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B.P.O
Introduction:
BPO (Business
process outsourcing) promises to become one of India
biggest and most exciting business opportunities.
Optimists feel that it could overshadow India's
achievements in IT. Estimates of the size of the
market, and the manifold opportunities it offers
particularly to India's educated population are
given. Business applications suited to BPO, problems
and threats are broadly identified.
Definition
BPO/ITES:
Business process
outsourcing (BPO) is the act of giving a third-party
the responsibility of running what would otherwise
be an internal system or service.
In simple terms ITES is the delegation of one or
more IT-intensive operations to an external provider,
who in turn administers and manages the selected
business process based upon defined and measurable
performance.
Size of the Market
a) Indian Scenario:
A $2 billion industry and expected it to grow at
a CAGR of 54 per cent till 2006 to reach $12 billion.
The ITES-BPO segment contributes 25 per cent of
the total IT software and service exports from India
and witnessed a growth of 59 per cent to reach Rs
11,300 crore (US $2.3 billion) in 2002-03.
b) Global Scenario:
According to
a recent study released by Pricewaterhouse Coopers,
more than 100 US companies averaging about $4.4
billion in yearly revenue, the study shows that
around 73 percent of US companies in the sample,
presently outsource one or more business processes
to external service providers. Centered on the US
market. A study by Gartner on the emerging BPO market
shows that BPO services Worldwide will grow from
US$ 119 billion in 2000 to US$ 234 billion in 2005
at a 14.4 percent compound annual growth rate.
Threats
There exists
competition from countries like China and Philippines,
China also possesses low cost labor and IT skills
but the problem with them being their handicap in
English. Philippines is the world's third largest
English speaking country and has an IT skill set
next only to India however this pool of talent is
not large enough.
Increase in attrition can be seen as a major threat
to the Indian BPO industry, attrition levels reaching
as high as 35%, reason being high stress and burnouts
also a lot of people switch off when they get opportunities
elsewhere.
Social resistance in client countries, especially
the US wherein the downturn of the economy and rise
in unemployment rates can be seen as major influential
factors.
The feeling of losing control over your processes,
especially in the services industry can act as a
deterrent for companies to outsource.
There is a need for Indian companies to move up
the value chain as competition will be fierce in
future and to sustain itself India has to offer
services like a one stop shop for companies that
need to outsource and provide services in niche
areas.
Advantages
a) Low Labor Costs: India is highly
competitive and cost effective due to it lowest
wage rates and employee
attrition rates compared to other major IT destinations.
b)
Vigorous Infrastructure: Quick to adapt
and can deliver on any business in a very short
time frame. Indian bandwidth
itself currently stands at 1.2 Gbps and is slated
to increase to 16Tbps by 2005
c)
Educated Workforce: Computer literate population
with excellent Communication Skills & Large
English Speaking manpower
is available in abundance. It has the maximum number
of quality and quantity
knowledge workers. An excellent infrastructure as
its back up not only helps the communications
but also enhances the skills that are so very flexible
in India.
d)
Brand Equity: Outsource to a mature industry
with world-class systems, systems and quality.
e)
Govt: Support: India has a stable government
and is one of the world's 10 fastest-growing economies.
Government has recognized the potential of IT Enabled
Services and has offered multiple
incentives.
Opportunities
a) Exploitation
of time differences between
India and main target markets: India's time zone difference with the US makes
it possible to offer 24X7 service and reduce turnaround
times, enabling work in
sync with U.S. businesses.
b) Utilization Improvement: The
Company is better equipped to focus its available
resources on other ctivities
that the company engages in and thus improve company
focus.
c) Fast Implementation & Procuring
Resources Not Available Internally: India has
access to a large pool
of graduates having IT skills who speak fluent English,
which is unavailable elsewhere in the
world.
d) Global strategy: There is also
a market outside the US that India needs to tap,
markets
in Europe and UK also have
high potential.
e) Expansion into new markets either vertically
or horizontally from existing customer base.
f) Riding the back of the broad trend
towards and awareness of outsourcing to India
Indian BPO
Companies
Started with
GE. Many players today are Global Telesystems, Msource,
Intelnet, Spectramind, Daksh, Efunds, 24/7 Customer,
CustomerAsset, FirstRing, exlService, Tracmail,
Talisma, Transworks, ibackoffice and iSeva.
Range of services
provided varies from Customer Interaction Services,
Industry Specific Services, Payment Services, Supply
Chain Services, Finance and Accounting Services
to HR Services.
Comment
The field of
BPO has tremendous potential to grow; a lot now
depends on the factors that will influence its growth.
As far as the corporates are concerned they are
to gain from this endeavor but for certain exceptions
wherein the domestic markets are only relied upon.
Studies have shown that outsourcing has led to increased
customer satisfaction, better efficiency, better
accuracy and definitely cost reduction. All these
factors are highly influential in raising the stock
value of a company. It remains to be seen what happens
of the US backlash, US being the market that BPO
is centered around. The Indian taxman waking up
now will also decide what course companies would
take, as a lot of competition exists from countries
like China and Philippines. Also how the HR strategies
adopted by companies to reduce the attrition rates
fare remains to be seen.
To be continued…
Sources:
1. Pricewaterhouse Analysis.
2. Gartner Study.
3. The Economic Times.
4. The Times of India (July 28,2003).
5. Wipro Spectramind.
Article
by Prof A. B.Kasbekar
Contributed
by:
Disha Arora,Neha
Batta, Preeti
Surana,Rajorshi
Chanda,Rahul
Dongre ,Somitra
Jain.
