Indian IT & BPO industry

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  • Indian IT & BPO industry

    1. 1. Future of BPO Industry
    2. 2. What is BPO? <ul><li>Business process outsourcing (BPO) is the contracting of a specific business task, such as human resources and customer service, to a third-party service provider. </li></ul><ul><li>This allows companies to focus on their core business processes. </li></ul><ul><li>BPO is implemented as a cost-saving measure for tasks that a company requires. </li></ul>
    3. 3. Facts of Indian BPO Industry <ul><li>Size of Indian IT & BPO industry is about $ 71 Bn and growing at 38% CAGR. </li></ul><ul><li>India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. </li></ul><ul><li>Potential size of India’s offshore IT/BPO industry in 2015 is estimated at US$ 120 to 180 billion, providing Direct employment for four million and indirect employment for 10 to 12 million by 2015 </li></ul>
    4. 4. Share of GDP
    5. 5. Forex Earnings <ul><li>IT/ITES industry grew by impressive 32.6% in FY07 </li></ul><ul><li>Expected to reach 40 bn USD in FY08 </li></ul>
    6. 6. Capabilities: Why go to India? <ul><li>Language </li></ul><ul><ul><li>Major attraction for Multinationals </li></ul></ul><ul><ul><li>Advantage over competitors </li></ul></ul><ul><li>Educated Employees </li></ul><ul><ul><li>Large number of qualified workers </li></ul></ul><ul><ul><li>Proven to be the best in the IT and computer software fields </li></ul></ul><ul><ul><ul><li>Strong technical skills </li></ul></ul></ul><ul><ul><ul><li>Eagerness to engage clients </li></ul></ul></ul><ul><ul><li>Produce around 100,000 engineers annually </li></ul></ul>
    7. 7. Capabilities: Why go to India? <ul><li>Infrastructure </li></ul><ul><ul><li>Improvements have led to increasing success </li></ul></ul><ul><ul><ul><li>Telecom facilities </li></ul></ul></ul><ul><ul><ul><li>Power sector </li></ul></ul></ul><ul><ul><ul><li>India as a whole </li></ul></ul></ul><ul><li>Government </li></ul><ul><ul><li>Realize potential for economic development </li></ul></ul><ul><ul><li>Favorable policies have turned India into a BPO/IT hub. </li></ul></ul><ul><ul><ul><li>Examples: Investment promotion, telecom policy, IT Act </li></ul></ul></ul>
    8. 8. Indian BPO industry continues to grow rapidly Notes: (1) Leader locations are Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR (Delhi, Noida, Gurgaon, Faridabad), Pune Source: NASSCOM Exports Domestic Indian BPO Sector Revenue (USD billion, percentage) CAGR 38% 37% 52% <ul><li>Higher process maturity and quality of output </li></ul><ul><li>Increasing proportion of non-voice work (e.g., transaction processing, research etc.) likely to be outsourced over the next two – three years </li></ul><ul><li>Higher competition for lower end BPO services </li></ul><ul><li>Emergence of competing destinations trying to emulate the Indian success </li></ul><ul><li>Perceived ‘commoditization’ - Increasing sensitivity to prices </li></ul><ul><li>Growth in domestic BPO industry – Still nascent, expected to increase with growing business demands </li></ul><ul><li>Primarily driven by Financial Services, Telecom and Retail sectors </li></ul>3.4 7.2 12.5
    9. 9. However, most of this growth is currently concentrated in ~7 leading locations Success and economic growth of these locations has led to significant interest from other states / locations to leverage this sector as a growth driver for their economies <ul><li>The top 7 locations account for around 90% of the industry’s employment today </li></ul><ul><li>These locations have helped in transforming their states into a knowledge driven economy with high per capita income </li></ul><ul><li>However, the hyper and concentrated growth across most of these leading locations have resulted in: </li></ul><ul><ul><li>Saturation and deteriorating infrastructure </li></ul></ul><ul><ul><li>Presence of large number of IT-BPO players resulting in high attrition and increased wages </li></ul></ul><ul><ul><li>Rapid growth of other sectors, resulting in greater competition for talent </li></ul></ul><ul><ul><li>Rising real estate costs </li></ul></ul><ul><ul><li>Deteriorating social and living environment </li></ul></ul>Hyderabad Delhi Faridabad Gurgaon Bangalore Mumbai Pune Chennai Noida Kolkata
    10. 10. Findings indicate that the 50 locations in India are categorized along a typical four stage development path Location Classification Notes: (1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and Faridabad (2) Ahmedabad includes Gandhinagar (3) Chandigarh includes Mohali and Panchkula Increasing Location Attractiveness <ul><li>Bangalore </li></ul><ul><li>Chennai </li></ul><ul><li>Hyderabad </li></ul><ul><li>Kolkata </li></ul><ul><li>Mumbai </li></ul><ul><li>NCR </li></ul><ul><li>Pune </li></ul>Leaders Challengers Followers Aspirants <ul><li>Ahmedabad (2) </li></ul><ul><li>Bhubaneshwar </li></ul><ul><li>Chandigarh (3) </li></ul><ul><li>Coimbatore </li></ul><ul><li>Indore </li></ul><ul><li>Jaipur </li></ul><ul><li>Kochi </li></ul><ul><li>Lucknow </li></ul><ul><li>Madurai </li></ul><ul><li>Mangalore </li></ul><ul><li>Nagpur </li></ul><ul><li>Thiruvananthapuram </li></ul><ul><li>Tiruchirappalli </li></ul><ul><li>Vadodara </li></ul><ul><li>Visakhapatnam </li></ul><ul><li>Aurangabad </li></ul><ul><li>Bhopal </li></ul><ul><li>Goa </li></ul><ul><li>Gwalior </li></ul><ul><li>Hubli-Dharwad </li></ul><ul><li>Kanpur </li></ul><ul><li>Mysore </li></ul><ul><li>Nashik </li></ul><ul><li>Pondicherry </li></ul><ul><li>Salem </li></ul><ul><li>Surat </li></ul><ul><li>Vijayawada </li></ul><ul><li>Allahabad </li></ul><ul><li>Dehradun </li></ul><ul><li>Durgapur </li></ul><ul><li>Gangtok </li></ul><ul><li>Guwahati </li></ul><ul><li>Ludhiana </li></ul><ul><li>Patna </li></ul><ul><li>Raipur </li></ul><ul><li>Ranchi </li></ul><ul><li>Shimla </li></ul><ul><li>Siliguri </li></ul><ul><li>Srinagar </li></ul><ul><li>Varanasi </li></ul>
    11. 11. Current happenings and its potential effects on the Industry <ul><li>US president Barrack Obama Vowed to end tax breaks for the companies seeking to cut cost through outsourcing. </li></ul><ul><ul><li>Bilateral Trade agreements. </li></ul></ul><ul><ul><li>Protectionism would backlash in other markets. </li></ul></ul><ul><ul><li>Increase cost on US citizens due to non off-shoring. </li></ul></ul><ul><ul><li>Proposed increase in taxes on profits & risky assets will subdue further investments. </li></ul></ul>
    12. 12. Mantra for future growth <ul><li>Non- Linear growth </li></ul><ul><li>Focus on domestic growth(growing at 50% from past 5 years) </li></ul><ul><li>Move up the value chain </li></ul>
    13. 13. DELL CONFIDENTIAL Growth = Headcount Growth = Value Headcount Revenue Growth Headcount Non-linear is the mantra for future growth Last 7 Years : Way Forward : Revenue Growth Dell Presentation, NASSCOM 2008
    14. 14. Improving the platform . . . <ul><li>Standardize shift and break hours across teams as top processes within the centre </li></ul><ul><li>Gradually increase productive hours over next 2-3 years </li></ul>Sample ideas under implementation Define skill – sets based on complexity of processes Recruit contractors for simpler tasks Investigate options for leave encashment and carry forward of leaves Increase contractors Create multiple shifts for processes with TAT >1 day Share same set of seats across voice and data processes Rationalize demand for IT applications Redefine services levels appropriate to processes Benchmark AXA – Tech performance (AXA Presentation, NASSCOM 2008) Levers Change recruiting mix to reduce entry – level salary Reduce IT maintenance costs Increase seat utilisation Increase productive days Increase shift timing (hours/shift)
    15. 15. Domestic Market <ul><li>Domestic BPO market, with a growth rate of 50% over five years, grew faster than the exports market to reach nearly $1.6 billion in the financial year 2008. </li></ul><ul><li>With Indian companies stepping up investments in IT and outsourcing, there is a huge opportunity for the existing service providers to leverage their global expertise and help Indian companies to garner strategic advantage. </li></ul>
    16. 16. Move up the value chain
    17. 17. Conclusion
    18. 18. References <ul><li>Howcroft D and Richardson H (2009) (eds.) Work and Life in the Global Economy , Palgrave </li></ul><ul><li>Howcroft et al (2010) The Back office goes global: Exploring Connections and Contradictions in Shared Service Centres, Work Employment and Society . </li></ul><ul><li>Howcroft D and Richardson H (2008) Gender matters in the global outsourcing of service work, New Technology, Work and Employment , 23:1-2, 44-60. </li></ul><ul><li>Website: </li></ul><ul><li>http://www.bpowatchindia.com </li></ul><ul><li>http://knowledge.wharton.upenn.edu </li></ul><ul><li>http://www.wikipedia.org/ </li></ul><ul><li>http://www.nasscom.in </li></ul><ul><li>http://www.bpowatchindia.com </li></ul>

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