The
popularity of BPO continues to scale new heights
with companies in India tackling the challenges
which are bound to arise with the passage
of time. The potential benefits are enormous,
but at the same time the companies should
not lose sight of the pitfalls.
Now,
it is crystal clear. Outsourcing is
in vogue. Shared service models are
ruling the roost. IT outsourcing came
into being in the early 1990s as a
cost- saving measure for companies
which bore the brunt of recession
before that. Though Business Process
Outsourcing, or BPO as it is more
popularly known, has been around since
the mid-1990s, it has made its presence
felt in a vigorous way in recent times.
A strategic part of outsourcing, BPO
is an engagement where an enterprise
offloads the responsibility of one
or more of its functions or activities
to an external vendor.
As the world has shrunk into a global
village, offshore outsourcing has
gained momentum. As the name suggests,
offshore signifies that organizations
delegate their work to companies overseas
in order to gain greater benefits
in cost and quality. This, in turn,
increases their competitiveness.
Ranjan
Sinha Chairman, Summit HR
Worldwide
“Rapid growth of globalization has added
to competitive pressures across geographic
markets that were previously relatively
isolated from overseas competition,”
opines NASSCOM.
The worldwide business process outsourcing
market will expand at a 10.9-per cent
compound annual growth rate through
2009. According to IDC, the market is
“vibrant and brimming with opportunity”.
According to the research firm, the
market will reach $641.2 billion in
2006 compared with $382.5 billion in
2004.
BPO
is finally showing signs of maturity.
“The BPO industry has matured and
has progressed in its third phase
of industry evolution which involves
a greater degree of depth, specialization
and competition,” says Aditya Gupta,
President, InfoVisionGroup.
India is the numero uno at offshore
attractiveness index. The reason for
India’s dominance in the BPO industry
is not far to seek. “A very sophisticated
eco-system of managers, business leaders,
elaborate education system, support
services like accent training schools,
and increasing societal awareness,
along with English-speaking population
are the unique advantages of India,”
says Ranjan Sinha, Chairman, Summit
HR Worldwide.
Thanks to lower labour and operational
costs, India is the most sought-after
BPO destination in the world and is
being dubbed as the “back office”
of the world. Technological innovations
and the universality of English have
contributed to the growth of BPO as
a worldwide phenomenon.
Dibyendu
Das Principal Consultant,
QAI India
Outsourcing is no longer considered
to be an option, but a necessity. The
western companies are jockeying for
a position in order to exploit the huge
pool of educated talent available in
India. India has the largest English-speaking
talent pool in the world – over 4,40,000
engineering degree- and diploma-holders,
approximately 2.3 million other (Arts,
Commerce and Science) graduates and
300,000 postgraduates are added each
year. “McKinsey-NASSCOM report shows
that India will continue to stay on
the top, maintaining its 46-per cent
share of the global BPO market and its
65-per cent share in the IT offshoring
and outsourcing market through 2010,”
says Aditya Gupta.
According
to McKinsey-NASSCOM 2005 Report, Indian
companies will continue to maintain
their 46-per cent share of the global
business processing outsourcing (BPO)
market and 65-per cent share of the
IT outsourcing market through 2010.
The combined market is estimated to
grow from the current level of $30
billion to $300 billion by 2010.
These two sectors will earn $60 billion
in exports by March 2010, an increase
from 3 per cent of Gross Domestic
Product to about 7 per cent. The Report
projects that the BPO industry will
grow from the present $11.6 billion
to $150 billion by 2010, while IT
outsourcing will increase from $18.4
billion to $150 billion over the next
five years.
“The Indian BPO industry has demonstrated
a high level of service delivery;
organizations which came for cost
arbitrage stayed for quality. People
have taken cognizance of the fact
that this is an industry to stay. The
unique advantages include large resource
pool, diversified resource pool availability,
Aditya
Gupta President, InfoVisionGroup
multi-city
operations – option for business contingency
availability, analytic/problem solving;
flexibility of operations,” says Dibyendu
Das, Principal Consultant, QAI India.
“BPO in India is accessing as well as
developing new value-based programs
and softwares to cater to the requirement
of the industry. Also, BPO organizations
have developed internal systems and
tools to better manage processes and
make them more robust,” adds Dibyendu
Das.
The projected growth of the Indian
IT and BPO industry will directly
employ approximately 2.3 million people,
provide indirect employment to another
6.5 million workers, and pay for a
massive infrastructure to be built
by 2010.
“Apart from cost, the biggest advantages
of India are excellent infrastructure
and abundant skilled and English-speaking
manpower. Also, India enjoys a good
time zone difference with respect
to US,” says Rohit Chanana, Business
Head, HeroITES.
However, the phenomenal growth in
the Indian BPO industry is not going
to be a smooth affair.
According to Dibyendu Das, there remain
some issues which need to be addressed
systematically.
“Today, the Indian ITeS-BPO (IT-enabled
Services – Business Process
Raja
Gopalakrishnan Global Operations
Head and MD, India, eFunds
Outsourcing)
industry is world-class in Customer
Satisfaction, Quality and People Satisfaction.
However, it still lags in Efficiency,
Attrition and Absenteeism,” he noted.
“To
sustain its growth and performance,
the Indian ITeS–BPO Industry needs
to continue its focus on processes
and people. Having demonstrated efficacy
in customer satisfaction, quality
and service, the industry now needs
to focus on people retention and efficiency
improvement,” he added.
The NASSCOM McKinsey report also has
not lost sight of political opposition
against outsourcing in the Western
countries like the United States.
“I think it is a matter of sustained
positive communication not only from
the industry forums and bodies such
as NASSCOM, but also from recognized
global Business Leaders from the client
organizations,” says Dibyendu Das.
So far as the BPO trend is concerned,
finance and accounting, Market Research,
Legal Process Outsourcing Logistics
& Procurement are witnessing a growth
cycle. Apart from the traditional
areas like Back-Office Operations,
Revenue Accounting, Data Entry and
Conversion as well as HR Services,
procurement outsourcing is growing
sharply.
Rohit
Chanana Business Head, HeroITES
India’s booming outsourcing industry
runs the risk of being derailed due
to high labour attrition, poor infrastructure
and lack of data protection laws in
the country.
The non-availability of workers is one
of the most serious problems the Indian
BPO firms are facing. Anecdotal reports
indicate that the attrition rate could
reach as high as 50 per cent annually.
One of the reasons why this is so high
is that the companies are not able to
offer meaningful career paths to the
motivated employees who seek to move
up the ladder into other back-office
work.
“We can’t deny that attrition is a problem
– poaching staff to operate new centres
is an ongoing issue as players win new
contracts or seek employees with specific
skills that may have already been trained
elsewhere. Unfortunately, this contributes
to a turnover problem almost as bad
as the one outsourcing was supposed
to solve,” says Raja Gopalakrishnan,
Global Operations Head & Managing Director,
India, eFunds.
NASSCOM has predicted that the outsourcing
industry was expected to face a shortage
of 2,62,000 professionals by 2012.
Infrastructure also needs to be addressed
immediately. “India’s Infrastructure
poses another threat to the growing
BPO industry, giving other countries
the competitive advantage. The quality
of the talent pool in the tier II cities
is good, but not large enough. Further,
the high quality communications facility
that we seek is more costly in smaller
towns compared to large cities,” said
Aditya Gupta.
In the meantime, the outsourcing of
jobs to India from the United States
and Europe has led to an outcry from
the western workers. “The business we
are in, it is inevitable that there
will be a significant backlash. BPO
companies have to take this in their
stride. The initial, most major and
visible impact is one of the job losses
in the home country. The long-term benefits
of greater productivity, lower transaction
costs, process enhancements are gradual
and only recognized with time. Indian
companies need to ‘weather this storm’
as the time will soon show that the
benefits overshadow the initial pain
and backlash,” said Aditya.
India has to stay ahead of the competition
from other low-cost destinations such
as South Africa, China and Eastern Europe.
“The biggest threat to the Indian industry
is from China, which has made English
mandatory in schools and colleges,”
he adds.
“South-East and Asian countries would
soon emerge as desirable outsourcing
destinations. These countries have the
potential to offer skilled labour pool
at low cost,” says Rohit.
Data security is another concern, which
needs to be tackled on a war footing.
Taking a step in this direction, NASSCOM,
in collaboration with the National Securities
Depository Limited (NSDL), has launched
National Skills Registry (NSR), in an
attempt to further strengthen security
in the Indian IT industry. According
to the industry body, National Skills
Registry was a “global first” and would
provide IT and BPO firms with information
on the professional and educational
background of prospective employees.
The large IT and BPO employers in India
have agreed to enlist their employees
on the new database.
Conclusion…
India will continue to be a star on the BPO
firmament. Challenges are there. And they
are in urgent need of being addressed in a
systematic manner. “Just like many regions
of the US and the world, we have tried to
recreate a Silicon Valley with a limited or
marginal success. I believe India will continue
to keep grabbing market share from other countries for service-based
outsourcing. We do not experience too much
competition from other geographies,” says
Ranjan Sinha.
“We do not meet any competition from South-East
Asian countries and other South Asian countries
like Bangladesh and Sri Lanka for the kind
of sophisticated processes we perform on behalf
of our clients,” asserts Raja Gopalakrishnan.
