The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. (IDC)
The delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner)
The transfer of a function previously performed (or considered to be performed) in-house to an outside provider.
Nearshore Sourcing: sourcing services from geographies within close proximity to the location in which the services are consumed or contracted.
Offshore Sourcing: sourcing services from geographies at a considerable distance from the location in which the services ar consumed or contracted.
Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both nearshore and offshore locations.
Insourcing : sourcing services internally as opposed to through a third-party BPO provider. Often provided in a a centralized shared services environment.
Services Globalization: The New Paradigm Digitization and Telecommunication enabling this reality
Three Strategic Sourcing Questions If the answer to each of these questions is YES then the company should own the operation or asset otherwise, OUTSOURCE. Strategy Does the operation or asset directly contribute to the organization’s competitive advantage, core competency or capability? 1 Finance Does the investment in the operation or asset yield a return that is greater than the cost of invested capital? 2 Performance Is the operating performance of the operation or asset (quality of output, cost and cycle time) measurably superior to relevant industry standards? 3
Present Scenario - Growth in BPO Exports Growth in IT Exports Contribution to GDP Employment Creation $ in Bn % Strong Growth setting the stage for India’s Global Leadership $ in Bn % of GDP Source: Nasscom, Analyst Reports, TCS-GCP Research
Industry would comprise 2.5 percent of India's GDP.
Expansion to Tier-II and Tier-III cities.
Competitor Presence: International Source: McKinsey analysis Size of circle corresponds to number of qualified workers
Other basic infrastructure
Country risks/FDI incentives
Incentives for investments
Quality, Cost, Qualifications
Knowledge of English
High Low Low High Australia UK Philippines China Mexico Singapore Ireland India Semitransparent circles denote future projections
- - Attractiveness Index for Offshore Location Source: AT Kearney, neoIT Global Leadership of India Relative Analysis of India vs. Others Rank Country Attractiveness Index 1 India 7.12 2 China 5.61 3 Malaysia 5.59 4 Czech Republic 5.58 5 Singapore 5.45 6 Philippines 5.45 7 Brazil 5.44 8 Poland 5.33 9 Hungary 5.29 10 Thailand 5.20 Parameter Rank Labor Pool 1 Education System 1 English Proficiency 1 Cost Advantage 1 Infrastructure 2 Government Support 1 Quality 1 Cultural Compatibility 2 Business Environment 1
Transfer of business process to external service provider
Enabled by IT and
Customer Relation Management
Order processing/customer fulfillment
Finance and Accounting
Captive service providers Quality of services, deliverability, Confidentiality GE, e-Serve, WNS, Dell Process specialists Knowledge of process ADP, Exhult, Convergys, Hewitt IT outsourcing companies Specific verticals and outsourcing skills ACS, EDS, CSC Pure BPO vendors Cost advantage and skilled labour Wipro Spectramind, IBM-Daksh, GTL Software companies Cost advantage and process knowledge Infosys, HCL, Mphasis, Satyam Consultants Financial and accounting background Accenture, E&Y, PwC BPO Key BPO Players in India
Customer Care Finance BPO Opportunities HR Payment Services Content Development & Research Supply Chain & Administration
India BPO - Cost Structure Improved ROI through higher asset utilization and lower operating costs At Par 2-2.5 Times 50-60% Lower Developed countries India Capital Costs Asset Utilization Labour Cost
US$ Cost per FTE (Full Time Employee) Overheads Cost ($) Personnel 6,179 G&A Expense 1,000 Telecom 2,328 Property Rentals 847 Depreciation 1,500 TOTAL EXPENSES 11,854
Revenue per Employee Head Amount ($) Sales generated 14054 Taxes 200 Expenses 11854 Profit per employee $2000 For a unit of 10 people Total Profits $20000
Global Business Leaders - Bullish On India ’ s Potential “ India is a developed country as far as intellectual capital is concerned ” “ India can be a major part of Dell ’ s operations and we are looking to capitalize on India ’ s human capital ” “ We are expanding our presence in India to take advantage of the ample R&D talent available ” “ India is handling the most sophisticated projects in the world..I am impressed with the quality of work ” JACK WELCH, GE JOHN CHAMBERS, CISCO MICHAEL DELL, DELL BILL GATES, MICROSOFT