BUSINESS PROCESS OUTSOURCING Arunesh Chand Mankotia – Created Tuesday, May 23, 2006
THE POLITICAL SCENARIOFor over 50 years, India has been the world’s largest Democracy, structured under asecular Constitution and governed by recognized democratic institutions.It has an active and free Press and a demonstrably independent Judiciary.During the past decade, a process of ‘irreversible’ economic liberalization wasinitiated, which has been supported and sustained by successive governments.Regulatory structures and procedures are being continuously modified.The Government – both at the State as well as the Central level – recognizes thegrowing importance of the I.T Services and I.T Enabled Services industries. Thishas resulted in rapid improvement in I.T services related delivery infrastructure (e.g.Telecommunications), both in terms of Capacity as well as Cost.
THE ECONOMIC SCENARIOIndia’s GDP growth for the past ten years has ranged between 5–7%, making it one of the world’s better performing and stableeconomies.GDP composition by Sector – Agriculture: 25% / Industry: 30% /Services: 45%.India is the world’s 4th largest economy in terms of purchasingpower parity.It is amongst only 5 countries in the world to have a Spaceprogrammes.India currently has the 12th largest Telecom network in theworld and is growing rapidly due to privatization and demandsurge.
INDIA- THE ITES SCENARIOIndia is emerging as the preferred offshore outsourcingdestination for organizations across the world.Over 100,000 people are employed in this sector.The Market size is expected to grow to $21-24 billion by 2008. 1million jobs are expected to be created in the ITES sector by2008.Last five-year CAGR of ITES over 100%. Last two years’ growth 70% p.a. reaching a market size of US$1 billion Customer Care, HR, Payment Services to continue constitute70% ITES potential
Indian IT and ITES industry will be the major drivers ofIndia’s economic growth, as indicated in the table below:
GROWTH OF IT SERVICEThe growth of the Indian IT Services and the ITESindustry are rooted in four trends:Dramatic increase in offshoring by the existingcustomers.New customers relocating work to India.Further penetration in existing service lines.Penetration of new service lines.
COMPETITOR’S OF INDIAIndia’s closest competitor is Ireland.China and Russia are still sub scale in terms of their industrycapabilities and the value of the total software exports.
India’s: Location Comparison 1The criteria used by the customers to decide upon alocation to which IT enabled services can be outsourced arebroadly classified into:People attractivenessLocation attractivenessToday only India and Ireland have large broad basedpresence in the ITES market worldwide, while Philippinesand Singapore have emerged as niche players.
India : The Manpower ScenarioEvery year, 2.1 mn graduates and 0.3mn post-graduates pass out of India’s non engineeringcolleges.Although less than 10% find a job or pursuehigher studies abroad, the remaining have veryfew attractive avenues of employment open tothem.Ireland produces approximately 43000 graduatesevery year.
Manpower Scenario - The Resource Pool Reservoir
Manpower Scenario – SummaryAbundant supply of graduate level workers.Massive low-cost, English speaking labor pool.Wage differentials expected to continue for a few decades.Average salary of graduate (2001) – US$ 2,400 per annum.Total number of graduates produced in (2001) – 2,100,000.Significantly lower employee attrition rates compared toother countries.Low training costs.Relatively short learning curve.
India – The InfrastructureConnect 33 countries enroute from Singapore to France.Connects Europe to the Middle East, South East Asia and Asia Pacific;has 40 Gbps capacity.Connects UK to Japan with landing stations in 13 countries; has 10 Gbpscapacity.Links South Africa to South East Asia; has 40 Gbps capacity.The present capacity is 10 times that currently required from India.The privatization of the telecom industry has resulted in a significant dropin telecom rates. Some recent examples of rate cuts are:Rates of international private leased circuits (IPLC) reduced in two steps-by ~75% in November 2000 and about another 40% in January 2002Reduction in national long distance rates by 62% in January- March 2002with the entry of the private operators
Many corporations have either already started or plan to start sourcing ITES from India.
BPO’S The Top Rankers The basis of ranking is the revenues generated by the BPO companies in 2003-04, as per US GAAP.3. WNS Group4. Wipro Spectramind5. Daksh e-Services6. Convergys7. HCL Technologies8. Zenta9. ICICI Onesource