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Marketing Project Report on Business Process Outsourcing [BPO] :

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project on bpo

  1. 1. A SUMMER INTERNSHIP PROJECT REPORT ON THE STUDY OF SUBMITTED In the partial fulfillment for the award of degree of MBA (FYIC) Finance SUBMITTED TO: SUBMITTED BY: Prabhjot Kaur MBA (FYIC) Roll No. 5525 Department of Commerce and Business Management Guru Nanak Dev University, Amritsar 1
  2. 2. ACKNOWLEDGEMENT Apart from the efforts of me, the success of this project depends largely on the encouragement and guidelines of many others. I take this opportunity to express my gratitude to the people who have been instrumental in the successful completion of this project. First of all, I would like to show my greatest appreciation to Mr.Ashish Jasoria, COO of KRCPL (KPMG), who has given me such a glorious opportunity to work in KPMG. I would also like to thank my mentors during the project- Mr. Siddharth Nagpal and Ms. Paula Ghosh, without the guidance of whom this project would not have been materialized. Ms. Ankita Mahori, how can I forgot to acknowledge her, I can’t say thank you enough for her tremendous support and help. I always feel motivated and encouraged every time I met her. Without her encouragement and moral support successful completion of this project was not possible. And also my friends Karan Singh and Ashish Anand who provides me invaluable advice and help every time I need. I would also like to express my greatest gratitude to the entire KRCPL, who have provided me a cordial environment here. Last but not the least, my loving family and Almighty GOD, contribution of whom can never be explained in words, it’s beyond explanation. Pra bhjot Kaur 2
  3. 3. ABSTRACT This project is based on “BPO INDUSTRY IN INDIA”. Business Process Outsourcing is the delegation of one or more of the business processes to an external provider, which in turn owns, manages and controls the selected processes based on some specific standards. It was started in India in early 1980’s by the British Airways who set-up their captive unit in Delhi. BPO in India starts with low-end data entry processes, but now it moves up the value chain and deals in core business processes also. Both voice and non-voice BPO Industry exists in India. Various types of services are performed, call centres being the attraction today for the youth. BPO operates through three types of business models viz. - Transactional, Niche and Comprehensive. Finance and Accounting has also set its significant place in BPO pie. In 2008 BPO industry generates USD 12.8 Bn revenue, out of which exports revenue was USD 10.9 Bn. It will achieve USD 14.8 Bn by the end of 2009 (expected) and is expected to achieve USD 60 Bn by 2012 and USD 225 Bn by the end of 2020. Cost competitiveness and talented pool of human resources are the key drivers in the growth of BPO industry, but still some factors such as underdeveloped infrastructure and competition from other low-cost countries are providing challenge to the Indian industry, which needs to be addressed carefully by the cooperation of government, NASSCOM and industry itself. Still, India is shining in the BPO landscape and is the most attractive destination. 3
  4. 4. COMPANY PROFILE KPMG provides audit, tax and advisory services and industry insight to help organizations negotiate risks and perform in the dynamic and challenging environments in which they do business. KPMG was formed in 1987 with the merger of Peat Marwick International (PMI) and Klynveld Main Goerdeler (KMG) and their individual member firms. Spanning three centuries, the organization's history can be traced through the names of its principal founding members - whose initials form the name "KPMG."  K stands for Klynveld. Piet Klynveld founded the accounting firm Klynveld Kraayenhof & Co. in Amsterdam in 1917.  P is for Peat. William Barclay Peat founded the accounting firm William Barclay Peat & Co. in London in 1870.  M stands for Marwick. James Marwick founded the accounting firm Marwick, Mitchell & Co. with Roger Mitchell in New York City in 1897.  G is for Goerdeler. Dr. Reinhard Goerdeler was for many years’ chairman of Deutsche Treuhand-Gesellschaft and later chairman of KPMG. He is credited with laying much of the groundwork for the KMG merger. 1911 William Barclay Peat & Co. and Marwick Mitchell & Co. joined forces to form what would later be known as Peat Marwick International (PMI), a worldwide network of accounting and consulting firms 1979 Klynveld joined forces with Deutsche Treuhand-Gesellschaft and the international professional services firm McLintock Main Lafrentz to form Klynveld Main Goerdeler (KMG) 1987 PMI and KMG and their member firms joined forces. Today, all member firms throughout the world carry the KPMG name exclusively or include it in their national firm names 4
  5. 5. ABOUT KPMG IN INDIA KPMG is the global network of professional services firms whose aim is to turn understanding of information, industries, and business trends into value. KPMG was established in India in September 1993, and has rapidly built a significant competitive presence in the country. The firm operates from its offices in Mumbai, Pune, Delhi, Kolkata, Chennai, Bangalore and Hyderabad, and offers its clients a full range of services, including financial and business advisory, tax and regulatory, and risk advisory services. In India, KPMG has a client base of over 2000 companies. The firm's global approach to service delivery help provide value-added services to clients. The firm serves leading information technology companies and has a strong presence in the financial services sector in India while serving a number of market leaders in other industry segments. KPMG’s differentiation is derived from rapid performance-based, industry-tailored and technology-enabled business advisory services delivered by some of the most talented professionals in the country. KPMG professionals are grouped by industry focus and our clients are able to deal with industry professionals who speak their language. Our internal information technology and knowledge management systems enable the delivery of informed and timely business advice to clients. 5
  6. 6. SERVICES KPMG in India is one of the leading providers of risk, financial and business advisory, internal audit, corporate governance, and tax and regulatory services. With a global approach to service delivery, KPMG responds to clients' complex business challenges with seamless service across industry sectors and national boundaries. The Risk Advisory Services practice helps clients manage risk so they can focus on their core businesses. By intimately understanding each client's business, it converts information into insights to uncover hidden opportunities to improve client efficiency and performance. These help clients improve performance and make decisions that strengthen their business. The practice provides Information Risk Management, Internal Audit, Corporate Governance advisory, Software Process Improvement, and Quality Registrar certification and advisory services. KPMG’s Business Performance Services (BPS) assists clients in strategy formulation, market- driven feasibility studies, process re-engineering, cost management, operational processes alignment, information systems planning, technology implementation program management, and change enablement. The practice aims to provide clients with integrated solutions to enhance performance through the synergy of strategy, processes, people, and technology. Business Performance’s Infrastructure Advisory Group also assists in tackling issues brought forth by liberalization – redefinition of the roles of the central and state governments in infrastructure building; shift in focus from being service providers to being facilitators and policy makers; and managing the privatization process. KPMG's Tax practice is focused on finding opportunities and leveraging them to the advantage of clients in the form of significant tax savings. It helps reduce clients’ bottom-line expenses through tailored, innovative methodologies. The practice provides advisory services in the areas of direct, indirect and personal taxes. KPMG’s Financial Advisory Services practice provides valuable insights into how companies can grow and enhance their shareholder value. KPMG Corporate Finance and KPMG’s Transaction Services support clients through all phases of a transaction, from corporate strategy to post-merger integration. KPMG’s Corporate Recovery practice helps companies with turnaround solutions and in rebuilding stakeholder confidence, while KPMG Forensic SM assists in protecting the reputation and integrity of clients' businesses. Strategic and Commercial Intelligence (SCI) is KPMG‘s niche transaction advisory practice providing key insights around strategic, commercial and operational issues arising in course of a 6
  7. 7. deal. The practice works with both corporate and private equity clients, advising them on market entry and growth strategy, market assessment, business modeling & forecasting, commercial due diligence and portfolio synergies, in connection with their M&A and other growth plans. With over 35 professionals from diverse background and expertise located out of Mumbai, Delhi, Chennai, Bangalore & Hyderabad, SCI has successfully executed a large number of transactions over the last 2 years. The team has aligned itself in line with KPMG's Lines of Business model to ensure access to niche industry verticals. TABLE OF CONTENTS Sr. No. TITLE PAGE NUMBER 1 INTRODUCTION TO BPO • Definition of BPO • Objectives of BPO (11-12) 11 12 2 EVOLUTION OF BPO IN INDIA (13-14) 3 SIZING OF BPO IN INDIA • Growth in Indian BPO Market • Global Market and India’s Share (15-19) 15-18 19 4 SEGMENTS IN BPO • Voice and Non-Voice • Horizontal and Vertical (20-26) 20-23 24-26 5 STEPS TO BE FOLLOWED WHILE OUTSOURCING (27-29) 6 REGULATORY FRAMEWORK OF INDIAN BPO • Data Protection Law • Sarbanes Oxley Act (30-31) 30 31 7 BPO BUSINESS MODELS (32-34) 8 BPO AND FINANCE (35-38) 7
  8. 8. 9 TRENDS IN INDIAN BPO INDUSTRY • Drivers of BPO Growth • Issues and Challenges (39-42) 40 41-42 10 COMPETITIVE LANDSCAPE OF INDIAN BPO (43-49) Sr. No. TITLE PAGE NUMBER 11 CRITICAL ANALYSIS OF BUSINESS PROCESS OUTSOURCING • Benefits of BPO • Limitations of BPO • SWOT Analysis (50-53) 50 51 52-53 12 BUDGET 2009-10 – IMPACT ON BPO INDUSTRY 54 13 CONCLUSION 55 14 BIBLIOGRAPHY 56 8
  9. 9. LIST OF FIGURES AND TABLES FIGURE NUMBE R TITLE OF FIGURE PAGE NUMBER 1 Definition of BPO 11 2 History of BPO In India 13 3 Value Chain of BPO in India 14 4 Growth of BPO in Terms of Exports 15 5 Growth in Domestic BPO Revenue 16 6 Total BPO Growth in Terms of Revenue 17 7 BPO and Employment 18 8 Size of Global BPO Market 19 9 Global BPO Market Share 20 10 Classification of Voice and Non-Voice BPO 21 11 Horizontal and Vertical BPO 24 9
  10. 10. 12 Vertical Segments in BPO 25 13 Diagrammatic Presentation of Horizontal and Vertical BPO 26 14 Steps to be Followed While Outsourcing 27 15 Financial BPO Processes Being Outsourced 36 16 Top 10 BPO Companies in India 43 17 SWOT Analysis of Indian BPO Industry 52 TABLE NUMBER TITLE OF THE TABLE PAGE NUMBER 1 BPO Growth in Exports 15 2 BPO Growth in Domestic Market 16 3 Overall (Exports & Domestic) BPO Growth 17 4 Employment Generated by BPO 18 5 Global BPO Market 19 6 Characteristics of BPO Business Models 34 7 Major Players in BPO Finance 38 10
  12. 12. CUSTOMER SERVICE CLAIMS PROCUREMENT ORDER PROCESSING TRANSCRIPTION TECHNICAL SUPPORT LEASE ABSTRACTION APPOINTMENT SETTINGS DATA EXTRACTION DEBT COLLECTION HUMAN RESOURCES FIGURE 1- DEFINITION OF BPO BUSINESS PROCESS OUTSOURCING: - It is the delegation of one or more of IT intensive business processes to an external provider, which in turn owns, manages, and administers the selected processes based on defined and measurable performance criteria. BPO as per the work performed can be classified as VOICE BASED, which includes customer related services such as technical support, marketing etc. and NON-VOICE, which includes internal business operations. And as per the location 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 business processes to India was the want of low cost. But now-a-days, companies that offshore their business processes to India are no longer looking at cost reduction alone. They typically want to achieve: 1) Process improvement and efficiency - faster turnaround and greater productivity 2) Cost savings. 3) Improved quality - less errors/rework 4) Building/strengthening presence in a new market/foreign country 5) Increased focus on core competencies - e.g. developing new products or services 6) Building business value and strategic differentiation All these objectives help the companies to increase their competitiveness and thereby, striving successfully in this globally competitive world. All of the above add up to help these companies achieve increased competitiveness through BPO. 12
  13. 13. 2. EVOLUTION OF BPO IN INDIA Outsourcing as a concept is probably one of the oldest and most commonly practiced. As a concept and practice it pervades all aspects of our lives – domestic as well as professional. The idea of outsourcing has its roots in the 'competitive advantage' theory propagated by Adam Smith in his book 'The Wealth of Nations' which was published in the year 1776. Over the years, the meaning of the term 'outsourcing' has undergone a sea-change. Evolution of BPO in India can further be explained under two heads: 1. HISTORY OF BPO IN INDIA. 2. VALUE CHAIN OF BPO IN INDIA. 1. HISTORY OF BPO IN INDIA: In India BPO started with the British airways setting their back-office operations in Delhi in early 1980’s. Starting from captive units Indian BPO moves to the third party 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: 13
  14. 14. FIGURE 2- HISTORY OF BPO IN INDIA 2. VALUE CHAIN OF BPO IN INDIA: Value chain is a chain describing the value of business processes being outsourced to India. Value can be explained as the importance of business processes to the firm outsourcing its business operations. India is moving up in the value-chain. At the beginning only low end data entry processes were outsourced to India. With the passage of time trend goes on changing. From low value data entry processes chain moves up to core processes being outsourced now-a-days. It started with: MID-1990’s- DATA ENTRY PROCESSES: Data entry simply includes entry of data from papers, books or any hard copy format to computer aided soft copy. DATA CONVERSION PROCESSES: Conversion of data across various databases on different platforms. LATE 1990’s- CALL CENTRE SERVICES: Call centers are outlets that exist mainly to answer inbound or place outbound telephone calls and can exist for the purpose of sales, marketing, telemarketing, customer service, technical/non technical support or any other specific business activity. 2000- TRANSCRIPTION PROCESSES: Transcription process implies transcribing the audio or visual information into electronic document form. Up till 2000 only non-core activities were EARLY 1980’s MID 1980’s 1990’S 1999 2000 2002 0NWARDS European airlines started its back-office operations in New Delhi. BRITISH AIRWAYS set its captive unit in Delhi. American express (AMEX) consolidated its JAPAC (Japan and Asia- Pacific) back- office operations in New Delhi General Electric starts an enterprise called GECIS (GE Capital International services) for voice operations in India. In 2004 GECIS was spun off into GENPACT The NEW TELECOM POLICY OF 1999 ended the state monopoly on international calling facilities. This heralded the growth of inbound/outbound call centres and data processing services. Pioneered by the GE THIRD- PARTY BPO’s sprung up in India, thereby overtaking captives.EXL Efunds and Daksh started its third party BPO’s in Noida, Mumbai and Gurgaon respectively. IT-MAJORS ENTERED INTO INDIA. All major Indian software organisations went into BPO including Infosys, Inforlinx, and Patni. By 2003 Daksh bought out by IBM, Quattro started in 2006. Convergys, Sitel, Accenture, Hewlett Packard and dell also set up their shops in India 14
  15. 15. outsourced. Then the trend changed and today the core activities also occupy a significant proportion in total Indian BPO pie. The value chain is explained briefly in the following diagram: MID 1990’s LATE 1990’s 2000 TODAY FIGURE 3- VALUE CHAIN OF BPO IN INDIA So the above diagram clearly explains that Indian BPO started its journey with low valued processes. But with the passage of time it moves up in the value chain thereby operating with the high-value business processes that is it moves from the non-core to core activities. 3. SIZING OF INDIAN BPO INDUSTRY India became familiar with ‘Business Process Outsourcing’ only in the early and mid 1990’s, but now the entire country seems to be quivering with the ‘BPO fever'. The BPO industry is growing very fast in India. It grew at a rate of 38% by 2005 and at the rate of 27% by 2008. To know the actual sizing of the BPO industry we will describe it under two heads: 1. GROWTH OF INDIAN BPO MARKET 2. GLOBAL MARKET AND INDIA’S SHARE Let’s firstly discuss, 1. GROWTH OF INDIAN BPO MARKET: BPO in India has witnessed a steady growth. Both offshore as well as onshore component of BPO market is increasing. DATA-ENTRY DATA- CONVERSION CALL-CENTRE TRANSCRIPTION- PROCESSES- NON CORE TRANSCRIPTION PROCESSES- CORE 15
  16. 16. A. In Terms of Exports: USD Billion FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 E Exports 2.6 3.1 4.6 6.3 8.4 10.9 12.8 TABLE 1- BPO GROWTH IN EXPORTS BPO Exports 0 2 4 6 8 10 12 14 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 E Year USDBillion Exports FIGURE 4 –GROWTH OF BPO IN TERMS OF EXPORTS The above figure clearly shows that exports in the BPO market are increasing at the fluctuating rate. In 2003 it was USD 2.6 billion. Then it increased to USD 3.1 billion in 2004. And in the financial year 2008 it was USD 10.9 billion. It is expected to reach at USD 12.8 billion by the end of 2009. Figure indicates that it grows almost at the rate of 50% from 2003 to 2006. After that it grows almost at the rate of 20%-30%. B. In Terms of Growth in Domestic Market: USD Billion FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 E Domestic 0.2 0.3 0.6 0.9 1.1 1.6 1.9 TABLE 2- BPO GROWTH IN DOMESTIC MARKET 16
  17. 17. Domestic BPO Revenue 0 0.5 1 1.5 2 F Y 2 003F Y 2 004F Y 2 005F Y 2 006F Y 2 007F Y 2 008 F Y 2 009 E Years USDBillion Domestic FIGURE 5 - GROWTH IN DOMESTIC BPO REVENUE The above figure shows the trend of growth in domestic revenues of Indian BPO industry. It shows that onshore component is less than offshore component. In 2003 revenue of BPO from domestic industry was USD 0.2 Billion. It increased to USD 0.3 Billion in 2004. Then in 2008 it was USD1.6 Billion and is expected to reach USD 1.9 Billion at the end of 2009. It is growing at a slow pace than export component of BPO market. C. Total BPO Growth: USD Billion FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 E Total BPO (Domestic and Exports) 2.8 3.4 5.2 7.2 9.5 12.5 14.8 TABLE 3- OVERALL (Export & Domestic) BPO GROWTH 17
  18. 18. Total BPO Growth 0 2 4 6 8 10 12 14 16 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 E Years USDBillion Total BPO (Domestic and Exports) FIGURE 6- TOTAL BPO GROWTH IN TERMS OF REVENUES As shown by the figure overall BPO grow steadily at the rate of almost 2005 total BPO Industry was USD 12.5 Billion while it is expected to reach USD14.8 Billion in 2009. FUTURE OUTLOOK: As per the study conducted by NASSCOM Indian BPO industry is growing at a CAGR of 28%. If it continues with this pace it will reach to USD 30 Billion by 2012 but it is expected that it will touch USD 60 Billion because of the many advantages it has over the competitors. While the other study of NASSCOM predicts the Indian BPO market will reach USD 225 Billion by 2020. So it can be represented as: 2012= USD 60 Billion E 2020= USD 175 Billion (Exports) + USD 50 Billion (Domestic) So 2020= USD 225 Billion E E= Expected D. In Terms of Employment Generated: BPO has contributed a lot in the Indian economy by down turning the graph of unemployment. BPO has been successful in creating lot many jobs. This can be made clearer with the help of following table: Year FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2012 E 18
  19. 19. No. of Employees(in ‘000) 180 216 316 415 553 700 790 2500 E=Expected TABLE 4-EMPLOYMENT GENERATED BY BPO BPO Employees (in ‘000) 0 500 1000 1500 2000 2500 3000 FY 2003FY 2004FY 2005FY 2006FY 2007FY 2008FY 2009 FY 2012 E Years No.ofEmployees No. of Employees(in ‘000) FIGURE 7- BPO AND EMPLOYMENT So the greatest pool of graduates is moving towards the BPO industry thereby decreasing the unemployment and developing the economy by utilizing the available 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 following table in 2000 it was USD 119 Billion and progressed to USD 310 Billion in 2008. Year 2000 2005 2008 2009 E Size (USD Bn) 119 234 310 450 19
  20. 20. TABLE 5- GLOBAL BPO MARKET Size of Global BPO Market 119 234 310 450 2000 2005 2008 2009 EYears Revenues (USD Bn) Size (USD Bn) FIGURE 8- SIZE OF GLOBAL BPO MARKET Out of this total global market India’s share is estimated to be 5-6%, currently as shown by the following diagram. US have the largest share of 52% followed by UK which commands 20% of the BPO pie. GARTNER predicts that India’s share in the Global BPO market will get double by 2010 i.e. it will reach to 10% of total BPO market. Global BPO Market Share 52% 10% 1% 20% 3% 5% 7% 2% US Europe S.America UK N.America India Asia Others FIGURE 9- GLOBAL BPO MARKET SHARE 4. SEGMENTS IN BPO BPO in India is organized in many segments. Previously there was only low end voice operations were outsourced to India. In the early days of BPO in India voice operations were the major actors leaving a very small proportion for non-voice activities. But, as India moves up in the value chain, 20
  21. 21. non-voice operations starting occupy a bigger proportion of the BPO pie. Except voice and non- voice, BPO in India can also be segmented into horizontal and vertical. So business process outsourcing can be segmented as: 1. VOICE AND NON-VOICE BPO. 2. HORIZONTAL AND VERTICAL BPO. Let’s firstly discuss 1. VOICE AND NON-VOICE BPO: INBOUND SALES ACCOUNTING OUTBOUND SALES DATA ENTRY TELEMARKETING DATABASE MANAGEMENT CUSTOMER SERVICE CLAIMS PROCUREMENT ORDER PROCESSING TRANSCRIPTION TECHNICAL SUPPORT HUMAN RESOURCES APPOINTMENT SETTINGS DEBT COLLECTION HELP DESK MARKET RESEARCH AND QUALITY SURVEYS FIGURE 10- CLASSIFICATION OF VOICE AND NON-VOICE BPO (A) VOICE BPO (FRONT OFFICE OPERATIONS) Voice outsourcing is also termed as front office outsourcing. Front office outsourcing services have to do with interactions directly with customers, usually over the telephone but can also include email, internet, fax, and other forms of interactive communications with customers. Organisation can concentrate on high valued core business activities by outsourcing its non-core 21 BPO VOICE- BPO NON-VOICE BPO
  22. 22. front-office operations. It also allows them to reduce the significant expense associated with voice element of business. And by outsourcing the non-core activities to the service provider who can handle them more efficiently and effectively, customer satisfaction can also be increased and create a sustainable, long term, productive relationship. Voice activities being outsourced include: 1. INBOUND SALES: Inbound sales refers to the process where your customer calls your business as a result of stimulus such as a marketing promotion, a referral from someone, a direct mail campaign, a media advertisement, a contact number on your company’s web page, or any type of marketing and sales activity where the logical next step in the sales process for the customer is to place a call to the business. For an inbound sales process, the call center agent works through the sales process to conclude with a sale for your company. Results include making a commitment to purchase or placing an actual order for a product or service. This could represent anything from a vacation package to a floral arrangement to a subscription to almost any type of purchase that can be done over the phone. 2. OUTBOUND SALES: Outbound sales refer to the proactive selling of products and services using the telephone. In inbound selling your customer calls you but in the outbound sales you call your customer for affecting a sales activity. This includes contacting the customers who have already demonstrated interest by signing up or by contacting your company by mail, email, web, phone, or in-store activity. 3. TELEMARKETING: Conducting business has changed, it’s no longer possible to personally visit all your clients and customers, in fact with the popularity of the Internet, many clients may not even reside in the same city or even country. Establishing and creating a telemarketing service has enabled businesses to connect with all their customers via the phone. A telemarketing service allows you to keep track of customers as they close, merge and relocate. Keeping in regular contact with your clients’ means being able to record their movements while maintaining a marketing and ongoing customer relationship. 4. CUSTOMER SERVICE: Customer service covers a wide range of services providing assistance, support, information, and answers to your customers to a variety of questions and enquiries. Although generally customer service is done using inbound calls, it can also be used with outbound calls. Examples of outbound customer service include follow-up on orders, confirmation of receipt of a product or service, quality surveys with your customers, and more. 5. ORDER PROCESSING: Order processing includes the process of taking information from your customers so that a specific transaction or order can be processed. This applies to 22
  23. 23. either Business to Business or Business to Consumer relationships with customers. 6. TECHNICAL SUPPORT: If your business’s product or service has some element of technology involved, telephone oriented technical support can help you cost effectively work with your customers to address and solve their questions in this area. 7. APPOINTMENT SETTING: For some businesses, a direct contact between people is required to complete the sale or provide the service. The challenge is getting the appointment with a potential client. This service allows businesses to leverage experts in the area of appointment setting to be able take a potential client from expressing interest in your business’s offer to setting up a specific time and day for a meeting between that potential client and an account representative from your company. 8. DEBT COLLECTION: The reality of business is that some of your customers may miss paying a bill. By using the telephone as a reminder service, a large amount of bills can be collected easily and effectively. Doing this sooner than later helps your business manages cash flow and improves results. 9. HELP DESK: The help desk function is typically considered to be an internal company function for supporting your company’s employees and businesses in your supply chain. It can also refer to a place for your customers to call to receive help with questions they have. 10. MAREKT RESEARCH AND QUALITY SURVEYS: Market research or quality surveys help to learn more about your market or your business potential, and also helps in determining the quality of your service and products to customers. Experienced agents are able to contact and discuss with your existing or potential customers to gather valuable information to help you make business decisions. (B) NON-VOICE BPO (BACK OFFICE OPERATIONS) Non-voice BPO or Back office outsourcing services includes the processes associated with running the business operations such as financial operations, human resources, and information management. It does not include the interaction with the customers as it includes the internal business processes. Again by outsourcing low-end activities a firm can concentrate more on its core business operations thereby enhancing the profitability of the firm. 1. ACCOUNTING: Accounting services include either portions or the full range of managing the accounts payable and accounts receivable processes. It also includes managing the general ledger, bank reconciliation accounts etc. 2. DATA ENTRY: Data entry services helps in getting large amounts of information added into databases or specific 23
  24. 24. applications, cost effectively. 3. DATABASE MANAGEMENT: Every business have customer and contact databases to manage and keep up to date. Database management service allows keeping database clean and up to date through a program of contacting your customers to ensure you have the latest information. 4. CLAIMS PROCESSING: Typically associated with the insurance industry, claims processing actually covers any process that starts with a customer enquiry that requires investigation, analysis, assessment, decision, and follow-up with a formal response. 5. TRANSCRIPTION: Transcription is the process of converting the audio or visual information into electronic document form. Medical transcription was one of the first offshore BPO services to be launched from India. This service involves the transcribing of medical records from audio format or dictated by doctors or other healthcare into either a hard copy or electronic format. 6. HUMAN RESOURCES: Human resources are the manpower employed by the firm. It is the valuable asset of the company. More and more businesses are outsourcing their human resource business function or parts of that function to experts who do this service full-time. This ranges from hiring processes to management of employee benefits process to payroll. Businesses that find a high quality service provider outsource their HR activities and can 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 value 2. High value and low volume. High-volume and low-value are the horizontal BPO’s while high-value and low-volume are the vertical BPO’s. 24
  25. 25. FIGURE 11-HORIZONTAL AND VERTICAL BPO Now let us discuss these in detail: (A) HORIZONTAL BPO: Horizontal BPO involves function centric outsourcing. The vendor specializes in carrying out particular functions across different industry domains. So the various features of Horizontal BPO include: 1. It is function specific in nature. 2. It spreads across different industry domains i.e. domain-extensive. 3. It includes high-volume, low-value business processes. 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. (B) VERTICAL BPO: A vertical BPO focuses on proving various functional services in a limited number of industry domains. It involves following features: 1 It is function extensive. 2 It spreads across limited number of industry domains. 3 It involves high-volume, low-value business processes. 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. As shown by the diagram, vertical BPO encompasses various segments. Among them IT is the largest one sharing 22% of the BPO pie. Human resources accounts for 13%.whereas finance and customer services accounts for 11% each. Finance is the attractive destination now-a-days and its proportion is increasing. HORIZONTAL BPO VERTICAL BPO 25 BPO
  26. 26. Vertical Segments In BPO 22% 3% 16% 3%13%5% 9% 7% 11% 11% IT TRANSPORT MFG. MGMT. HR LOGISTICS MKTG. REAL EST. FINANCE CUST.SERV. FIGURE 12- VERTICAL SEGMENTS IN BPO DIAGRAMETICAL PRESENTATION OF HORIZONTAL AND VERTICAL BPO In the diagram below, there are three industry domains-recruitment, sales and procurement and four processes viz., process A, B, C, and D. vertical BPO’s move along the various processes but are specific to a particular industry domain, such as recruitment in the following diagram. It focuses only on recruitment but covers the entire processes of it, from identifying open positions to selecting a new hire. So vertical BPO is function extensive but domain intensive. Whereas, horizontal BPO moves horizontally in a single process. Such as, in Process D in the following diagram. So horizontal BPO is domain extensive but function intensive, just opposite to vertical BPO. We can also observe from the following diagram that vertical BPO is low volume and high-value process as it focuses on one domain (recruitment) and is handling all the activities(Process A to Process D). On the other hand horizontal BPO is high-volume and low value as it focuses on various industry domains but only low-end processes as process D here. 26
  27. 27. FIGURE 13-DIAGRAMETIC PRESENTATION OF HORIZONTAL AND VERTICAL BPO After studying the segments of BPO we can say that trend is changing more towards the non-voice BPO now. And the industry is moving towards the vertical BPO as it is moving up in the value chain. According to the one study by GARTNER, companies should move to vertical from horizontal as the firm starts maturing. 27
  28. 28. 5. STEPS TO BE FOLLOWED WHILE OUTSOURCING Outsourcing means we are handling our business processes to some outsider firm. So when the firm is outsourcing its core high-valued business processes it should take diligent care as any mistake can mar the firm. Not only the core ones, even non-core processes contribute a lot to the firm directly or indirectly. So outsourcing decision should be made carefully. For outsourcing to be effective there are certain steps which need to be followed: Identifying the agency needs Selecting the vendor Experience and Expertise HR Issues Ability to Ramp-Up Security Level In house facilities to meet the agency’s needs. 28
  29. 29. FIGURE 14 -STEPS TO BE FOLLOWED WHILE OUTSOURCING STEP 1: IDENTIFYING AGENCY NEEDS The first step in the decision-making process is to identify the organizations' needs. These needs lay the framework for projects and activities to be outsourced. Address the strategic interests and goals of the company - The strategic plan, the information sources and the company's performance measures should all be taken into consideration while identifying the company's needs. The goals of the company serve as a basis for determining a project's success. Core competencies, by and large, should not be outsourced. However, this might change if it is found viable that resources or knowledge from an external source could supplement the available in-house resources. The needs could include cutting costs, enhancing service levels, moving to a different technology platform, increasing technical know-how and skills within the organization. STEP 2: SELECTING THE VENDOR Outsourcing skeptics believe that an outsider cannot provide the same attention as the in-house team. Therefore, a thorough vendor scrutiny becomes vital before assigning critical technical roadmaps and confidential information to him. Understanding the emphasis of a vendor's business, or what it is that drives the vendor, is essential while choosing the appropriate vendor to meet the specific needs. A vendor selection team should be developed that would recognize business areas for the project. The vendor selection team should comprise senior management, legal staff with contract expertise, technical staff, end users and financial staff. The parameters on which the vendor should be assessed have been carefully chosen. The three most important factors considered while choosing an outsourcing vendor included price, quality and flexibility. STEP 3: EXPERIENCE AND EXPERTISE As with any procurement process even in an outsourcing initiative the relevant past experience and skill-sets of the prospective vendor should be considered and given due weightage. This will not only ensure that best practices are adopted in the outsourced activity but also high efficiency is likely to be maintained. Besides selecting a vendor with relevant past experience is likely to give the company a further edge in terms of reduction of training time and costs. 29
  30. 30. A strong track record and a positive reputation of the vendor are other important criterion, which will ensure that the partnership has been struck with the correct match. This could further be ensured by undertaking a reference check. STEP 4: IN-HOUSE FACILITIES TO MEET THE AGENCY NEEDS It is important that the prospective vendor already has their processes and infrastructure in place to handle the assignments to be outsourced to them. The vendor should be financially sound. Any investment made by the vendor should be towards improving the processes rather than towards architecting them. STEP 5: HR ISSUES It is imperative to take into account the HR issues that may arise in the vendors’ organization. The type of selection and hiring processes of the vendor can go a long way to ensure the quality of the assignment, as the human resources selected and hired by the vendor are going to perform the assignment. Also retaining and training policies are important as these ensure that the quality of the resources improve with time rather than deteriorate. It is desirable that mature employees populate the vendor organization rather than immature ones. STEP 6: ABILITY TO RAMP-UP Most businesses are cyclic in nature and hence there will be slack seasons as well as peak seasons. Hence the vendor organization should have a flexible business model and be in a position to ramp up/reorganize its resources as well as ramp down its resources without any major problems – organizational, legal etc. STEP 7: SECURITY Data security is the most important factor to be considered while outsourcing. The vendor organization should be able to instill a certain comfort level as far as maintenance of confidentiality regarding the business process, business standards, business data etc is concerned. Hence it is important that well defined security policies are implementable in the vendor organization and there is a respect for intellectual property within the organization. It is most desirable that the vendor organization has a sound and resilient business plan in place. This will ensure that the vendor does not collapse with the loss of a single client or with changes in the business environment. So the outsourcing to be successful, all the above stated steps should be followed realistically. It will ensure the effective and efficient completion of the project outsourced as well as data security. 30
  31. 31. 6. REGULATORY FRAMEWORK OF INDIAN BPO Each and every business is regulated by some law. So is the BPO industry. BPO industry involves a lot of business processes (core and non-core) to be outsourced. One company handles its data and business processes to the other one. So it needs the proper regulation otherwise it will lead to the scandals in BPO industry. So in order to prevent this possibility of scandals there are some regulations, some of which are in process, framed to protect the BPO industry. It involves: • DATA PROTECTION LAW • SARBANES OXLEY ACT A. DATA PROTECTION LAW: Data protection is the major consideration in framing the regulation for BPO industry The government is planning to introduce a law on data protection, which will regulate the working of Indian Business Process Outsourcing companies. The proposed legislation will provide a framework to govern the use of customer data by Indian companies and prevent any misuse. This will be the first attempt by the government to regulate the working of call centres and BPO companies. The proposed law will cover areas like financial transactions, unsolicited bulk e-mails, hacking and unauthorized access to personal information, such as health information, credit card and other personal details. The new law has been necessitated by a European Union directive, which insists on EU member states restricting outsourcing to countries that fulfill certain data protection requirements. This law would not only cover companies offering outsourcing services to overseas customers, but also those operating in the domestic market. The government has also set up an expert group to review the existing legal framework in the country, including the IT Act, 2000, and suggest specific changes. The proposed law will not only have provisions to protect the privacy of individuals and companies, but will also set stringent conditions on the use of personal information by companies in India. Government might introduce this law as a separate legislation or may amend the IT Act to incorporate various clauses on data protection. 31
  32. 32. The government's objective in framing this law is not just to make Indian companies compliant with EU norms, as most companies were bound by contractual obligations, but also to introduce a law encompassing the broad aspects of privacy and protection of personal information. As a step towards framing the legislation, the government has asked industry associations to come forward with detailed papers on best practices and how such a regulation will impact the Indian software and BPO sectors. B. SARBANES OXLEY ACT: One of the most important pieces of legislation impacting the BPO industry today is the Sarbanes Oxley Act. In response to Enron WorldCom and other scandals US Congress established Sarbanes Oxley Act in 2002. It was established to better organizational transparency and governance, and improve managerial accountability to shareholders. The Act includes provisions for quarterly certification of financial results (Section 302) and management's annual assertion that internal controls over financial reporting are effective (Section 404). Section 404, which has received most attention from publicly traded firms, requires formation of an accounting oversight board, the maintenance and evaluation of adequate internal control structures and processes as they pertain to financial reporting, an attestation examination by independent auditors and the consequent disclosure of material weaknesses. Entire business processes outsourced by the US firms in India need to comply the SOX act. So the challenges to BPO providers in general and Finance and Accounting BPO providers in particular, are to develop service offerings and service delivery methodologies that facilitate compliance with Sarbanes-Oxley requirements. To overcome the lingering doubts of prospective customers, providers should not only possess a detailed understanding of these requirements, but also make recommendations to how to meet them. Too often however, providers responded reactively, rather than proactively, to these issues. So these are the two regulations which currently regulate the working of BPO industry in India. Data protection Law will be enacted soon, hopefully. And Sarbanes Oxley act is doing its work wonderfully. But still there are some shortcomings in BPO regulation which needs to be addressed. 32
  33. 33. 7. BUSINESS PROCESS OUTSOURCING (BPO) BUSINESS MODELS A business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. 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. In addition to on-shoring, near-shoring and offshoring, BPO operations are also conducted through the following three business models: 1. Transactional Business Model 2. Niche Business Model 3. Comprehensive Business Model 1. TRANSACTIONAL BUSINESS MODEL Transaction providers handle the transactions for only one process. In payroll, for instance, they do not take over your payroll department; they only cut the checks. They do not take on your people, their contracts are short (1-2 years), and the contract values are not large ($1-5 million a year). Using transaction providers has many benefits, but the more processes you outsource; the more fragmented your processes become. In essence, you still have an in-house department to manage. In transaction outsourcing, most of the operational risk stays with the client. There might be penalties for non-performance, but these are minor because the client still retains most of the function in-house. 2. NICHE BUSINESS MODEL Niche providers focus on two to four processes. Niche providers will hire your people, but only up to 50 or so. They will invest modest amounts of capital to release some of your asset value. For instance, they will buy your assets in their specialist process area. Niche providers are generally 33
  34. 34. domestic, and their deals range from three to five years in length, with a yearly contract value of $5-10 million. Niche providers aim to make selected processes more efficient, by lowering costs and raising service levels. They are paid based on outcomes. In niche outsourcing, risk is typically shared evenly between client and provider. Although the providers will hire your people and be responsible for outcomes, they only make limited investments in capital and only impact a few processes. Thus, clients continue to shoulder the other processes in a function. 3. COMPREHENSIVE BUSINESS MODEL Comprehensive providers handle almost all the transactional and administrative processes in a function, or even several functions, such as HR and financial accounting. For instance, there are 22 processes in HR and 33 processes in finance and accounting. Comprehensive BPO prefers global deals, which are typically 7-10 years in length, and are generally over $100 million a year. These providers will buy client assets and will take on hundreds and sometimes thousands of client staff. Comprehensive providers strive to make interrelated processes more effective, so they aim to reduce the total cost of a function by introducing best practices. They are accountable for cost savings as well as outcomes for an entire function, so clients pay for outcomes, not inputs. Comprehensive providers shoulder 70 percent of the operational risk of the in-scope processes because they are responsible for the information technology, transactions, and administrative elements of those processes. Furthermore, they invest significant amounts of capital in the relationship, and they absorb most client personnel. The risk to clients is that comprehensive BPO is new - it's only been around for two-three years - so providers are less mature, their processes less proven, and most have very few reference-able accounts 34
  35. 35. CHARACTERISTICS OF BUSINESS MODELS: As shown in the figure below, there are several characteristics that distinguish between these three flavors of BPO. BPO Business Model Transactional Niche Comprehensive Number of processes Transactions only, typically for 1 process 2-4 processes 10+ processes in a function; sometimes more than one function Invest in client assets? No, migrate everything to their system Yes - but modest dollars and personnel take-on Yes - significant dollars and employee take-on Hire client's people? No Yes - but usually upto 50 people Yes, usually &get; 100s and often in the 1000s Locations Work at provider's location; very low headcount at the client site -typically account managers and sales people Mixed, people at both client and provider locations Mixed, people at both client and provider locations Geographic spread Multi-country Domestic (& get; 80% of revenue) with some international (typically Europe) Global Contract duration 1-2 years 3-5 years 7-10 years Contract value per year $1-5 million a year $5-10 million a year $50-$100 million a year Accountability For the transaction processing For process outcomes For cost savings for the entire function plus business outcome Risk-holder 90% of the risk is still on the client, 10% provider 50% client, 50% provider 30% client, 70% provider 35
  36. 36. Metrics Per transaction Based on outcome Based on outcome TABLE 6- CHRACTERISTICS OF BPO BUSINESS MODELS 8. BPO AND FINANCE BPO started with the low end data-entry processes to be outsourced to India. Then it moves up the value chain and now stepped in finance and accounting also. Globally, BP (BP plc is the third largest global energy company, a multinational oil company "oil major" with headquarters in London.) led the way by outsourcing its F&A work to Accenture in 1991 and, during the last decade, leading service providers gained the history, context and actual experience to develop best practices in this area. Today's companies are realizing that outsourcing accounting is a smart business proposition as compared to the costly and elaborate in-house accounting capabilities. Additionally, there is a growing need to cut costs, centralize accounting operations and adopt best practices by transferring the ownership of running the accounting processes to experts. The economic downturn and intense competition in the industry is forcing companies to optimize their back- office processing capabilities, including capabilities for non-core processes. A. SEGMENTS IN BPO FINANCE There are two sub-segments of companies providing finance BPO. For both cost saving is the natural driver. These are: 1. COMPANIES IN BANKING, FINANCIAL SERVICES AND INSURANCE (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 Express and Citibank led the initiative in 36
  37. 37. India. The reason is that their customer-facing front office 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: For them, the finance function is important as it helps the rest of the organisation run smoothly. So such a company will outsource functions like sales order processing, accounts payable, receivables management, balance-sheet management and cash management. For instance, a US-based industrial major currently evaluating finance BPO companies in India has 850 employees looking at finance at a total annual cost of $110 million. Global airlines also, under cost pressures, are looking at India to outsource revenue accounting and sales audit functions. These include British Airways, Austrian Airlines, Malaysian Airlines and Qatar Airways. B. FINANCIAL BPO PROCESSES BEING OUTSOURCED: Three types of financial processes are being outsourced to India. These include: FIGURE 15- FINANCIAL BPO PROCESSES BEING OUTSOURCED 1. CLERICAL LOW GRADE WORK: TOP-END ACTIVITIES (AROUND 10%) MIDDLE LEVEL ACTIVITIES (25%-35%) CLERICAL LOW- END ACTIVITIES (65%-75%) 1. 2. 3. 37
  38. 38. Most of the work being outsourced to India in finance and accounting vertical consists of clerical low-grade work. Almost 60% to 70% of the work includes processes like transaction, accounting, fixed assets (depreciation calculation etc.), account receivable, account payable, travel & living, cash application (goes into making ledger entries) and account reconciliation. 2. MIDDLE LEVEL: The middle level which constitutes almost 25% to 35% of the work includes processes like accounting operations, general ledger consolidation, reporting. It also includes tasks 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 statistics graduate. Other work in this category includes equity/debt market research and analysis. C. REASONS FOR OUTSOURCING FINANCE AND ACCOUNTING There are many reasons which lure a business to outsource its finance and accounting operations. These are: 1 EXPECTATION TO REDUCE COST: Study conducted by Deloitte suggests that the firms achieve 39 percent cost savings from 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 either because of a lack of specialized resources, scale or simply because this is not their prime area of focus. This is why it makes sense to outsource it. And as the back office becomes more standardized, in particular the accounting functions, even bigger cost savings can be seen. 3 OUTSOURCING DISASTER RELIEF: Organisations have become extra cautious after the WTC disaster and want to have protection against disasters. Finance & accounting activities constitute a major part of the activities of all corporates and as such even organizations not having finance and accounting as their 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 accounting functions to Outsource Partners International (OPI), a BPO firm specializing in finance and accounting. OPI's 38
  39. 39. Bangalore office handles most of TTF's accounting work. Source documents are scanned in New York and sent to Bangalore by remote connection; the Bangalore 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 and infrastructure is less costly gives the outsourcing companies the advantage of economies of scale. Moreover working hours can be increased in locations such as India by increasing the number of shifts. 5 BENEFITING FROM THE TECHNOLOGY AND EXPERIENCE OF THE SERVICE PROVIDER: The service provider gives cutting edge technology and has expertise in specific verticals. Hence it is able to provide the benefit of excellent expertise and best processes in that specific vertical. D. MAJOR PLAYERS IN INDIA IN BPO FINANCE: Following is the list of major players in this vertical and the approximate number of people in the respective organisations. BPO Player Approx no. of people in Finance BPO GE 2000 E-SERVE(Citi group) 3000 AMEX 2000 HSBC 2000 Accenture 1000 Ford Business Service Centre 600 World Bank 100 HP Global Business Operations 800 JP Morgan 400 PWC 50 39
  40. 40. Wipro Spectramind 1200 TABLE 7- MAJOR PLAYERS IN BPO FINANCE The above table explains the major BPO Players who are dealing in outsourcing finance including other business processes, and the number of people employed by them in finance outsourcing. Finally: The Finance and Accounting outsourcing companies in India need to ramp up their scale as well as expertise to cater to the high-end needs of the market. The Finance and Accounting outsourcing market in India is largely a fragmented market. Their exists a huge potential for the growth of Finance and Accounting BPOs and the good prospects of BFSI sector will accelerate this growth. Need of the hour is to make the best possible use of existing and upcoming opportunities. 9. TRENDS IN INDIAN BPO INDUSTRY Trends imply the various changes which we are going to see in the near future in Indian BPO industry 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 won't have to go far offshore to find talent. Planned initiatives by Barack Obama and increased government spending on infrastructure 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 lower their spending on information technology, consolidate or exit markets, and find skilled labor locally from layoffs in financial services and other industries. 40
  41. 41. 3. STRATEGIC COMPANIES WILL PROSPER: The economic meltdown could create opportunities for strong, well-positioned companies. "While the economic climate will not immediately improve, companies involved in outsourcing that act strategically and decisively for the long-term will be increasingly valued and sought," said IAOP board member Sven Govaars, senior vice president, Colliers International. 4. SHIFT IN FOCUS FROM COST ARBITRAGE TO VALUE ADDITION: Traditionally the main aim of the companies outsourcing to India was the cost saving. But now 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 outsourcers to create solutions that address them.IAOP predicts these will include industry competitive employee retention and welfare programs. 6. IT WILL ALSO CREATE NEWER OPPORTUNITIES, NEW MARKETS AND ALSO THE NEW SERVICES 7. SERVICE PROVIDERS WILL SHIFT FROM TIER-1 TO TIER-2 AND TIER-3 CITIES THEREBY CREATING RURAL BPO’S A. DRIVERS OF BPO GROWTH IN INDIA: A driver is most commonly a factor that contributes to the growth of a particular business. There are mainly six important business drivers that are pushing enterprises to consider the BPO option in India. These are: 1. ABUNDANT TALENT: India’s young demographic profile is an inherent advantage complemented by an academic infrastructure that generates a large pool of English speaking talent. Talent suitability concerns are being addressed through a combination of government, academia and industry led initiatives. It includes efforts by NASSCOM and other education agencies like UGC and AICTE to facilitate industry inputs on curriculum and teaching. 2. SUSTAINED COST COMPETITIVENESS: India has a strong track record of delivering a significant cost advantage, with client’s regularly reporting savings of 25%-50% over the original cost base. The ability to achieve 41
  42. 42. such high levels of cost advantage by sourcing to India is driven by the ability to access highly skilled talent at lower wage cost. 3. CONTINUED FOCUS ON QUALITY: Demonstrated process quality and expertise in service delivery has been a key factor driving India’s leadership in global service delivery. Since the inception of industry in India, players within the India has been focusing on quality initiatives, to align themselves with international standards. 4. WORLD CLASS INFORMATION SECURITY ENVIRONMENT: Indian authorities have built a strong foundation for an ‘info-source’ environment in the country. These include strengthening the regulatory framework through proposed amendments 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 declining rapidly and service level improving significantly. The growth is taking place not only in existing urban centres but also in satellite towns and smaller cities. 6. ENABLING BUSINESS POLICY AND REGULATORY ENVIRONMENT: The enabling policy environment in India was instrumental in catalyzing the early phase of growth in this sector. Policy makers in India have laid special emphasis on encouraging foreign participation, with participating firms enjoying minimum regulatory and policy restrictions 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 Western Europe. While national issues with infrastructure, e.g. telecommunications system etc is being addressed, the local infrastructure (roads, bridges, airports, urban transportation, etc) is becoming a bottleneck 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 are using several methods like tie-ups with existing players, acquisitions, investing in research and development and leveraging industry best practices for expansion. 42
  43. 43. 3. SHRINKING PROFIT MARGINS: To sustain in the highly competitive market, the players are looking for newer revenue sources and opportunities to keep cash flowing in. Again with service level agreements becoming stringent and sales cycles stretching far in international deals, the BPO service providers need deeper pockets and financial muscles. High initial capital investments in the industry, long gestational periods, competition leading to reduced billing rates, appreciation of rupee against the 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. Odd hours at job and stress are supposed to be major causes of high attrition rate which increases recruitment and training costs. The service providers need to spell out a comprehensive human resource policy that outlines a clear career progression path for the employees. 5. OTHERS: There are several other important issues facing the Indian ITeS-BPO companies which are given below • US sub prime crisis and possible slowdown in the US economy may hit Indian ITeS-BPO industry as the US contributes a lion’s share to the Indian ITeS-BPO export revenue • Declining profit margin due to rise in operating cost coupled with rise in real estate prices in Tier I and II cities, wage inflation etc • Lack of adequate physical infrastructure in Tier III cities such as roads, airports, high speed voice and data communication telecom links etc • Anti Outsourcing laws in the US and UK could dent robust growth of Indian ITeS-BPO industry • Threat of competition from other emerging countries like Philippines, Ireland, Mexico and Brazil among others. CHALLENGES FOR HR PROFESSIONAL IN BPO HR professional has to face various challenges other than the above stated. These are: 1. BRAND EQUITY: People still consider BPO to be "low brow", thus making it difficult to attract the best talent. So HR managers have to work for its promotion. 43
  44. 44. 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. DEMAND OF CUSTOMER COMPANIES: 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: Again there is not any kind of training which can be provided to the employees in BPO and no bench-marks and certifications to rank them. Given this background, the recruiting and compensation challenges of HR departments are only understandable. 10. COMPETITIVE LANDSCAPE OF BPO IN INDIA BPO Industry in India is growing very fast. It is gaining ground everywhere. There is a lot of competition today in BPO landscape. Let’s check out which are the major players in India. We will study this under two heads: 1. GENPACT 1. DAKSH-E-SERVICES 2. WNS GLOBAL 2. ISEVA 3. IBM DAKSH 3. ICICI ONESOURCE BASED ON REVENUE GENERATED BASED ON EMPLOYEE SATISFACTION TOP 10 BPO COMPANIES IN INDIA (2008) 44
  45. 45. 4. ADITYA MINACS WORLDWIDE 4. EFUNDS INTERNATIONAL 5. TCS BPO 5. HINDUJA TMT 6. WIPRO BPO 6. EXL SERVICES 7. FIRST SOURCE 7. AJUBA 8. INFOSYS BPO 8. MOTIF 9. HCL BPO 9. MIT SMART SERVE 10. EXL SERVICE HOLDINGS 10. HCL TECH BPO FIGURE 16- TOP 10 BPO COMPANIES IN INDIA. Now detailed description of all the major players in BPO ground: 1. GENPACT: Genpact was born in 1997 as the India-based business process operations for GE Capital. In 2005, with equity investments from General Atlantic and Oak Hill Capital Partners, it became an independent company and was rebranded Genpact. It is India's No. 1 BPO firm. Genpact manages business for companies around the world with a network of more than 30 operations centres in nine countries. Genpact offers services in finance and accounting, collections and customer service, insurance, supply chain and procurement, analytics, enterprise application and IT infrastructure. Headed by Pramod Bhasin, the company had staff strength of over 34,300 employees as on March 31, 2008. Its revenues for the year 2007 stood at $822.7 million. Accolades won by Genpact 'No.1 Best Performing BPO' and 'No.3 Leader in Human Capital Development' by Global Services magazine, in 2008 Top 10 in IAOP's 'Global Outsourcing 100' list, 2007-08 'Top 10 Employer' distinction, Dalian, China, 2006-08 'No.1 ITeS-BPO Company' in India by NASSCOM, 2005-08 2. WNS GLOBAL: WNS Global serves several industries, including travel, insurance, financial services, healthcare, professional services, manufacturing, distribution and retail. Warburg Pincus is the majority shareholder in WNS Global Services. The NASDAQ-listed company with more than 9,000 professionals was set up in 1996. Neeraj Bhargava is a co-founder of WNS (Holdings) Ltd and group chief executive officer. It posted 45
  46. 46. quarterly revenue of $116.1 million for the fourth quarter ended March 31, 2008, up 4.9 per cent from the corresponding quarter last year. Its revenues stand at $459.9 million, up 30.5 per cent from fiscal 2007. Accolades won by WNS Global Nasscom ranking: No. 1 BPO Company for the year 2005 NeoIT Global Survey: No. 1 'Best Performing' BPO Company / No. 1 in Human Capital 3. IBM DAKSH: The five-year old IBM Daksh was created by four professionals -- Sanjiv Agarwal, Pawan Vaish, MJ Aravind and Venkat Tedanki -- who saw a great opportunity in the business process outsourcing space. With no business model to follow, it was a big challenge to set up the company. IBM Daksh is known for a good leadership, a focussed vision and an undying passion. In April 2004, IBM Corporation acquired Daksh e-Services to serve as a global hub to manage business processes for clients from across the world. With 14 service delivery centres in India, IBM Daksh has more than 36 centers around the world. Today IBM Daksh employs more than 20,000 people. Pavan Vaish is the chief executive officer of IBM Daksh Business Process Services. A co-founder of Daksh eServices, he has been with the organisation since January 2000. Accolades for IBM Daksh Frost & Sullivan Contact Center Outsourcing Vendor of the Year 2007 Most Respected BPO Company in India(Business World) IBM Daksh tops the 2007 Global Outsourcing 100 4. ADITYA BIRLA MINACS WORLDWIDE: Aditya Birla Minacs is part of the $24 billion global conglomerate, the Aditya Birla Group. Aditya Birla Minacs was formed when Minacs, Canada's leading BPO Company, and Transworks, the BPO arm of Aditya Birla Group, joined hands to become a leading global business process outsourcing player. Aditya Birla Minacs clocked revenues to the tune of $392 million (or about Rs 1,575 crore) till March 2008, a 17 per cent rise over the previous year's $335 million. With over 26 years of experience, Aditya Birla Minacs offers BPO solutions for Fortune 500 clients. Minacs has more than 12,000 employees at locations in North America, Europe and Asia. 46
  47. 47. It serves clients in automotive, banking, financial services, insurance, telecommunications and technology verticals. Dev Bhattacharya is the managing director for Aditya Birla Minacs Worldwide Ltd, a subsidiary of Aditya Birla Nuvo. Awards for Aditya Birla Minacs Worldwide Dataquest (annual Top 20 BPO listing) - Ranked as India's No 2 BPO company NASSCOM 2006-07 - Ranked as India's third largest BPO, based on export revenues NASSCOM - Among Top 100 IT innovators in India IT People Group 5. TCS BPO TCS BPO is one of the leader players in the outsourcing industry. It offers services in areas such as finance and accounting, banking, HR outsourcing, KPO, insurance, payroll, healthcare, telecom, media, travel and entertainment. TCS operates from more than 41 countries and has more than 155 offices across the globe. Its head office in India is located in Bangalore. It has branches in Mumbai, Gurgaon, Goa, Hyderabad, Pune, Lucknow and many other places in India. While Tata Consultancy Services is India's top software company, TCS BPO established a stronghold in the BPO space. The TCS group posted a consolidated net profit of Rs 1,290.61 crore (Rs 12.90 billion) for the first quarter ended June 30, 2008, an increase of 7.3 per cent compared to the year-ago period. Accolades for TCS BPO In 2006, TCS BPO was named as one of the world's top BPO providers by the International Association of Outsourcing Professionals. 6. WIPRO BPO: Wipro BPO has carved a unique position in the outsourcing industry. In 2002, Wipro took a quantum jump in the BPO services by acquiring the then Spectramind. Wipro BPO Solutions complements the services offered by Wipro Technologies, making it one of the largest BPO service players. The company with over 19,000 people, operating out of 9 different locations (India and Eastern Europe) serves clients across the globe. Wipro BPO clientele spans across banking and capital markets, insurance, travel and hospitality, hi-tech manufacturing, telecom and healthcare sectors. T K Kurien heads Wipro's BPO operations. The IT services revenue for Wipro Technologies stood at Rs 4,405 crore (Rs. 44.05 billion), a YoY growth of 39 per cent. 47
  48. 48. Accolades won by Wipro BPO Wipro BPO & Cairn India declared winner at the first annual 'FAO Research Awards of Distinction' Wipro BPO has been rated as a Best Employer in India in the Best Employers Hewitt Survey for 2007 Wipro BPO is the winner of the 2007 Global BPO Standard Bearer by IQPC 7. FIRST SOURCE: First source (formerly ICICI OneSource) is a leading global business process management company. Founded in 2001, the company is ranked third in Business Week’s 'Hot player' list of offshore outsourcing companies. The company has 17,000 employees in centres across India, the United States, the United Kingdom, Argentina and the Philippines. Ananda Mukerji is the managing director and chief executive officer. Its revenues for the year ended March 31 2008 stood at Rs 12,988 million, up 53.3 percent compared to the previous year. Accolades won by First Source Ranked among the top 10 ITES companies by NASSCOM, 2007 National Outsourcing Association (NOA) award for best Telecom outsourcing project, 2007 8. INFOSYS BPO; Infosys BPO Ltd, the business process outsourcing subsidiary of Infosys Technologies, was set up in April 2002. Today, it is ranked among the leading BPO companies in India by NASSCOM, Dataquest, the International Association of Outsourcing Professionals, Red Herring, FAO Today and Nelson Hall. Infosys BPO focuses on integrated end-to-end outsourcing through lesser costs. Infosys BPO operates in India, the Czech Republic, China, Philippines, Poland, Bangkok, Mexico and employs about 16,295 people. It closed FY2007-08 with revenues of $250.3 million. Accolades won by Infosys BPO Infosys conferred 'Provider of the Year' award by FAO Today in 2008 Listed among top BPO companies in Dataquest, the International Association of Outsourcing Professionals, Red Herring lists 48
  49. 49. 9. HCL BPO: HCL BPO, a division of HCL Technologies Limited was established in 2001. With over 13,200 professionals operating out of India and Northern Ireland, HCL BPO runs fourteen delivery centres across India, UK and Malaysia. The company has reported revenues to the tune of $220.9 million. HCL BPO also offers multilingual support in eight European languages and eight Asia, Pacific and Africa Collections (APAC) languages. HCL BPO's focuses on sectors like telecom, retail, banking and financial services, insurance, hi-tech & manufacturing, and media, publishing and entertainment. Shiv Nadar is the founder, chairman and chief strategy officer of HCL Technologies. Accolades of HCL BPO Ranked second in Purdue Benchmark (2003) Global Peer Group of BPO Service Providers Ranked third in Highest Satisfaction for Business Process Outsourcing by the Black Book of Outsourcing (2007) Ranks among the Top 10 ITeS-BPO companies in India (NASSCOM & Dataquest) 10. EXL Service Holdings EXL Service Holdings came into existence in April 1999 in Delaware, US. It was founded by a group of professionals including Vikram Talwar (now executive chairman) and Rohit Kapoor, who is now the CEO. Vikram was then the CEO and managing director of Ernst & Young, and Rohit managed international investments for clients at Deutsche Bank. In August 2001, Conseco acquired EXL and operated as its wholly owned subsidiary. Later, in November 2002, Oak Hill Capital Partners L.P. and FTVentures along with members of the senior management team bought EXL from Conseco making it a third party pure-play business process outsourcing service provider. The company has seen a fast-paced growth with 50 clients and staff strength of 8,200 employees. Revenues for the quarter ended March 31, 2008 were $50.9 million compared to $39.9 million in the quarter ended March 31, 2007, an increase of 27.8 per cent. Accolades for EXL Service Holdings Recognized as one of the Top 100 hot growth companies for 2007 Among the top 10 best performing BPOs in CMP Media's list No.1 rising star in the Global Outsourcing list by International Association of Outsourcing Professionals. 49
  50. 50. 11. ISEVA: ISeva is a leading BPO and is a part of e4eGroup. It is an ISO: 9001 – 2000 Certified company and provides services in customer care, transaction processing and data processing. ISeva has two facilities in India, which are in Bangalore. It has employee strength of 1,000. 12. ICICI ONE SOURCE: ICICI OneSource is one of the leading BPO service providers in India. It has been successful in providing excellent customer services in Financial Services, Telecom, Healthcare, Media and Publishing. According to company sources, it has employed more than 4,500 people in its facilities worldwide. ICICI OneSource has been successful in receiving the BS 7799 certification for information security. 13. EFUNDS INTERNATIONAL: Although Efunds was ranked fourth in the overall E-SAT survey, it had outsmarted its rival companies by a convincing margin to get the top slot as the ‘Most Preferred Employer’. It has been chosen by the most number of employees as a ‘Dream Company’ to work with. Efunds provides excellent services in customer care (both voice and email process), transaction processes and back office operations. Its areas of functioning are Financial Services, Electronic Funds Network, Retailers, Telecom, Software Development and other businesses. Efunds has recruited over 4,000 employees in its branches worldwide. In India it has one facility in Gurgaon (New Delhi NCR) and two in Mumbai. It also has two software development centers in Chennai. According to sources, Efunds is on the verge of receiving the BS 7799 certificate as it has already implemented this internationally recognized security standard in the organization. 14. HINDUJA TMT: With employee strength of nearly 2,000, Hinduja TMT has successfully established itself as one of the leading BPO service providers in India. It provides a wide range of services in more than 50 countries in the world. HTMT functions in the areas of IT, Telecom, Banking, Finance, Insurance, Healthcare, Transport and Education. In India, it has service centers in Bangalore and Mumbai. 15. AJUBA: Ajuba Solutions is a surprise entry in the E-SAT survey. It’s a growing BPO with just a little over 500 employees. It deals in IT solutions and other customer service operations. Ajuba is located in Chennai, India. 16. MOTIF: Ahmedabad-based BPO, Motif India provides BPO services to Fortune 500 companies. It operates in transaction processing, which includes Investor Services, Administration and Mutual fund and 50
  51. 51. Customer Services like Voice Process, Email Management and Fax Processing. Nearly 500 employees are currently working for Motif. 17. NIIT SMART SERVE: NIIT Smart Serve is a global BPO company, which has expanded its outsourcing business over the years. Its services include Insurance, Financial Services, Real Estate, Transportation and Technology. The current employee strength of NIIT SmartServe is more than 800. Its service center is located in Gurgaon (New Delhi NCR). It offers services both in customer care and back office processing. 11. CRITICAL ANALYSIS OF BUSINESS PROCESS OUTSOURCING Critical analysis means an appraisal based on careful analytical evaluation. Now for analyzing the BPO industry we will study its: 1. Benefits of BPO industry. 2. Limitations of BPO industry. 51
  52. 52. 3. SWOT Analysis. 1. BENEFITS OF OUTSOURCING:  Outsourcing your non-core activities will give you more time to concentrate on your core business processes.  Offshoring 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.  Offshoring 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. 52
  53. 53. 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.  Offshoring 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.  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 53
  54. 54. FIGURE 17 - SWOT ANALYSIS OF INDIAN BPO INDUSTRY 1. 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. 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.  Political opposition from developed countries. STRENGTHS OPPORTUNITIES WEAKNESSESTHREATS 54
  55. 55. 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. 55
  56. 56. 12. BUDGET 2009-10: IMPACT ON THE BPO INDUSTRY The Budget for 2009-10 was a mixed bag for BPO industry with no clear long term benefits announced. It includes: POSITIVES FOR INDUSTRY: 1. Extension of tax holiday – Short-term respite! One of the positives is the extension of tax holiday for Software Technology Park of India (STPI) scheme. The extension of the STPI scheme provides short-term relief to the industry, which is facing tremendous margin pressures due to the economic slowdown. In addition to this, the budget has cleared the long standing ambiguity in Section 10AA on the 100% tax holiday. Until now, tax holiday applies to the profits of a company’s operation within the special economic zone (SEZ). 2. Removal of Multiple Taxation on ‘Packaged Software’: A move towards removal of multiple taxation on ‘packaged software’ will help in adoption of IT in general, and also reduce costs for all businesses, and especially IT and BPO companies which are big buyers/users of technology. 3. Abolition of Fringe Benefit Tax: This is another positive for the companies, though marginal (FBT accounts for not more than 5% of the total tax provisions of these companies). This however will reduce the administrative burden for companies and might bring back the popularity of ESOPs. 4. Increased Outlay for Institutions: The Finance Minister has given special attention to the education sector and has proposed increased outlay for institutions such as IITs and National Institutes of Technology (NITs) to Rs 20,000 mln. This will benefit the industry in the long term with the availability of a larger and employable talent pool. DISAPPOINTMENTS! The increase in minimum alternate tax (MAT) from 10% to 15% was a disappointment, especially at a time when the companies across industries are facing credit crunch. Increased MAT will affect cash flows of companies at a time when liquidity is critical. While this negates the positives of the budget proposals and lands the IT sector in negative territory marginally, the good news is that the budget does allow the companies to carry forward the tax credit from the 7 years period to 10 years. Over the last decade, IT and BPO industry combined have significantly contributed to the country’s GDP, exports and the employment (employing over two million people). However, the economic downturn has put tremendous margin pressures on the companies. The industry has 56
  57. 57. been demanding several exemptions and tax benefits and the government needs to do more by providing long term incentives to ensure sustainable competitiveness of the sector. 13. CONCLUSION Business Process Outsourcing industry is growing rapidly since its inception. Indian BPO’s are going through exciting times. Starting with captive units and low-end activities BPO’s are now moving to high-end activities. Indian BPO’s are operating in both front-office and back-office operations. BPO industry in India is growing at the rate of 28% and is expected to reach around USD14.8 Bn in 2009. Exports are accounting major proportion, which are in journey to touch USD 12.8 Bn by the end of 2009. These are growing at the fluctuating rate of around 20%-30% a year. Domestic BPO market is also in growth and has accounted USD1.6 Bn in 2008. Inspite of this BPO’s are helping in the development of economy by decreasing the evil of unemployment. Since the evolution of BPO it is serving the country by providing the employment to talented and able youth of the country. Up till 2009 it has generated around 730,000 employments in the country. Shift in BPO services has also been experienced with moving from low-end to BFSI (Banking, Financial Services and Insurance) and Hi-Tech sector. But the economic downturn has impacted the growth of BPO industry. Still it occupied 60% of the offshore market. The industry is expected to achieve USD 60 Bn by the end of 2012. And USD 225 Bn by the end of 2020. Various trends have been experienced in BPO industry in 2009, where it’s moving from cost- arbitrage to value-addition. Rural BPO’s are also finding their place. But there are lot more challenges ahead for the BPO industry. Philippines and China are emerging as strong competitors for the Indian industry. Therefore it requires efforts from NASSCOM, Government and industry itself. NASSCOM (National Association of Software and Service Companies) should work for developing an agenda for growth in BPO industry. Government should also look for better infrastructure, educational facilities and incentives in fiscal policies to attract more MNC’s towards Indian BPO industry; this will help in retaining the tip of BPO iceberg, and will ensure sustainable growth. 57
  58. 58. BIBLIOGRAPHY 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Research Studies conducted by: • NASSCOM • McKinsey • Everest Group • Evalue Serve • A.T. Kearney • Gartner • TPI • IDC 12. 13. 58