THE STUDY OF
In the partial fulfillment for the award of degree of
MBA (FYIC) Finance
SUBMITTED TO: SUBMITTED BY:
Roll No. 5525
Department of Commerce and Business Management
Guru Nanak Dev University, Amritsar
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.
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.
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
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
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
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.
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
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
1 INTRODUCTION TO BPO
• Definition of BPO
• Objectives of BPO
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
4 SEGMENTS IN BPO
• Voice and Non-Voice
• Horizontal and Vertical
5 STEPS TO BE FOLLOWED WHILE OUTSOURCING (27-29)
6 REGULATORY FRAMEWORK OF INDIAN BPO
• Data Protection Law
• Sarbanes Oxley Act
7 BPO BUSINESS MODELS (32-34)
8 BPO AND FINANCE (35-38)
9 TRENDS IN INDIAN BPO INDUSTRY
• Drivers of BPO Growth
• Issues and Challenges
10 COMPETITIVE LANDSCAPE OF INDIAN BPO (43-49)
11 CRITICAL ANALYSIS OF BUSINESS PROCESS
• Benefits of BPO
• Limitations of BPO
• SWOT Analysis
12 BUDGET 2009-10 – IMPACT ON BPO INDUSTRY 54
13 CONCLUSION 55
14 BIBLIOGRAPHY 56
LIST OF FIGURES AND TABLES
TITLE OF FIGURE PAGE
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
12 Vertical Segments in BPO 25
13 Diagrammatic Presentation of Horizontal and Vertical
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
TITLE OF THE TABLE PAGE
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
1. INTRODUCTION TO BPO
DEFINITION OF BPO
OUTSOURCING: - An organisation entering into contract with another organisation to operate
and manage one or more of its business processes.
INBOUND SALES ACCOUNTING
OUTBOUND SALES DATA ENTRY
TELEMARKETING DATABASE MANAGEMENT
BASED ON WORK
BASED ON LOCATION
VOICE ON-SHORE OFF-SHORE NEAR-SHORE
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.
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:
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
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
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
its captive unit in
in New Delhi
starts an enterprise
called GECIS (GE
services) for voice
operations in India.
In 2004 GECIS
was spun off into
POLICY OF 1999
ended the state
This heralded the
call centres and
Pioneered by the
sprung up in India,
Efunds and Daksh
started its third
party BPO’s in
INDIA. All major
into BPO including
and Patni. By 2003
Daksh bought out by
IBM, Quattro started
in 2006. Convergys,
Hewlett Packard and
dell also set up their
shops in India
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.
A. In Terms of Exports:
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY
Exports 2.6 3.1 4.6 6.3 8.4 10.9 12.8
TABLE 1- BPO GROWTH IN 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:
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Domestic 0.2 0.3 0.6 0.9 1.1 1.6 1.9
TABLE 2- BPO GROWTH IN DOMESTIC MARKET
Domestic BPO Revenue
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:
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
2.8 3.4 5.2 7.2 9.5 12.5 14.8
TABLE 3- OVERALL (Export & Domestic) BPO GROWTH
Total BPO Growth
FIGURE 6- TOTAL BPO GROWTH IN TERMS OF REVENUES
As shown by the figure overall BPO grow steadily at the rate of almost 28%.in 2005 total BPO
Industry was USD 12.5 Billion while it is expected to reach USD14.8 Billion in 2009.
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
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
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
FY 2005 FY 2006 FY 2007 FY 2008 FY
180 216 316 415 553 700 790 2500
TABLE 4-EMPLOYMENT GENERATED BY BPO
BPO Employees (in ‘000)
No. of Employees(in
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
TABLE 5- GLOBAL BPO MARKET
Size of Global BPO Market
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
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,
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
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
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
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
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
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
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
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.
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
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.
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
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
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
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.
Vertical Segments In BPO
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
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
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.
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.
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
Ability to Ramp-Up
In house facilities to meet the
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
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.
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
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
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
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.
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
7. BUSINESS PROCESS OUTSOURCING (BPO)
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
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
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
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
typically for 1 process
10+ processes in a function;
sometimes more than one
Invest in client assets?
No, migrate everything to
Yes - but modest dollars
and personnel take-on
Yes - significant dollars and
Hire client's people? No
Yes - but usually upto
Yes, usually &get; 100s and
often in the 1000s
Work at provider's
location; very low
headcount at the client site
managers and sales people
Mixed, people at both
client and provider
Mixed, people at both client
and provider locations
Geographic spread Multi-country
Domestic (& get; 80%
of revenue) with some
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
For the transaction
For process outcomes
For cost savings for the entire
function plus business
90% of the risk is still on
the client, 10% provider
50% client, 50%
30% client, 70% provider
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
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:
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.
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
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
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
BPO Player Approx no. of
people in Finance
E-SERVE(Citi group) 3000
Ford Business Service
World Bank 100
HP Global Business
JP Morgan 400
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.
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
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.
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
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
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
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
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
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.
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.
There are several other important issues facing the Indian ITeS-BPO companies which are
• 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
• 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.
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.
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
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
BASED ON EMPLOYEE
TOP 10 BPO COMPANIES IN INDIA (2008)
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:
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
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
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
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.
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
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.
Accolades won by Wipro BPO
Wipro BPO & Cairn India declared winner at the first annual 'FAO Research Awards of
Wipro BPO has been rated as a Best Employer in India in the Best Employers Hewitt Survey for
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
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
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
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.
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
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
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
11. CRITICAL ANALYSIS OF BUSINESS PROCESS
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.
3. SWOT Analysis.
1. BENEFITS OF OUTSOURCING:
Outsourcing your non-core activities will give you more time to concentrate on your core
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.
2. LIMITATIONS OF OUTSOURCING:
At times, it is more cost-effective to conduct a particular business process, rather than
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
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
FIGURE 17 - SWOT ANALYSIS OF INDIAN BPO INDUSTRY
Highly skilled, English-speaking workforce.
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.
Conducive business environment.
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.
Political opposition from developed countries.
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.
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
Other BPO/ITES destinations such as China, Philippines and South Africa could have an
edge on the cost factor.
Slowdown of demand.
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
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.
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
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
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.
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
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
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