Business process outsourcing in India

The business process outsourcing industry in India refers to the services outsourcing
industry in India, catering mainly to Western operations of multinational corporations
(MNCs).

As of 2008, around 0.7 million people work in outsourcing sector[1] (less than 0.1% of
Indians). Annual revenues are around $11 billion,[1] around 1% of GDP. Around 2.5
million people graduate in India every year. Wages are rising by 10-15 percent as a result
of skill shortage.[1]

Airlines

In the early 1980s several European airlines started using Delhi as a base for back office
operations, British Airways being one among them. The BA captive was finally spun off
as a separate organisation called WNS Global Services in 2002

Amex

In the second half of the 1980s, American Express consolidated its JAPAC (Japan and
Asia Pacific) back office operations into New Delhi and NCR region[2]. This center was
headed by Raman Roy, and has been a source of several leading names in the Indian BPO
Industry.

General Electric

In the 1990s Jack Welch was influenced by K.P. Singh, (A Delhi based realtor) to look at
Gurgaon in the NCR region as a base for back office operations. Pramod Bhasin, the
India head of G.E. hired Raman Roy and several of his management from American
Express to start this enterprise called GECIS (GE Capital International Services). Raman
for the first time tried out voice operations out of India, the India operations also was the
Beta site for GE Six sigma enterprise. The results made GE ramp up their Indian presence
and look at other locations. In 2004 GECIS was spun off as a separate legal entity by GE,
called Genpact. GE has retained a 40% stake and sold a 60% stake for $500 million to
two equity companies, Oak Hill Capital Partners and General Atlantic Partners.

[edit] Third party BPO's

Until G.E most of the work was being done by "captives"- a term used for in house work
being done for the parent organisation. In 2000 Raman Roy and some team members
from GECIS quit , and with VC funding from Chrysalis Capital started Spectramind. At
the same time an organisation called EXL started in Noida and Efunds started in Mumbai
and Gurgaon, and Daksh in Gurgaon. However, recently most of the Indian BPO's even
smaller and mid-sized ones are actually setting-up their onshore presence. Most of the
serious players are actually improving the outsourced business processes by leveraging
on years of experience and now some of them are directly competing with their own
older clientbase by marking this transition to KPO 's.

Entry of IT majors

In 2002 Spectramind was bought by software major Wipro, and BPO by then had become
mainstream like the IT Industry in India. The team that had setup Spectramind went on to
start Quatrro in 2006, a BPO specialising in high end BPO/KPO services. By 2002 all
major Indian software organizations were into BPO, including Infosys (Progeon),
Inforlinx, HCL, Satyam (Nipuna) and Patni. By 2003 Daksh was bought out by IBM, and
later in 2006 MphasiS was acquired by EDS. Even international 3rd party BPO players
like Convergys and Sitel had set up shop in India, swelling the BPO movement to India.
Then service arms of organizations like Accenture, IBM, Hewlett Packard, Dell also set
up shop in India.

Emergence of Rural BPOs

Booming India Inc has led to skyrocketing real estate and infrastructure costs in Tier-1
cities. BPO industry has thrived all these years because of its ability to deliver services at
a low cost. Increasing infrastructure costs, real estate costs, and salaries have raised BPO
costs significantly and as a result Indian BPOs in Tier-1 cities are looking at Tier-2 and
Tier-3 cities for operation.

Few entrepreneurs who had a vision of bringing the rural India into the mainstream of
knowledge economy have found an opportunity here - setting Rural BPOs. The
transformation of rural India started with the emergence of these Rural BPOs. The major
hurdles that these BPOs faced is quality man power. As a result these rural BPOs have
remained targeting low end jobs like data entry

Effect of global meltdown on Indian BPOs

American financial meltdown has begun to take its toll on India's IT and outsourcing
business.[1]

[edit] Challenges to outsourcing services in India

Many analysts believe that the growth of India outsourcing sector is widely optimistic
and it will slow down in future. Both IT and BPO sector is extremely dependent in USA
and if the US dollar depreciates can adversely impact the entire sector. Additionally
countries like China, Mexico and Vietnam are also expanding outsourcing operations and
often providing cheaper services.

Size of industry

The industry has been growing rapidly. It grew at a rate of 38% over 2005. For the FY06
financial year the projections is of US$7.2 billion worth of services provided by this
industry. The base in terms of headcount being roughly 400,000 people directly
employed in this Industry. The global BPO Industry is estimated to be worth 120-150
billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India
thus has some 5-6% share of the total Industry, but a commanding 63% share of the
offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO
Industry which is in total expected to have revenues worth US$36 billion for 2006. The
headcount at 400,000 is some 40% of the approximate one million workers estimated to
be directly employes in the IT and BPO Sector.

The related Industry dependent on this are Catering, BPO training and recruitment,
transport vendors, (home pick up and drops for night shifts being the norm in the
industry). Security agencies, Facilities management companies.

Table 5: Call Center Employee cost[3]

Country Cost (USD/yr)
USA 19,000
Australia 17,000
Philippines 9,050
India 9,500

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Is there a career path in the BPO industry?

The popular belief is that there are numerous job opportunities but
fewer career opportunities in the BPO sector, but I feel that the Indian
BPO industry currently has boundless career opportunities. This is
evident from the fact that over the years the scope of services has
grown from providing just voice-based marketing and customer
relationship management services to transaction processing in
finance and accounting, human resources, learning and procurement,
legal transcription, animation and multimedia, content creation, as
well as industry-specific services focusing on the insurance,
healthcare, pharmaceutical and utility industries.
For example, companies in the life science industry are quite familiar
to outsourcing; they outsource some of their critical processes such
as drug discovery, clinical trials, product manufacture, and data
management. Thus the mainstream outsourcing service providers
require specialist knowledge and skill sets to perform traditional life
science functions such as clinical data management and
pharmacovigilance (the monitoring of drug safety). India is a popular
offshore location for outsourcing these sensitive functions, due largely
to cost benefits and the availability of an appropriately skilled talent
pool.
We keep hearing that companies want to move up the value chain.
Does India have the potential to become the hub of high-end, high-
value outsourcing?
Yes, interestingly today BPO companies are creating comprehensive
roles for employees by expanding globally and providing them the
opportunity to work on multiple verticals. It is a fast-growing industry
that provides ample opportunity for growth and challenging
entrepreneurial environment.
This change in role of the BPO sector from transaction-processing to
providing high-end specialised services, has led to the need for
skilled employees. Capability development has become critical in this
industry today.
Professionals with degrees such as MBBS, MDS, M.Tech., MBA, CA,
ICWA, etc, are taking up work in domain-specific back-office
processes in analytical, advisory and consulting arena. This requires
a clear relationship between the IT/BPO industry and the academia,
which trains the future workforce to make them industry-ready.
How are parents viewing their wards' choice of BPO jobs?
With youngsters wishing to join a BPO because they genuinely see it
as a long-term career option, parents are also becoming more
supportive towards this avenue. There is an increasing realisation
that BPOs are just not about call centres, but about providing the right
opportunities and building skills and global exposure. In a nutshell,
employees in the BPO industry now get a challenging career with
tremendous growth opportunities, hands-on experience of
understanding different geographies, customs and cultures early in
life. This experience of understanding and appreciating diversity is
very valuable for their professional growth.
Does the industry get due support of the academia and vice versa?
Companies have come up with training programmes specifically
designed for the BPO sector in collaboration with academia institutes.
For example, we recently tied-up with IGNOU for a diploma
programme which aspires to create an industry-ready talent pool by
training students from across the country to take up a career in the
BPO space.
More courses of this nature are being designed by other companies
providing outsourcing services, as a step towards making BPO a
long-standing career with lower rate of attrition. These have heralded
a beginning for a brighter and better future not only for young
graduates in the metros, but also in Tier-II and Tier-III cities.
What does Accenture bring to the table, as regards the diploma
initiative?
We are collaborating with IGNOU for developing the courseware and
deployment strategy. Our subject-matter experts, BPO training
institution and academicians have designed the programme.
Counsellors and faculty are trained by Accenture and industry experts
who provide `on the job' practice scenarios in the form of e-learning
and textbooks. Students who successfully complete the programme
and pass all term-end examination papers will be eligible to apply for
employment with us and other BPO companies.

The global outsourcing industry, once India's near-exclusive preserve, is shifting

to other parts of the planet including China, the Philippines, Russia and Eastern
Europe, presenting unprecedented challenges to the country that virtually
invented the idea.

India still controls as much as 65 percent of the industry and derives an

estimated US$52 billion in annual revenues from it, employing more than 2
million people in finance, human resources and customer services. R&D
operations for information technology in places like Bangalore are some of the
most extensive in the world, with as many as 200 of the Fortune 500 companies
operating their own research centers, according to the Philippines-based
outsourcing website IT2P.