Project on BPO


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Project on BPO

  1. 1. (Submitted for the Degree of B.Com Honours in Accounting &Finance under the University of Calcutta) Title of the Project ―Business Processing Outsource (BPO)‖ Submitted by Vivek Saha Roll no. : Registration No.: Supervised By February, 2013 1
  2. 2. This is my proud privilege to express my deepest sense of gratitude andineptness to my Supervisor Professor Basudeb Sahukhan, Department ofcommerce, Acharya Girish Chandra College, Kolkata-700003.Words perhaps would fail to express the gratitude I owe to him. It would havebeen impossible for me to complete the project work without his constant andinspiring guidance and valuable suggestion at every stage of the project.I am also indebted to all other teachers of the same department for theirconstant support, inspiration and suggestions.I express my gratitude to my parents, friends for their help and inspiration tocomplete the project. 2
  3. 3. This project is based on ―BPO INDUSTRY IN INDIA‖. Business ProcessOutsourcing is the delegation of one or more of the business processes to anexternal provider, which in turn owns, manages and controls the selectedprocesses based on some specific standards. It was started in India in early 1980’sby the British Airways who set-up their captive unit in Delhi.BPO in India starts with low-end data entry processes, but now it move up thevalue chain and deals in core business processes also. Both voice and non-voiceBPO Industry exists in India. Various types of services are performed, callcenters being the attraction today for the youth.BPO operates through three types of business models viz. - Transactional, Nicheand Comprehensive. Finance and Accounting has also set its significant place inBPO pie.In 2008 BPO industry generates USD 12.8 Bn revenue, out of which exportsrevenue was USD 10.9Bn. It will achieve USD 14.8 Bn by the end of 2009(expected) and is expected to achieve USD 60Bn by 2012 and USD 225 Bn by theend of 2020.Cost competitiveness and talented pool of human resources are the key drivers inthe growth of BPO industry, but still some factors such as underdevelopedinfrastructure and competition from others low-cost countries are providingchallenge to the Indian industry, which needs to be addressed carefully by thecooperation of government, NASSCOM and industry it self.Still, India is shining in the BPO landscape and is the most attractive destination.Sr.No. Pg. No. TITLE 3
  4. 4. 1. Introduction (7-8) . Definition 7 . Objectives 82. Evolution (9-10)3. Sizing Of BPO In India (11-16)4. Segments In BPO (16-22) . Voice & Non-Voice 18-21 . Horizontal & Vertical 21-225. Steps Followed While Outsourcing. (22-23)6. Regulatory Framework Of Indian BPO. (24-25) . Data Protection Law. 24 . Sarbanes Oxley Act. 257. BPO & Finance. (25-28)8. Trends In BPO Industry. (29-31) . Drivers of BPO Growth. 30-31 . Issue & Challenges. 319. Competitive Landscape Of Indian BPO. (32-36)10. Critical Analysis Of BPO. (36-39) . Benefits of BPO. 36-37 . Limitations of BPO. 37 . SWOT Analysis. 38-3911. Conclusion (39-40) Bibliography 41 Annexure-1 42 Annexure-2 43 4
  5. 5. Sr.No Pg. No. FIGURES1. Definition Of BPO. 7.2. History Of BPO In India. 9.3. Value Of Chain Of BPO In India. 10.4. Growth Of BPO In Terms Of Exports. 11.5. Growth In Domestic BPO Revenue. 12.6. Total BPO Growth in Terms Of Revenue. 13.7. BPO & Employment. 14.8. Size Of BPO Global Market. 15.9. Global BPO Market Share. 16.10. Classification Of Voice & Non-Voice BPO. 17.11. Horizontal & Vertical BPO. 21.12. Vertical Segments In BPO. 22.13. Steps To Be Followed While Outsourcing. 23.14. Financial BPO Process Being Outsourced. 26.15. Top 10 BPO Companies. 32.16. SWOT Analysis. 36. 5
  6. 6. Sr.No. Pg. No.0. TABLES1. BPO Growth In Export. 11.2. BPO Growth In Domestic Market. 12.3. Overall (Export & Domestic) Growth. 13.4. Employment Generated By BPO. 14.5. Global BPO Market. 15.6. Major Players In BPO Finance 18. 6
  7. 7. 1. INTRODUCTION TO BPODEFINITION OF BPOOUTSOURCING: -An organization entering into contract with another organization to operate andmanage one or more of its business processes BASED ON BASED ON VOICE LOCATION 7
  8. 8. BUSINESS PROCESS OUTSOURCING: -It is the delegation of one or more of IT intensive business processes to anexternal provider, which in turn owns, manages, and administers the selectedprocesses based on defined and measurable performance criteria.BPO as per the work performed can be classified as VOICE BASED, whichincludes customer related services such as technical support, marketing etc. andNON-VOICE, which includes internal business operations. And as per thelocation involved it can be classified as:ON-SHORE: BPO that is contracted inside a company’s country.NEAR-SHORE: BPO that is contracted to a company’s neighboring country.OFF-SHORE: BPO that is contracted outside a company’s country.OBJECTIVES OF BPO:Traditionally, the main objective of companies outsourcing their businessprocesses to India was the want of low cost. But now-a-days, companies thatoffshore their business processes to India are no longer looking at cost reductionalone. They typically want to achieve:1) Process improvement and efficiency - faster turnaround and greaterproductivity2 ) C o s t s a v i n g s .3) Improved quality - less errors/rework4) Building/strengthening presence in a new market/foreign country5) Increased focus on core competencies - e.g. developing new products orservices6) Building business value and strategic differentiation. 8
  9. 9. 2. EVOLUTION OF BPO IN INDIA.Outsourcing as a concept is probably one the oldest and most commonlypracticed. As a concept and practice it pervades all aspects of our lives- domesticas well as professional. The idea of outsourcing has its roots in the `competitiveadvantage` theory propagated by Adam Smith in his books ` THE WEALTH OFNATIONS ` which was published in the year 1776. Over the years, the meaning ofthe term outsourcing has undergone a sea-change.Evolution of BPO in India can further be explain under twoheads:-1. HISTORY OF BPO IN INDIA.2. VALUE CHAIN OF BPO IN INDIA.1. HISTORY OF BPO IN INDIA: In India BPO started with Britishairways setting their back-office operations in Delhi in early 1980`s. Starting withcaptive units India BPO moves to the third p[arty BPO`s. thereafter the entry of IT-majors brightens the Indian BPO industry in global BPO landscape.Following diagram depicts briefly the history of BPO in India: 9
  10. 10. 2. VALUE CHAIN OF BPO IN INDIA:Value chain is a chain describing the value of business processes being outsourced toIndia. Value can be explained as the importance of business processes to the firmoutsourcing its business operations. India is moving up in the value-chain. At thebeginning only low end data entry processes were outsourced to India. With thepassage of time trend goes on changing. From low value data entry processes chainmoves up to core processes being outsourced now-a-days. It started with:MID-1990’s- DATA ENTRY PROCESSES: Data entry simply includes entry of datafrom papers, books or any hard copy format to computer aided soft copy.DATA CONVERSION PROCESSES: Conversion of data across various databases ondifferent platforms.LATE 1990’s- CALL CENTRE SERVICES: Call centers are outlets that exist mainly to answer inbound or place outboundtelephone calls and can exist for the purpose of sales, marketing, telemarketing,customer service, technical/non technical support or any other specific businessactivity.2000- TRANSCRIPTION PROCESSES: Transcription process implies transcribingthe audio or visual information into electronic document form.Up till 2000 only non-core activities were outsourced. Then the trend changed andtoday the core activities also occupy a significant proportion in total Indian BPO pie. TRANSCRIPTION TRANSCRIPTION -PROCESS-CORE CALL- - PROCESS- NON DATA CENTRE CORE DATA ENTRY CONVERSION MID 1990’S LATE 1990’S 2000 TODAY Fig 3: VALUE CHAIN OF BPO IN INDIA 10
  11. 11. Fig. 4 –GROWTH OF BPO IN TERMS OF EXPORTs 11
  12. 12. The above figure clearly shows that exports in the BPO market are increasing atthe fluctuating rate. In 2003 it was USD 2.6 billion. Then it increased to USD 3.1billion in 2004.And in the financial year 2008 it was USD 10.9 billion. It isexpected to reach at USD 12.8 billion by the end of 2009. Figure indicates that itgrows almost at the rate of 50% from 2003 to 2006. After that it grows almost atthe rate of 20%-30%. 12
  13. 13. The above figure shows the trend of growth in domestic revenues of Indian BPOindustry. It shows that onshore component is less than offshore component. In 2003revenue of BPO from domestic industry was USD 0.2 Billion. It increased to USD 0.3Billion in 2004. Then in 2008 it was USD1.6Billion and is expected to reach USD 1.9Billion at the end of 2009. It is growing at a slow pace than export component of BPOmarket. Table 3:- OVERALL (Export & Domestic) BPO Growth FIG 6: TOTAL BPO GROWTH IN TERMS OF REVENUEAs shown by the figure overall BPO grow steadily at the rate of almost 28% in2005 total BPO industry was USD 12.5 Billion while it is expected to reach USDBillion in 2009.FUTURE LOOK: As per the study conducted by NASSCOM Indian BPOindustry is growing at a CAGR of 28%. If it continues with this pace it will reach 13
  14. 14. to USD 30Billion by 2012 but it is expected that it will touch USD 60 Billionbecause of the many advantages it has over the competitors.While the other study of NASSCOM predicts the Indian BPO market will reachUSD 225 Billon by 2020.So it can be represented as:2012=USD 60Billion E.2020= USD 175 Billion (Exports) +USD 50 Billion (domestic) .So 2020= USD 225 Billion.E= Expected.D. IN TERMS OF EMPLOYMENT GENERATEDTABLE 4. EMPLOYMENT GENEREATED BY BPOFIGURE 7. BPO AND EMPLOYMENT 14
  15. 15. So the greatest pool of graduates is moving towards the BPO industry therebydecreasing the unemployment and developing the economy by utilizing theavailable pool of talent.2. GLOBAL BPO MARKET AND INDIA’S SHARE:Global BPO market is also growing at the rapid pace. As shown by the followingtable in 2012 it was USD 5.1 Billion and progressed to USD 53.4 Billion in 2017.FIGURE 8- SIZE OF GLOBAL BPO MARKET 15
  16. 16. Out of this total global market India’s share is estimated to be 5-6%, currently asshown by the following diagram. US have the largest share of 52% followed byUK which commands 20% of the BPO pie. GARTNER predicts that India’sshare in the Global BPO market will get double by 2010i.e. it will reach to 10% oftotal BPO market.FIGURE 9- GLOBAL BPO MARKET SHARE4. SEGMENTS IN BPOBPO in India is organized in many segments. Previously there was only low endvoice operations were outsourced to India. In the early days of BPO in India voiceoperations were the major actors leaving a very small proportion for non-voiceactivities. But, as India moves up in the value chain, non-voice operations startingoccupy a bigger proportion of the BPO pie. Except voice and non-voice, BPO inIndia can also be segmented into horizontal and vertical. 16
  20. 20. 10. MARKET RESEARCH AND QUALITY SURVEYS(B) NON-VOICE BPO (BACK OFFICE OPERATIONS)1. ACCOUNTING.2. DATA ENTRY.Data entry services helps in getting large amounts of information added into databasesor specific applications, cost effectively.3. DATABASE MANAGEMENT.Every business has customer and contact databases to manage and keep up to date.Database management service allows keeping database clean and up to date through aprogram of contacting our customers to ensure you have the latest information.4. CLAIMS PROCESSING.Typically associated with the insurance industry, claims processing actually covers anyprocess that starts with a customer enquiry that requires investigation, analysis,assessment, decision, and follow-up with a formal response. 20
  21. 21. 5. TRANSCRIPTION.Transcription is the process of converting the audio or visual information intoelectronic document form.Medical transcription was one of the first offshore BPO services to be launched fromIndia. This service involves the transcribing of medical records from audio format ordictated by doctors or other healthcare into either a hard copy or electronic format.6. HUMAN RESOURCEHuman resources are the manpower employed by the firm. It is the valuable asset ofthe company. More and more businesses are outsourcing their human resourcebusiness function or parts of that function to experts who do this service full-time. Thisranges from hiring processes to management of employee benefits process to payroll.Businesses that find a high quality service provider outsource their HR activities andcan increase their employee satisfaction vis-à-vis reduce expenses.2. HORIZONTAL AND VERTICAL BPO:There are two types of BPO opportunities in the market—1. High volume and low value2. High value and low volume. High-volume and low-value are the horizontal BPO’swhile high-value and low-volume are the vertical BPO’s. Horizontal Vertical BPO BPO BPO Figure 11: HORIZONTAL AND VERTICAL BPONow lets discuss in detail: 21
  23. 23. 5. STEPS TO BE FOLLOWED WHILE OUTSOURCINGOutsourcing means we are handling our business processes to some outsiderfirm. So when the firm is outsourcing its core high -valued business processesit should take diligent care as any mistake can mar the firm. Not only thecore ones, even non-core processes contribute a lot to the firm directlyor indirectly. So outsourcing decision should be made carefully. Foroutsourcing to be effective there are certain steps which need to be followed: Security level Fig. 14: STEPS TO BE FOLLOWED WHILE OUTSOUCING 23
  26. 26. A. SEGMENTS IN BPO FINANCE.1. COMPANIES IN BANKING, FINANCIAL SERVICES ANDINSURANCES (BFSI).If they outsource finance, it is their core business that they are outsourcing. In fact,finance has been at the forefront of outsourcing – General Electric, American Expressand Citi Bank led the initiative in India. The reason is that their customer-facing frontoffice is in high cost locations. But there are functions, which, if delivered at low costs,would have a major impact on their balance sheets.2. NON-BFSI COMPANIES.From them, the finance function is important as it helps the rest of the organizationruns smoothly. So such a company will outsource functions likes sales ordersprocessing, accounts payable, receivable managements, balance-sheet management andcash management. For instance, a US based industrial major currently evaluatingfinance BPO companies in India has 850 employees looking at finance at a total annualcost of $110 million. Global airlines also, under cost pressures, are looking India tooutsource revenue accounting and sales audit functions. These include British Airways,Australian Airlines, Malaysian Airlines and Qatar Airways.B. FINANCIAL BPO PROCESSES BEING OUTSOURCED:Three types of financial processes are being outsourced to India. These include: TOP END ACTIVITIES 1. (AROUND 10%) MIDDLE END ACTIVITIES 2. (AROUND 25%- 33%) CLERICAL LOW END 3. ACTIVITIES Fig.15: Financial BPO process (AROUND 65%-75%) being outsourced 26
  27. 27. 1. CLERICAL LOW GRADE WORK:Most of the work being outsourced to India in finance and accounting vertical consistsof clerical low-grade work. Almost 60% to 70% of the work includes processes liketransaction, accounting, fixed assets (depreciation calculation etc.), account receivable,account payable, travel & living, cash application (goes into making ledger entries) andaccount reconciliation.2. MIDDLE LEVEL:The middle level which constitutes almost 25% to 35% of the work includes processeslike accounting operations, general ledger consolidation, reporting. It also includestasks such as income tax returns.3. TOP-END ACTIVITIES:The top end activities constitute only 10% of the work in the finance and accounting vertical.At the top end of the scale are activities like administration of mortgage-backed securities,financial planning and analysis, requiring expertise of at least MBA finance or a statisticsgraduate. Other work in this category includes equity/debt market research and analysis.C. REASONS FOR OUTSOURCING FINANCE AND ACCOUNTINGThere are many reasons which lure a business to outsource its finance and accountingoperations. These are:1. EXPECTATION TO REDUCE COST:Study conducted by Deloitte suggests that the firms achieve 39 percent cost savingsfrom moving operations to low-cost centers.2. STANDARDIZING THE FINANCE AND ACCOUNTING PROCESS:Companies on their own do not have the ability to standardize finance & accounting eitherbecause of a lack of specialized resources, scale or simply because this is not their prime areaof focus. This is why it makes sense to outsource it. And as the back office becomes morestandardized, in particular the accounting functions, even bigger cost savings can be seen.3. OUTSOURCING DISASTER RELIEF:Organizations have become extra cautious after the WTC disaster and want to haveprotection against disasters. Finance & accounting activities constitute a major part of theactivities of all corporate and as such even organizations not having finance and accounting astheir core processes want to safeguard their finance & accounting processes. For example,after the collapse of the WTC the Twin Towers Fund (TTF) gave the task of handling the 27
  28. 28. accounting functions to outsource Partners International (OPI), a BPO firm specializing infinance and accounting. OPIs Bangalore office handles most of TTFs accounting work.Source documents are scanned in New York and sent to Bangalore by remote connection; theBangalore office handles 95 percent of document and transaction processing.4. REAPING THE BENEFITS OF ECONOMIES OF SCALE:Outsourcing finance and accounting processes to cheaper locations where manpower andinfrastructure is less costly gives the outsourcing companies the advantage of economies ofscale. Moreover working hours can be increased in locations such as India by increasing thenumber of shifts.5. BENEFITING FROM THE TECHNOLOGY AND EXPERIENCE OFTHE SERVICE PROVIDER:The service gives cutting edge technology and has expertise in specific verticals. Hence it isable to provide the benefit of excellent expertise and best process in that specific vertical.D.MAJOR PLAYERS IN INDIA BPO FINANCE Following is the list of major players in this vertical and the approximately number of people in the respective organization. Table7. Major players in BPO financeThe above table explains the major BPO players who are dealing in outsourcing financeincluding other business process, and the number of people employed by them in finance 28outsourcing.
  29. 29. 9. TRENDS IN INDIAN BPO INDUSTRYTrends imply the various changes which we are going to see in the near future in Indian BPOindustry whether positive or negative.Various trends include:1. OUTSOURCING WILL STAY CLOSER TO HOME.With available labor from layoffs in many industries and tightened risk profiles of companies,especially in the financial services industry, companies wont have to go far offshore to findtalent. Planned initiatives by Barrack Obama and increased government spending oninfrastructure projects could lead to more domestic outsourcing, particularly for construction,real estate and technology, IAOP predicts.2. GLOBAL UNCERTAINITIES WILL CREATE OUTSOURCING VOLATILITY:Overall, the fast-paced growth in outsourcing will slow in 2009, as companies lowertheir spending on information technology, consolidate or exit markets, and find skilled laborlocally from layoffs in financial services and other industries.3. STRATEGIC COMPANIES WILL PROSPER:The economic meltdown could create opportunities for strong, well-positionedcompanies."While the economic climate will not immediately improve, companies involved inoutsourcing that act strategically and decisively for the long-term will be increasingly valuedand sought," said IAOP board member Sven Govaars, senior vice president, ColliersInternational.4. SHIFT IN FOCUS FROM COST ARBITRAGE TO VALUE ADDITION:Traditionally the main aim of the companies outsourcing to India was the cost saving. Butnow as India moves up the value chain, this aim shifts to value-addition and efficiency.5. SOCIAL RESPONSIBILITY WILL BE OUTSOURCING THEME: New government direction under OBAMA could promote higher emphasis on socially responsible business environments; driving outsources to create solutions that address them. IAOP predicts will include industry competitive employee retention and welfare programs.6. IT WILL ALSO CREATE NEWRER OPPORTUNITIES, NEW MARKETS AND ALSOTHE NEW SERVICES.7. SERVICE PROVIDERS WILL SHIFT FROM TIER-1 TO TIER-2 AND TIER-3 CITIESTHEREBY CREATING RURAL BPO’S. 29
  30. 30. A. DRIVERS OF BPO GROWTH IN INDIA:A driver is most commonly a factor that contributes to the growth of aparticular business.There are mainly six important business drivers that are pushing enterprisesto consider the BPO option in India. These are:1. ABUNDANT TALENT. India’s young demographic profile is an inherent advantage complemented by an academicinfrastructure that generates a large pool of English speaking talent. Talent suitabilityconcerns are being addressed through a combination of government, academia and industryled initiatives. It includes efforts by NASSCOM and other education agencies like UGC andAICTE to facilitate industry inputs on curriculum and teaching.2. SUSTAINED COST COMPETITIVESS:India has a strong track record of delivering a significant cost advantage, with client’sregularly reporting savings of 25%-50% over the original cost base. the ability to achieve suchhigh levels of cost advantage by sourcing to India is driven by the ability to access highlyskilled talent at lower wage cost.3. CONTINUED FOCUS ON QUALITY.Demonstrated process quality and expertise in service delivery has been a key factor drivingIndia’s leadership in global service delivery. Since the inception of industry in India, playerswithin the India has been focusing on quality initiatives, to align themselves with internationalstandards.4. WORLD CLASS INFORMATION SECURITY ENVIRONMENT:Indian authorities have built a strong foundation for an ―info-source‖ environment in thecountry. These include strengthening the regulatory framework through proposedamendments to further strengthen the IT Act-2000.5. RAPID GROWTH IN KEY BUSINESS INFRASTRUCTURE.BPO sector has been a key beneficiary with the cost of international connectivity decliningrapidly and service level improving significantly. The growth is taking place not only inexisting urban centre but also in satellite towns and smaller cities.The enabling policy environment in India was instrumental in catalyzing the early phaseof growth in this sector. Policy makers in India have laid special emphasis on encouraging 30
  31. 31. foreign participation, with participating firms enjoying minimum regulatory and policyrestrictions along with a broad range of fiscal and procedural incentives.B. ISSUES AND CHALLENGES IN BPO GROWTH:1. INFRASTRUCTURE CHALLENGE:India’s ITES-BPO industry continues to attract significant business from both the US and WesternEurope. While national issues with infrastructure, e.g. telecommunications system etc is beingaddressed, the local infrastructure (roads, bridges, airports, urban transportation, etc) is becoming abottleneck to the expansion of capacity. Getting a connection is still not a hassle-free job.2. MOVING UP THE VALUE CHAIN:Customers are looking for vendors who can provide end-to-end solutions. Indian vendors areusing several methods like tie-ups with existing players, acquisitions, investing in research anddevelopment and leveraging industry best practices for expansion.3. SHRINKING PROFIT MARGINS:To sustain in the highly competitive market, the players are looking for newer revenue sourcesand opportunities to keep cash flowing in. Again with service level agreements becomingstringent and sales cycles stretching far in international deals, the BPO service providers needdeeper pockets and financial muscles. High initial capital investments in the industry, longgestational periods, competition leading to reduced billing rates, appreciation of rupee againstthe US dollar have led to increased margin pressures and increased industry consolidation.4. HUMAN RESOURCE ISSUES:Another major problem is the high attrition and growth aspirations of the workforce. Oddhours at job and stress are supposed to be major causes of high attrition rate which increasesrecruitment and training costs. The service providers need to spell out a comprehensivehuman resource policy that outlines a clear career progression path for the employees.5. OTHERS: 31
  32. 32. 10. COMPETITIVE LANDSCAPE OF BPO IN INDIABPO Industry in India is growing very fast. It is gaining ground everywhere. There is a lotof competition today in BPO landscape. Let’s check out which are the major players in India.We will study this under two heads:Following is the list of Top 10 BPO Companies In India By Maximum Revenue as per datareleased by Dataquest, an industry journal. The BPO companies in India posted a totalrevenue of Rs. 32,246 crore in 2010-2011.As per the Industry fact sheet published by NASSCOM, the Indian ITES-BPO segment grewat 37% in 2005-06 (ITES-BPO) and the exports are expected to cross US$ 9 billion by end2007. TOP 10 BPO CAOMPANIES IN INDIA BASED ON REVENUE BASED ON EMPLOYEE SATISFACTION 1. GENPACT. 1. DAKSH-E-SERVICE 2. TCS BPO. 2. ISEVA 3. AEGIS BPO. 3. ICICI ONESOURCE 4. WIPRO BPO. 4. EFUNDS INTERNATIONAL 5. FIRST SOURCE SPOULTIONS. 5. HINDUJA TMT 6. WNS GLOBAL SOLUTIONS. 6. EXL SERVICES 7. INFOSYS BPO. 7. AJUBA 8. ADITYA BIRLA MINACS. 8. MOTIF 9. IBM DAKSH. 9. MIT SMART SERVE 10. IBM GLOBAL PROCESS SERVICES 10. HCL TECH BPOFig. 16- TOP 10 BPO COMPANIES IN INDIA.Now detailed description of BPO’s based on Revenue: 32
  33. 33. 1. GENPACT:Genpact was born in 1997 as the India-based business process operations for GE Capital. In2005, with equity investments from General Atlantic and Oak Hill Capital Partners, it becamean independent company and was rebranded Genpact. It is Indias No. 1 BPO firm.2. WNS GLOBAL3. IBM DAKSH 33
  35. 35. 5. WIPRO BPO:Now detailed description of BPO’s based on Employee Satisfaction:1. ISEVA.2. ICICI ONE SOURCE. 35
  36. 36. 3. EFUNDS INTERNATIONAL.4. AJUBA.5. MOTIF.10. CRITICAL ANALYSIS OF BUSINESS PROCESSOUTSOURCINGCritical analysis means an appraisal based on careful analytical evaluation. Now foranalyzing the BPO industry we will study its:1. Benefits of BPO industry.2. Limitations of BPO industry.3. SWOT Analysis. 36
  37. 37. 1. BENEFITS OF OUTSOURCING:  Outsourcing your non-core activities will give you more time to concentrate on your core business processes.  Off shoring can give you access to professional, expert and high-quality services.  With outsourcing your organization can experience increased efficiency and productivity in non-core business processes.  Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others.  Outsourcing can make your organization more flexible to change.  Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these.  Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time.  Off shoring can help your organization save on capital expenditures.  By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work.  By outsourcing, you can cater to the new and challenging demands of your customers.  Sharing your business risks is possible with outsourcing.  Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business.  Outsourcing can help your organization to cut its operational costs to more than half.  If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help your organization achieve all this and more.2. LIMITATIONS OF OUTSOURCING:  At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it.  While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing.  When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization.  Off shoring can create potential redundancies for your organization.  In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in- house or find another outsourcing provider.  The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work. 37
  38. 38.  Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not complete devotion to you and your company.  By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced.  In outsourcing, you may lose your control over the process that is outsourced.  Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed.3. SWOT ANALYSIS OF INDIAN BPO INDUSTRY WEAKNESS STRENGHT THREATS OPPORTUNITIESFIGURE 17 - SWOT ANALYSIS OF INDIAN BPO INDUSTRY1. STRENGTHS:  Highly skilled, English-speaking workforce.  Abundant manpower.  Cheaper workforce than their Western counterparts. According to Nasscom, The wage difference is as high as 70-80 percent when compared to their Western counterparts.  Lower attrition rates than in the West.  Dedicated workforce aiming at making a long-term career in the field.  Round-the-clock advantage for Western companies due to the huge time difference.  Lower response time with efficient and effective service.  Operational excellence.  Conducive business environment. 38
  39. 39. 2. WEAKNESSES:  Recent months have seen a rise in the level of attrition rates among BPO workers who are quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to pursue BPO as a full-time career.  The cost of telecom and network infrastructure is much higher in India than in the US.  Manpower shortage.  Local infrastructure.3. OPPORTUNITIES:  To work closely with associations like Nasscom to portray India as the most favoured BPO/ITES destination in the world.  Indian BPO/ITES companies should work closely with Western governments and assuage their concerns and issues.  India can be branded as a quality BPO destination rather than a low-cost destination.  $60 billion BPO business by 2010.4. THREATS:  The anti-outsourcing legislation in the US state of New Jersey. Three more states in the United States are planning legislation against outsourcing. These are- Connecticut, Missouri and Wisconsin.  Workers in British Telecom have protested against outsourcing of work to Indian BPO companies.  Other BPO/ITES destinations such as China, Philippines and South Africa could have an edge on the cost factor.  Slowdown of demand.11. CONCLUSIONBusiness Process Outsourcing industry is growing rapidly since its inception. IndianBPO’s are going through exciting times. Starting with captive units and low-endactivities BPO’s are now moving to high-end activities. Indian BPO’s are operating inboth front-office and back-office operations.BPO industry in India is growing at therate of 28% and is expected to reach around USD14.8 Bn in2009. Exports areaccounting major proportion, which are in journey to touch USD 12.8 Bn by the end of2009. These are growing at the fluctuating rate of around 20%-30% a year. DomesticBPO market is also in growth and has accounted USD1.6 Bn in 2008.Inspite of thisBPO’s are helping in the development of economy by decreasing the evilof unemployment. Since the evolution of BPO it is serving the country by providing theemployment to talented and able youth of the country. Up till 2009 it has generated 39
  40. 40. around 730,000 employments in the country. Shift in BPO services has also beenexperienced with moving from low-end to BFSI (Banking, Financial Services andInsurance) and Hi-Tech sector. But the economic downturn has impacted the growth ofBPO industry. Still it occupied 60% of the offshore market. The industry is expected toachieve USD 60 Bn by the end of 2012. And USD 225 Bn by the end of 2020.Varioustrends have been experienced in BPO. The BPO industry is drawing significant attention and India, by virtue of itsdominance in this sector is at the center of this attention. The shift of the Indianeconomy towards more service orientation suggests that in the long term, India willcontinue to be a major player in the global BPO industry.Despite the growth that this industry is witnessing, there are certain areas that requiregreater attention going forward from service providers to ensure that the industryremains firmly on the growth path. This survey was conducted with the objective ofanalyzing some of the key trends that will drive the future direction of the industry. WeHave endeavored to highlight some of the key risks that the industry faces and will faceas the industry evolves. We have also discussed the corresponding risk-mitigants thatservice providers and companies are focusing on, to manage the risks. We hope thatthis survey provides service providers with a deeper understanding of theIndustry they operate in and acts as an important input to potential customersconsidering outsourcing their processes to India. 40
  41. 41. 1. www.nasscom.com2. www.bpoindia.com3. www.equaterra.com4. www.economictimes.com5. www.coolavenues.com6. www.outsourceindia.com7. www.tutorialreports.com8. www.dataquest.com9. www.outsourcingprofessional.com10. www.wikipedia.com12. 41
  42. 42. Supervisor’s CertificateThis is to certify that Mr. BIKKY SHAW student of (Honours) inAccounting & Finance of Acharya Girish Chandra College under the Universityof Calcutta has worked under my supervision and guidance for his project workand prepared a Project Report with the title ―Business Processing Outsource(BPO).‖The project which he is submitting is his genuine and original work to the best ofmy knowledge. Place: Kolkata Name: Prof. Basudeb Sahukhan. Date: Designation: 42
  43. 43. Student’s DeclarationI hereby declare that the Project Work with the title ―Business ProcessingOutsource (BPO)‖ submitted by me for partial fulfillment of the degree ofB.Com (Honours) in Accountancy & Finance under the University of Calcutta ismy original work and has not been submitted earlier to any other University forthe fulfillment of the requirement for any course of study.I also declare that no chapter of this manuscript in whole or in part has beenincorporated in this report from any earlier work done by others or by me.However, extracts of any literature which has been used for this report has beenduly acknowledged providing details of such literature in the references.Place: KOLKATA Bikky ShawDate: 30, K.P Saha Street, Kolkata – 28 Registration No.: 141-1121-0093-10 Roll No.: 1141-61-0056 43