Business process outsourcing to India

Business process outsourcing to India refers to the business process outsourcing services in the outsourcing industry in India, catering mainly to Western operations of multinational corporations (MNCs).

As of 2012, around 2.8 million people work in outsourcing sector.[1] Annual revenues are around $11 billion,[1] around 1% of GDP. Around 2.5 million people graduate in India every year. Wages are rising by 10–15 percent as a result of skill shortage.[1]

History

A BPO hub in DLF Cyber City in Gurgaon, India

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Amex

In the second half of the 1980s, American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into Gurgaon region.[2] This centre (called the Financial Resource Centre East or FRC-E)was headed by an Expat Harry Robertson, a veteran American Express employee with Raman Roy reporting to him, Raman Roy later on quit Amex to join GE and later on started his own enterprise called Spectramind which got later on merged with Wipro and then later on started Quatrro BPO.

General Electric

In the 1990s Jack Welch was influenced by K.P. Singh, (a Delhi based realtor) to look at Gurgaon in the NCR region as a base for back office operations. Pramod Bhasin, the India head of G.E. hired Raman Roy and several of his management from American Express to start this enterprise called GECIS (GE Capital International Services). Raman for the first time tried out voice operations out of India, the India operations also was the Beta site for GE Six sigma enterprise. The results made GE ramp up their Indian presence and look at other locations. In 2004 GECIS was spun off as a separate legal entity by GE, called Genpact. GE has retained a 40% stake and sold a 60% stake for $500 million to two equity companies, Oak Hill Capital Partners and General Atlantic Partners..

IT: The headquarters of Infosys, India's third largest IT company, is located in Bengaluru

Third party BPOs

Until G.E. most of the work was being done by "captives"- a term used for in house work being done for the parent organisation. In 2000 Raman Roy and some team members from GECIS quit, and with VC funding from Chrysalis Capital started Spectramind. At the same time an organisation called Efunds started in Mumbai and Gurgaon, vCustomer in New Delhi and Daksh in Gurgaon. One of the current big pure play BPO firms, EXL Services, started in April 1999 and in 2012 hit $442.9 million in revenues.just one as the3

However, recently most of the Indian BPOs, even smaller and mid-sized ones, are setting up their onshore presence in the markets they serve. Most of the large players are improving the outsourced business processes by leveraging on their years of experience, and now some are offering more than just plain vanilla BPO processes. KPO, transformation and Consulting opportunities is gaining favor among large third party BPO providers like Genpact, WNS and EXL Services.

Entry of IT majors

In 2002 Spectramind was bought by software major Wipro, and BPO by then had become mainstream like the IT Industry in India. The team that had set up Spectramind went on to start Quatrro in 2006, a BPO specialising in high end BPO/KPO services. By 2002 all major Indian software companies were into BPO, including Infosys (Progeon), Inforlinx, HCL, Satyam (Nipuna) and Patni. By 2003 Daksh was bought out by IBM, and later in 2006 MphasiS was acquired by EDS. Even international 3rd party BPO players like Convergys and Sitel had set up shop in India, swelling the BPO movement to India. Then service arms of organisations like Accenture, IBM, Hewlett Packard, Dell also set up shop in India.

Emergence of Rural BPOs

Booming India Inc has led to skyrocketing real estate and infrastructure costs in Tier-1 cities. BPO industry has thrived all these years because of its ability to deliver services at a low cost. Increasing infrastructure costs, real estate costs, and salaries have raised BPO costs significantly and as a result Indian BPOs in Tier-1 cities are looking at Tier-2 and Tier-3 cities for operation.

Few entrepreneurs who had a vision of bringing the rural India into the mainstream of knowledge economy have found an opportunity here – setting Rural BPOs. The transformation of rural India started with the emergence of these Rural BPOs.

Future of outsourcing services to India

Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8–10% for the next decade. In addition, outsourcing efforts to India are held up as an effective remedy for concerns about both Chinese government policy and labour force issues, such as increasing costs and shortages.

Size of industry

City panorama showing gardens, clean roads and modern office buildings
HITEC city, the hub of information technology companies

The industry has been growing rapidly. It grew at a rate of 38% over 2005. For the FY06 financial year the projections is of US$7.2 billion worth of services provided by this industry. The base in terms of headcount being roughly 400,000 people directly employed in this Industry. The global BPO Industry is estimated to be worth 120–150 billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India thus has some 5–6% share of the total Industry, but a commanding 63% share of the offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO Industry which is in total expected to have revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of the approximate one million workers estimated to be directly employed in the IT and BPO Sector.

The related Industry dependent on this are Catering, BPO training and recruitment, transport vendors (home pick up and drops for night shifts being the norm in the industry), security agencies, facilities management companies.

From a PricewaterhouseCoopers survey

 Table 1: Global BPO Market by Industry[3]
IndustryPercentage (%)
Information Technology 43
Financial Services 17
Communication (Telecom) 16
Consumer Goods/ Services 15
Manufacturing 9
 Table 2: Global BPO Market by Geography[3]
CountryPercentage (%)
United States 59
Europe 27
Asia-Pacific 9
Rest of the World 5
 Table 3: Size of Global Outsourcing Market[3]
YearSize (USD Bn)
2000 119
2005 234
2008 (est.) 310
 Table 4: Size and Growth of BPO in India[3]
YearSize (US$ Bn)Growth Rate (%)
2003 2.8 59
2004 3.9 45.3
2005 5.7 44.4

Currently the Indian BPO Industry employs over 245,100 people and another 94,500 jobs are expected to be added during the current financial year (2005–2006)

 Table 5: Call Centre Employee cost[3]
CountryCost (USD/yr)
United States 19,000
Australia 17,000
India <7,500

Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12–24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.

Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

Mandatory registration of 'BPO' under the other service provider(OSP) category in India

BPO/KPO/Domestic & International Call Centres/NOC etc. are covered under the 'Other Service Provider' (OSP) Category by the Department of Telecommunications.

The companies who are providing the 'Applications Services' means providing services like tele-banking, tele-medicine,tele-education, tele-trading, e-commerce, call centre, network operation centre and other IT Enabled Services, by using Telecom Resources provided by Authorised Telecom Service Providers. The 'Telecom Resource' means Telecom facilities used by the OSP including, but not limited to Public Switched Telecom Network (PSTN), Public Land Mobile Network (PLMN), Integrated Services Digital Network (ISDN) and /or the telecom bandwidth provided by authorized telecom service provider having valid licence under Indian Telegraph Act, 1885. The 'Company' means a company registered under Indian Companies Act including foreign companies permitted by RBI under Foreign Exchange Management Regulations and registered under Part-XI(Section 591 to 608) of the Companies Act, 1956 for setting up a place of business in India. 'Domestic OSP' are the OSP providing the Application Services within national boundaries. 'International OSP' are the OSP providing the Application Services beyond national boundaries.

General conditions of OSP registration

(1) Registration may be granted to any company to provide Application Services. These service providers will not infringe on the jurisdiction of other Authorised Telecom Service Providers and they will not provide switched telephony. (2) The entities entitled for OSP registration must be a company registered under Indian Companies Act,1956. (3) A Company may apply for registration to the Authority in the proforma prescribed by the Authority from time to time.

Online system for OSP registration

It is mandatory to get new Registration Number allotted by the Online OSP Registration system for the existing OSP Registrations. In case you have existing registered OSP sites for which you would like to get the new Registration Number from the system please contact Assistant Director General (ADG) of the concerned Telecom Enforcement, Resource and Monitoring Cell (TERM Cell)[4] preferably before applying for the login-id from the system.

Terms and conditions of the OSP registration are available on the DOT website [5] [6]

Leading BPO-ITes cities in India

Bangalore, Chennai, Hyderabad, Gurgaon, Kolkata, Baroda, NCR, Mumbai and Pune are Tier I cities that are leading IT cities in India.

With rising infrastructure costs in these cities, many BPO's are shifting operations to Tier II cities like Nashik, Sangli, Aurangabad (Maharashtra), Mangalore, Mysore, Hubli-Dharwad, Belgaum, Coimbatore, Nagpur, Kochi, Trivandrum, Chandigarh, Mohali, Panchkula, Ahmedabad, Bhubaneshwar, Jaipur, Visakhapatnam, Raipur and Lucknow

Tier II cities offer lower business process overhead compared to Tier I cities, but have a less reliable infrastructure system which may hamper dedicated operations. The Government of India in partnership with private infrastructure corporations is working on bringing all around development and providing robust infrastructure all over the nation.

Criticisms

The BPO industry in India faces two key criticisms.

The first criticism concerns the damaging psychological effects on Indian call-centre employees who are expected to ape the Western employees they have replaced in terms of accents, slang and even names.[7]

The second criticism focuses on the wider ramifications of the industry's political influence. It has been claimed that this influence, which far exceeds the industry's economic contribution, has allowed the industry to secure the support and resources of the Indian state ahead of other sectors of the national economy where the developmental returns would be far greater.[8]

See also

References

  1. ↑ 1.0 1.1 1.2 "India's outsourcing revenue to hit $50 bn". Financial Express. 2008.
  2. ↑ EDC Help Desk Location- Amex
  3. ↑ 3.0 3.1 3.2 3.3 3.4 "The Evolution of BPO in India" (PDF). PriceWaterHouseCoopers. April 2005.
  4. ↑
  5. ↑ http://dotosp.gov.in/OSP_files//ospTermsandConditions.pdf
  6. ↑ "Welcome To OSP". Dotosp.gov.in. Retrieved 4 June 2013.
  7. ↑ Nadeem, Shehzad (2011). Dead Ringers:How Outsourcing is Changing the Way Indians Understand Themselves, Princeton University Press, New Jersey. ISBN 0691147876.
  8. ↑ Saraswati, Jyoti (2012). Dot.compradors: Power and Policy in the Development of the Indian Software Industry, Pluto Press, London. ISBN 9780745332659.

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