costs of $28/hour.

•Negatives are high operator attrition rates (though the U.S. is higher), shortage of
middle and senior migration and operations management, shortage of vertical expertise
in fast-growing areas like insurance, logistics, health care, real estate, and shortage of
horizontal expertise in payroll, benefits, document management and interactive
customer-care.

•Rapid ramp-up possible: most firms we met planned 100%+ annual expansion into the
next 3 years. Currently call-centers account for 70% of work, will drop to 30% by 2006;
MNCsdriving growth (40% market share), expect BP employment to cross 1,000.000 by
2006; focus on financial, telecom and IT firms’ back-office work.
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 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.

3. Telemarketing Services

Our telesales and telemarketing outsourcing services target interaction with

potential customers for 'prospecting' like either for generating interest inproducts
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 ratecard 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 multi-channel support
across a wide range of shrink wrapped and 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 processesapplicable 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:

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:

o Data entry from Paper/Books with highest accuracy and fast turn around
time (TAT)
o Data entry from Image file in any format
o Business Transaction Data entry like sales / purchase / payroll.
o Data entry of E-Books / Electronic Books
o Data Entry : Yellow Pages / White Pages Keying
o Data Entry and compilation from Web site
o Data Capture / Collection
o Business Card Data Entry into any Format
o Data Entry from hardcopy/Printed Material into text or required format
o Data Entry into Software Program and application
o Receipt and Bill Data Entry
 o Catalog Data Entry.
o Data Entry for Mailing List/Mailing Label.
o Manuscripting typing in to word
o Taped Transcription in to word.
o Copy, Paste, Editing, Sorting, Indexing Data into required format etc.
7. Data Conversion Services

Service Example:

o Conversion of data across various databases on different platforms

o Data Conversion via Input / Output for various media.
o Data Conversion for databases, word processors, spreadsheets, and
many other standard and custom-made software packages as per
requirement.
o Conversion from Page maker to PDF format.
o Conversion from Ms-Word to HTML format
o Conversion from Text to Word Perfect.
o Conversion from Text to Word to HTML and Acrobat
o Convert Raw Data into required MS Office formats.
o Text to PDF and PDF to Word / Text / Doc
o Data Compilation in PDF from Several Sources.
o E-Book Conversion etc.
8. Scanning, OCR with Editing & Indexing Services

Service Example:

o High speed Image-Scanning and Data capture services

o High speed large volume scanning
o OCR Data From Scanned page / image
o Scan & OCR paper Book in to CD.
o ADOBE PDF Conversion Services.
o Conversion from paper or e-file to various formats
9. Book Keeping and Accounting Services

Service Example:

o General Ledger
o Accounts Receivables and Accounts Payable
o Financial Statements
 o Bank Reconciliation
o Assets / Equipment Ledgers etc.
10. Form Processing Services:

Service Example:

o Insurance claim form

o Medical Form / Medical billing
o Online Form Processing
o Payrol Processing etc.

11. Internet / Online / Web Research

Service Example:

o Internet Search, Product Research, Market Research, Survey, Analysis.

o Web and Mailing list research etc.
 Challenges for a HR Professional in BPO

1. Brand equity: People still consider BPO to be "low brow", thus making it difficult
to attract the best talent.
2. Standard pre-job training: Again, due to the wide variety of the jobs, lack of
general clarity on skill sets, etc, there is no standard curriculum, which could be
designed and followed.
3. Benchmarks: There are hardly any benchmarks for compensation and benefits,
performance or HR policies. Everyone is charting their own course.
4. Customer-companies tend to demand better results from outsourcing partners
than what they could actually expect from their own departments. "When the job
is being done 10,000 miles away, demands on parameters such as quality, turn
around timeliness, information security, business continuity and disaster
recovery, etc, are far higher than at home. So, how to be more efficient than the
original?
5. Lack of focused training and certifications

Given this background, the recruiting and compensation challenges of HR

departments are only understandable.

Key To success

The key to success in ramping up talent in a BPO environment is a rapid training

module. The training component has to be seen as an important sub-process, requiring
constant re-engineering.
 Business Process Outsourcing: The Top Rankers

WNS has emerged as the top BPO in India, pushing Wipro Spectra mind 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. WNS Group
2. Wipro Spectramind
3. Daksh e-Services
4. Convergys
5. HCL Technologies
6. Zenta
7. ICICI Onesource
8. MphasiS
9. EXL
10. Tracmail
11. GTL Ltd.
12. vCustomer
13. HTMT
14. 24/7 Customer
15. Sutherland Technologies

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).
Employee Benefits Provided By Majoriy Of the BPO Companies

 Provident Fund: As per the statutory guidelines, the employee is required to

contribute a percentage of his basic salary and DA to a common fund. The
employer for this fund contributes as well. The employee can use the amount
deposited in this fund for various personal purposes such as purchase of a new
house, marriage etc.
 Gratuity: Gratuity is one of the retrial benefits given to the employee in which the
employer every year contributes a particular amount. The fund created can be
used by the employee for the purpose of long-term investment in various things
such as a house etc.
 Group Mediclaim Insurance Scheme: This insurance scheme is to provide
adequate insurance coverage of employees for expenses related to
hospitalization due to illness, disease or injury or pregnancy in case of female
employees or spouse of male employees. All employees and their dependent
family members are eligible. Dependent family members include spouse, non-
earning parents and children above three months
 Personal Accident Insurance Scheme: This scheme is to provide adequate
insurance coverage for Hospitalization expenses arising out of injuries sustained
in an accident. It is applicable to all the employees of JFWTC and covers total /
partial disablement / death due to accident and due to accidents.
 Subsidized Food and Transportation: The organizations provides transportation
facility to all the employees from home till office at subsidized rates. The lunch
provided is also subsidized.
 Company Leased Accommodation: Some of the companies provides shared
accommodation for all the out station employees, in fact some of the BPO
companies also undertakes to pay electricity/water bills as well as the Society
charges for the shared accommodation. The purpose is to provide to the
employees to lead a more comfortable work life balance.
 Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities
include pool tables, chess tables and coffee bars. Companies also have well
equipped gyms, personal trainers and showers at facilities.
 Corporate Credit Card: The main purpose of the corporate credit card is enable
the timely and efficient payment of official expenses which the employees
undertake for purposes such as travel related expenses like Hotel bills, Air tickets
etc
 Cellular Phone / Laptop: Cellular phone and / or Laptop is provided to the
employees on the basis of business need. The employee is responsible for the
maintenance and safeguarding of the asset.
 Personal Health Care (Regular medical check-ups): Some of the BPO'S provides
the facility for extensive health check-up. For employees with above 40 years of
age, the medical check-up can be done once a year.
 Loans: Many BPO companies provides loan facility on three different occasions:
Employees are provided with financial assistance in case of a medical
emergency. Employees are also provided with financial assistance at the time of
their wedding. And, The new recruits are provided with interest free loans to
assist them in their initial settlement at the work location.
 Educational Benefits: Many BPO companies have this policy to develop the
personality and knowledge level of their employees and hence reimburses the
expenses incurred towards tuition fees, examination fees, and purchase of books
subject, for pursuing MBA, and/or other management qualification at India's top
most Business Schools.
 Performance based incentives: In many BPO companies they have plans for ,
performance based incentive scheme. The parameters for calculation are
process performance i.e. speed, accuracy and productivity of each process. The
Pay for Performance can be as much as 22% of the salary.
 Flexi-time: The main objective of the flextime policy is to provide opportunity to
employees to work with flexible work schedules and set out conditions for
availing this provision. Flexible work schedules are initiated by employees and
approved by management to meet business commitments while supporting
employee personal life needs .The factors on which Flexi time is allowed to an
 employee include: Child or Parent care, Health situation, Maternity, Formal
education program
 Flexible Salary Benefits: Its main objective is to provide flexibility to the
employees to plan a tax-effective compensation structure by balancing the
monthly net income, yearly benefits and income tax payable. It is applicable of all
the employees of the organization. The Salary consists of Basic, DA and
Conveyance Allowance. The Flexible Benefit Plan consists of: House Rent
Allowance, Leave Travel Assistance, Medical Reimbursement, Special
Allowance
 Regular Get together and other cultural programs: The companies organizes
cultural program as and when possible but most of the times, once in a quarter,
in which all the employees are given an opportunity to display their talents in
dramatics, singing, acting, dancing etc. Apart from that the organizations also
conduct various sports programs such as Cricket, football, etc and regularly play
matches with the teams of other organizations and colleges.
 Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/-
based on their level in the organization.
 Employee Referral Scheme: In several companies employee referral scheme is
implemented to encourage employees to refer friends and relatives for
employment in the organization.
 Paid Days Off
 Maternity Leave
 Employee Stock Option Plan

Inspite of all these benefits, the attrition rate in BPO industry is very high, why?. What is
the reason for an employee to leave? These and many more are the questions that
need immediate attention from the industrial gurus.

Why people prefer to join BPO's?

In general a person with any graduation can join any of the BPO. Some BPO's like to
take people with MBA but then again the specialization are of an individual hardly
makes any difference. Again, this is the industry, where there is no reference checks
and very often people don't even specify there exact age. Lets me share with you some
of the reasons as why people prefer to join a BPO:

1. Did not get a better job.

2. Find nothing better to do.
 3. Education level doesn't matter
4. Good work environment
5. Good Benefits
6. Flexibility of time
7. Attractive life style
8. Transport facility

Why people leave the BPO's?

When there are so many benefits associated with BPO industry….when there are so
many privileges for the BPO employees than what makes them to change the
company/industry?? Is it only MONEY that matters or anything else as well?? Here are
some of the reasons for a BPO professional to change his/her job.

1. No growth opportunity/lack of promotion

2. For higher Salary
3. For Higher education
4. Misguidance by the company
5. Policies and procedures are not conducive
6. No personal life
7. Physical strains
8. Uneasy relationship with peers or managers

What they have to say?

With so much of uncertainty in the market…..people are trying their best to stop or to at
least have a control on the attrition rate…let me share with you the opinion of the real
gurus of the industry.

"Training is a very important aspect of the ITES-BPO industry"- Mr. Arjun Vaznaik,
COO, Tracmail

" Career growth in the industry is robust and there is a long-term opportunity. The great
growth momentum that the industry is witnessing is creating both vertical and lateral
career opportunities. There also exists enough growth opportunities in the middle-
management and supervisory level within the industry". - Aadesh Goyal, Executive Vice
President & GM, Hughes BPO Services
"It will not be possible for the industry to arrive at a blanket agreement on poaching but
bilateral agreements between companies are being signed. Basic norms are being put
in place and code of ethics is being stressed upon by industry players within the sector
with respect to HR practices. We are encouraging companies to adopt responsible
behavior in order to ensure that the industry does not become a victim of its own
actions. Industry needs to go aggressive but not cannibalistic." - Mr. Suren Singh
Rasaily, Senior Vice President, NIIT Ltd. and Head Plantworkz

Conclusion:

This is a descriptive report on BPO industry. I have tried to cover almost everything
related to the industry. Even at the end of this comprehensive report, my concerns are
related to development of employees in BPO, controlling attrition rate in BPO, can we
have some standard industrial compensation package/ break-ups??
•Five years ago, the key issues, common to both ITO and BPO were:telecom quality
and costs, lack of VC finance, long ramp-up time due to government delays. Against
this, firms weighed cost savings of 40-80%.
•Today, the cost savings range from 30-80% (less in IT, higher in BP) and issues with
telecom, VC and startup costs have disappeared. Clusters are emerging for both IT and
BP (Mumbai and Delhi for BP,Bangalore for IT and BP).
•MNCs will be the drivers of future growth, more focus on higher-end work.
•Skills shortage in high value-added areas and process management skills will initially
keep value-addition low relative to developed countries. The ability to absorb or
independently develop higher-level skills remains unknown, the software services
experience indicating how difficult this is.
•Challenge for developed economies is to produce enough high-end labor to leverage
Indian BPO business. IT provides a model for doing so.