1 1 | BPO

CHAPTER I
OUTSOURCING The concept of outsourcing started with Ross Perot when he founded Electronic Data Systems in 1962. EDS would tell a prospective client, "You are familiar with designing, manufacturing and selling furniture, but we're familiar with managing information technology. Outsourcing is a major movement. Companies realize that they do not necessarily have to provide services internally- they can get higher quality if they use specialist service organizations which can provide this service as their business focus, allowing the attention of executives to remain on their core business. The outsourcing industry on a whole is categorized into 3 segments:

1) Voice or Call Centers

2) ITES Outsourcing (IT Enabled Services) 3) Business Process Outsourcing

1 ) Call Center Outsourcing

Traditionally, a call center is defined as a physical location where calls are placed or received, in high volumes. This could be for the purpose of sales, marketing, telemarketing, customer service, technical support or business specialized activity. Call centers are also described as customer care centers, contact centers and service bureaus .A call center could be 1 or all of these-a huge telemarketing center, a teleservicing centre, a help desk, a service bureau that uses its large capacity to serve a lot of companies a reservation centre for air lines or hotels, an e-commerce transaction centre or even a fund raising and collection organization.

2 2 | BPO Call centers have now evolved to become sophisticated business enterprises .A typical call centre works 24X7 with employees working in shifts. It could be a micro-centre with 5-10 seats or a huge set up with 2000 seats. 2) ITES Outsourcing I.T. enabled services cover a wide spectrum of I.T. related work such as computer programming, I.T. help desk, maintenance support, new software design and development, etc. I.T resource requirements are increasingly becoming complex and expensive for companies, while their core competencies lie else where. I.T competencies are not usually available in non I.T companies and they fail to keep pace with technological changes. In house I.T programming and implementation is also time consuming. There are some clear advantages to out source certain I.T projects: Staff scalability A skilled and highly qualified resource pool A broad range of technology skill and expertise Cost arbitrage 24X7 Support and monitoring Speed cut down time for new software design and development.

3) Business Process Outsourcing It includes sub contracting non-core functions such as finance and accounting

processes, H.R processes, claims processing, etc. BPO is a lot different from IT out sourcing. In IT out sourcing, only IT employees experience change in the organization. But with finance and HR outsourcing, not only Finance and HR employees, but everyone else in the company are also affected since these processes affect almost all the employees in the company. Employees personal information, compensation related matters, etc in case of out sourcing HR will be

3 3 | BPO handled by someone from the outside company. Similarly in case of Finance outsourcing, confidential and legal information will reside with an outside service provider and an outsider will be supporting information needs.

CHAPTER II
BUSINESS PROCESS OUTSOURCING Business Process Outsourcing (BPO) occurs when an organization turns over the management and optimization of a business function to a third party that conducts the activity based on a set of predetermined performance metrics. A BPO vendor manages people and processes, while traditional outsourcers focus on life cycle management and hardware uptime. BPO [Business Process Outsourcing] has been the latest mantra to success today. As the current sources of revenue face slower growth, software companies are trying new ways. In todays highly competitive, unpredictable and fast-changing marketplace, organizations are challenged with improving productivity and operational efficiency with ever-shrinking budgets. Many executives find that running the enterprise consumes the bulk of their energy. They lack the time and resources to manage non-core, resource-intensive functions properly. As a result, many organizations are pursuing a Business Process Outsourcing (BPO) strategy in which a business process-outsourcing partner manages these non-strategic business processes. With the right partner, BPO delivers dramatic business value, significant competitive advantageand peace of mind. BPO is a term that has evolved over the years, and each time it evolves further, its definition has changed. Some people have not kept up with its evolution and, therefore, refer from time to time to old definitions or descriptions of BPO. It is not simply another term for outsourcing. In BPO, strategic value through outsourcing is created by creatively examining the process and changing the way it is actually performed. It is more than just changing who is performing the process. In BPO, the supplier not only takes on the responsibility to take over the function or business process, but it also reengineers the way it is done. BPO is a small

4 4 | BPO acronym, but its impact is extremely profound. Through outsourcing solutions, outsourcing firms are able to partner with their clients to meet these complex market demands. Businesses that do not quickly adopt a progressive BPO strategy will quickly be left behind. OFFSHORE OUTSOURCING Offshore outsourcing is the practice of hiring an external organization to perform some or all business functions in a country other than the one where the product or service will be sold or consumed. It can be contrasted with off shoring, in which the functions are performed in a foreign country, whether by the foreign subsidiary of the same company or a third-party. Opponents point out that this sends work to other countries than the one the opponents live in, thereby reducing domestic employment and domestic investment in the countries which, because of higher wages, are subject to outsourcing by countries with lower wages. Many jobs in the InfoTech sectors - such as data entry, computer programming, and customer support in countries such as the United States and the United Kingdom have been or are potentially affected. The general criteria for a job to be offshore-able are: The job does not require direct customer interaction. There is a significant wage difference between the original and offshore countries. The job can be telework. The work has high information content. The work can be transmitted over the internet. The work is easy to set up. The work is repeatable.

The driving factor behind this development has been the need to cut costs while the enabling factor has been the global electronic internet network that allows

5 5 | BPO digital data to be accessed and shipped instantly, from and to almost anywhere in the world. NEARSHORE OUTSOURCING Many top corporates, who have adopted outsourcing and have enjoyed the benefits, are slowly finding out the advantages of an upcoming concept of Nearshore Outsourcing. Near-shore Outsourcing is the practice of outsourcing work to neighboring countries rather than outsourcing them to far off countries. For example, many companies in the US outsource work to Canada and Mexico. Geographic proximity means that travel and communication is easier and less expensive, there are likely to be more similarities between the cultures, and people are more likely to speak the same language. This makes the outsourcing process easier.

CHAPTER III
WHY TO OUTSOURCE? Organizations outsource to address specific business issues and opportunities. Executives need to be conscious of their organization's specific motivations for outsourcing. What business issues are you looking to solve and how will outsourcing enable you to solve them? In other words for outsourcing to be successful, management must have a clear set of goals and objectives in mind from the start. BPO or outsourcing is advantageous as it links to shareholder value. Business Process Outsourcing is about optimizing business performance to attain value creation. There has been a tremendous upsurge in BPO and outsourcing industry in many developing countries like India because of their (BPO) expertise in reducing costs while increasing service quality. Another great BPO benefit is that it helps companies to focus on core areas. Companies generally outsource processes to reallocate accountability and control costs. Thus the management is in a better position to focus on core areas, and not keep itself engrossed in other areas. Outsourcing also helps companies to

6 6 | BPO avoid capital expenditures, which is in particular important in non-core areas that may need new systems and up gradation. By and large, companies only want to spend money on core areas. Reduction in costs is another BPO benefit. BPO provides quantifiable benefits through improved efficiencies, lower overhead, reduced payroll and benefit expenses, and fewer capital investments. Other BPO benefits include assurance of best practices, skills, and technology. It is important to note that BPO provides access to proprietary workflow systems, process reengineering skills, and innovative staffing and delivery models, coupled with world-class technology delivered by experts. Every subsequent outsourcing decision is rooted in a clear understanding of what an organization is trying to accomplish because the motivations drive the selection of candidates, expectations, and outcomes. Typically the issues and opportunities an organization faces will fall in one or more of three general categories tactical, strategic, and transformational. These categories represent ways in which outsourcing is typically used. Top Five Tactical Reasons for Outsourcing for Short-Term and Immediate Benefits: 1) REDUCE AND CONTROL OPERATING COSTS The single most important tactical reason for outsourcing is to reduce or control operating costs. Access to the outside provider's lower cost structure is one of the most compelling short-term benefits of outsourcing. This access to the outside provider's lower cost structure, may be the result of greater economy of scale or some other advantage based on specialization, it is clearly and simply one of the most compelling tactical reasons for outsourcing. In addition, companies that try to do everything themselves may incur vastly higher research, development, marketing, production and employment expenses - expenses that have to be passed onto the ultimate customer. Today's customers are too sophisticated to accept the costs associated with an organization's attempts to maintain singular control over all its resources.

7 7 | BPO 2) MAKE CAPITAL FUNDS AVAILABLE Outsourcing is a way to reduce the need to invest capital funds in non-core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for an "as used" operational expense basis. Outsourcing makes capital funds more available for core areas. It can also improve certain financial measurements of the firm by eliminating the need to show return on equity from capital investments in non-core areas. There is tremendous competition with most organizations for capital funds. Deciding where to invest the funds is probably one of the most important decisions that an organization's senior management is called upon to make. 3) CASH INFUSION Outsourcing may involve the transfer of assets from the customer to the provider. Equipment, facilities, vehicles, and licenses used in the current operations all have a value and are, in effect, sold to the provider as part of the transaction resulting in a cash payment. This cash can then be used in other parts of the operation. Similarly, some contracts involve an up-front payment by the provider to the customer of anticipated savings during the first few years of the contract. Similarly, this cash is then immediately available for investment elsewhere. 4) RESOURCES NOT AVAILABLE INTERNALLY Companies outsource because they do not have access to the required resourceshuman, capital, or intellectual. For example, if an organization is expanding its operations, especially into a new geographic area, outsourcing is a viable and important alternative to building the needed capability from the ground up. In other words companies outsource because they do not have access to the required resources within the company. For example, if an organization is expanding its customer base and does not have the equipment or personnel to continue mailing customer-billing statements in a timely basis, cash flow is affected. In addition, recent postal changes providing discounts to qualifying companies using automated mailing systems further impacts on that company's operational costs in that area because of limited resources.

8 8 | BPO Quite simply put, rapid growth or expansion of operations is often a strong indicator that outsourcing may be right for a company. 5) FUNCTION DIFFICULT TO MANAGE OR OUT OF CONTROL Outsourcing is certainly one option for addressing these types of problems. Outsourcing does not, however, mean abdication of management responsibility, nor does it work well as a knee-jerk reaction by companies in trouble. However, introducing the best-in-class management and business processes that a provider offers can be a quick way to bring control to a situation. The Top Five Strategic Reasons for Outsourcing Long-Term Far-Reaching Consequences : 1) IMPROVE BUSINESS FOCUS Outsourcing lets the company focus on broader business issues while having operational details assumed by an outside expert. For many companies, the single most compelling reason for outsourcing is that several of the `how' type of issues are siphoning off huge amounts of management's resources, time and attention. Too often, the resolutions of these issues are stuck in middle management "decision gridlock". This creates financial and opportunity costs that affect the organization's future. Outsourcing can enable an organization to accelerate its growth and success through expanded investment in the areas, which offer it the greatest competitive advantage.

2) ACCESS TO WORLD-CLASS CAPABILITIES By the very nature of their specialization, outsourcing providers bring extensive worldwide, world-class resources to meeting the needs of their customers. Partnering with an organization with world-class capabilities can offer: access to new technology, tools, and techniques that the organization may not currently possess; better career opportunities for personnel who transition to the outsourcing provider; more structured methodologies,

9 9 | BPO procedures, and documentation; competitive advantage through expanded skills. 3) ACCELERATED REENGINEERING EFFORTS Outsourcing is often a by product of another powerful management tool business process reengineering. It allows an organization to immediately realize the anticipated benefits of reengineering by having an outside organization one that is already reengineered to world-class standards take over the process. In fact, understanding the relationship between reengineering and outsourcing is central to getting the intended value out of these strategies. 4) SHARED RISKS There are tremendous risks associated with the investments an organization makes. When companies outsource they become more flexible, more dynamic, and better able to adapt to changing opportunities. ADP, the large payroll processor, illustrates this reason for outsourcing in their ad campaign referring to the number of new compensation related regulations enacted by congress yearly. ADP invests in staying up to speed on changes and the risk of a mistake is ADP's, not the clients. 5) FREE RESOURCES FOR OTHER PURPOSES Every organization limits on the resources available to it. Outsourcing permits an organization to redirect its resources from non-core activities toward building knowledge sets with long-term pay back and impact on innovation. The constant challenge is to ensure that its limited resources are expended in the most valuable areas. Outsourcing permits an organization to redirect its resources from non-core activities toward activities that have the greater return in serving the customer. Most often, the resources redirected through outsourcing are people resources. By outsourcing non-core functions, the organization can redirect these people, or at least the staff slots they represent, onto greater value-adding activities.

10 10 | BPO Top Five Transformational Reasons for Outsourcing 1) BRING NEW SOLUTIONS TO CUSTOMERS, FASTER The pace of business change is accelerating. Today, customer expectations and preferences can shift at the speed of a mouse click. The specialized capabilities of an outside expert are increasingly important in building that next generation solution. As an executive from Home Depot put it, "If we don't look at what everybody else is doing out there we'll become complacent, we'll become less innovative." 2) RESPOND TO SHORTENING PRODUCT LIFECYCLES Product lifecycles that recently measured in years, today measure in months. The 1999 Strategic Outsourcing Study found that companies facing this type of growing external turbulence are increasingly using outsourcing to reduce their time to market. 3) REDEFINE RELATIONSHIPS WITH SUPPLIERS AND BUSINESS PARTNERS Outsourcing can transform the entire supply and customer chains in a host of different ways. New, integrated providers can shorten the chain and provide additional services that transform markets or transform the customer experience. 4) LEAPFROG COMPETITORS Amazon.com fundamentally changed retailing thanks to a different philosophy, new technology, and a cadre of outsourcing providers. Everything changed when Amazon.com partnered with the providers who could manage call centres, process orders, fulfill orders, and warehouse books in ways previously untested. 5) ENTER NEW MARKETS WITH REDUCED RISKS Firms are moving headlong into new markets in response to new competition or opportunities, sometimes with little experience. This is most evident in the

11 11 | BPO areas of e-commerce and e-business. Providers like IBM Global Services are helping brick and mortar firms create entirely new customer bases on-line. Following figure shows as to why companies prefer outsourcing rather than insourcing: Every minute a company spends on an activity that does not directly add value to its customer's solution is a cost that can be saved. However, many organizations look at outsourcing not just as a cheaper option, but as the only viable option for many of their activities. Some of the reasons include:

Reduce overheads, free up resources

Avoid expenditure

capital

Increase customer satisfaction

Improve efficiency

Save manpower training costs

on and

Get

access

to

specialized skills

Reduce operating costs

Improve and service

speed

Spread risks

Be

reliable

and

innovative

Provide

value

added services

Offload non-core functions

WHAT TO OUTSOURCE? Executives often find it difficult to identify which processes to outsource in order to realize the objectives of outsourcing. Markets do not provide any help regarding this critical decision. There is no direct indication of the functions or processes that can be successfully outsourced.

12 12 | BPO A fair and coherent understanding of the various functions processes in the organization; as also the companys goals and success drivers play a significant role in deciding the functions/processes that would eventually be outsourced. This is a model that helps to identify all major functions in an organization. In each segment top executives what constitutes their core business and what does not. Often it is an extremely arduous task as all business processes are intertwined tightly. Identifying and separating them is a

tough job. Having identified its major functions the company needs to analyze why exactly it is considering outsourcing a particular function; what solutions they are looking for. Here too the market provides no guidelines. It is the companys internal matter.

13 13 | BPO The following chart provides some necessary drivers for executives, which they need to focus on when considering outsourcing:

Each company will have its own evaluation of its own processes and its own level of focus on various parameters. There are no standards and there are no ready solutions. What may be ideal for one company may not prove to be so for another. The decision as to which processes to outsource is not simple and requires due deliberation.

14 14 | BPO

ELEMENTS OF BPO Business Process Outsourcing in today's world is seen as a strategic management option rather than just a way to cut costs. It helps achieve the companies their business objectives through operational excellence and an edge in

the market place. The following is a chart manifesting the elements of BPO that can be outsourced: Every company today, has one or more of its services outsourced so that it can focus more on its core competencies. Outsourcing's emerging power as a business tool of unique versatility and flexibility is undoubted. Resources of the companies need to be focused on core business functions so the non-core functions need to be outsourced. Outsourcing gives you the right combination of people, processes and technology to operate effectively in

15 15 | BPO the Global market place without burdening your time and budget. This is the reason why more and more companies are showing interest in outsourcing there activities to various offshore locations. With the cost to bring a product from development to market having increased significantly, outsourcing is seen as a potential savior. Two prime factors come into play when searching for a reliable outsourcing provider: quality and price.

CHAPTER IV
KNOWLEDGE PROCESS OUTSOURCING (KPO) In layman's terms, they are firms that provide services based on specialized knowledge of a certain industry. For example, you need a doctor to be able to diagnose a medical condition, or a chartered accountant to handle the financial aspects of a business, or an MBA to track the marketing trends of a certain product. KPOs mainly offer research and backend work. Unlike BPOs, which need its executives to be involved with customer care, KPOs use their employees' expertise to carry out highend processes like valuation, research, investment researches, patent filing, legal and insurance claims, medical diagnoses and reports, and many other profiles depending on the industry the KPO caters to. The knowledge process outsourcing industry (KPO) will grow 45% in size by 2010 whereas the BPO industry, only 26%. Global KPO pie in 2010 will be around $17 billion of which $12 billion (70%) will be outsourced to India. KPO v/s. BPO: THE DIFFERNCE

16 16 | BPO Its not just a B replaced by a K. KPO involves high-end processes like valuation research, investment research, patent filing, legal and insurance claims processing, etc. Or as Pavan Bagai, vice president, strategic businesses, EXL puts it: Imagine unsorted data going through a black box and coming out as useful information. In KPOs the black box is your mind. There is no pre-defined process to reach a conclusion. In BPOs, there is a pre-defined way to solve a problem. BPOs will normally include transaction processing, setting up a bank account, selling an insurance policy, technical support, voice and email-based support.

WILL YOUR NEXT DOOR BPO GUY BENEFIT FROM THE KPO BOOM? Certainly Yes. With more and more KPO business coming into India, BPOs will try to upgrade themselves as revenue per unit is more in a KPO than a BPO. And the first to benefit will be those already working in a BPO with some degree of specialization. There are significant cost benefits. Ashish Gupta, country manager, Evalueserve, says, Drafting and filing of a patent application costs anywhere between $10,000 and $15,000. Offshoring even a small portion of the process to an agent in India can save up to 50% for the end-client.

17 17 | BPO India is a hub for those willing to outsource their R&D operations - be it chip design or pharma and biotech research. In fact, quite a few companies are locating their R&D divisions in India. All our research work is done from Gurgaon, where most of our staff is located. Its only the sales and business development thats done from outside India, adds Gupta of Evalueserve. Microsoft has opened its R&D centre in Bangalore. In contrast to BPOs, KPOs require understanding of how a client works. The contracts in the KPO industry will be of much shorter duration. They may range anywhere from three weeks to six months. So, delivering high quality work will be a major challenge. Several Indian BPOs have recognized this opportunity and are in the process of developing KPO capability. WILL KPO BE ABLE TO DRIVE OUT BPO? The answer is a clear NO. Revenues in absolute terms will always be more from BPO. While KPO exports from India are projected at $12 billion by 2010, BPO exports will be much higher at $20 billion for the same year. But India may start to lose its low-cost advantage in future. Low-end services may move to cheaper destinations like Ukraine, Belarus and Malaysia. Commoditization of low-end services is likely to occur as potential barriers to entry are minimal. Today, one can open a small call centre within Rs 5 lakh. Hence, for India to stay ahead in the global

18 18 | BPO outsourcing market it will have to develop both, the KPO as well as the BPO industry and maintain its leading edge. BUSINESS TRANSFER OUTSOURCING (BTO) Business transformation outsourcing (BTO) is a natural extension of the more tactical BPO model and involves the transfer of responsibility for all back-office functions, as well as a comprehensive business change management process to an external vendor. The objective is to maximize the long-term benefits of the BPO operations, resulting in a comprehensive business transformation (or overhaul). Transformation outsourcing is not a tactical issue but a forward-looking strategic tool for change. The logic: big gains in performance only come about through business transformation. Distinguishing between BPO and BTO outsourcing: BPO (a) What is at stake? Risk of disrupting operations Little Value Add on the upside. Risk of endangering strategic order of business. Upside opportunity to drive dramatic business improvement (b) Difficulty in specifying the performance required? BTO

19 19 | BPO EASY: Well understood processes Easily measured outputs Clear link between outputs and benefits Simple interface to nonoutsourced activities Excellence requires industry leading innovation (c) How much flexibility do you need? LITTLE: Annual benchmarking suffices EXTENSIVE: Must anticipate and respond to dynamic competitive environment VERY DIFFICULT: Effective behaviors and outputs only accessible by outcome, if then Activities inextricably linked to work that is not outsourced

CHAPTER V
MARKET SIZE AND SEGMENTATION INDUSTRY STRUCTURE At present a number of vendors BPO services across the globe. These players can be segmented on the basis of their models which are as follows: IN-HOUSE / CAPTIVE CENTRES A number of global corporates have set up their own inhouse facilities for back office work, mostly in the form of subsidiaries. These captive centres perform transaction processing for a wide range of processes across different business units or divisions. According to reports, 16 of the top 20 Fortune 500 companies have their own captive centres. Although initially these captive facilities used to be located in the country of operations, in the recent times a number of such centres have been relocated to low cost offshore

20 20 | BPO locations. For instance, Reuters, Honeywell and ABN Amro have set up facilities in Singapore whereas Caltex, Flour Daniel and AOL have set up facilities in The Philippines. In addition, a number if corporates have tried to create global / regional hubs in the offshore centres. For instance, American Airlines has set up a centre at Ireland for their entire European operations and General Electrics centre at India services the companys worldwide processing requirements. SPIN OFFS OF GLOBAL COMPANIES A number of in-house processing facilities of global corporates have been spun off as separate entities. These spin offs provide services not only for their parent companies but also for a number of outside clients. Some successful examples of these include: 1) Convergys, an in-house division Cincinatti Bell that was spun off to serve third parties during the telecom regulations in the 1990s. 2) E-Funds, a division of the largest cheque printer in the US, Deluxe, that was spun off to cater to the various processing needs in payment services. 3) First Data, a part of American Express that was spun off after the parent decided to exit the financial services processing business. Most of these spin offs have a significant presence in the vertical or function for which they used to provide services to their parent. They have also adopted their service offerings for various processes associated with the vertical in which the parent company had a presence. For instance, since Convergys was a part of Cincinatti Bell, it had

21 21 | BPO developed processes for the wireline industry. However, after the spin-off it has leveraged the experience to cater primarily to the wireless industry. FOCUSED BPO Given the need to manage the processes of large corporates, a number of focused BPO providers have emerged over the years. Successful examples include Automatic Data Processing (ADP), Paychex, Sitel, Ceredian, Sitel and Exult. Generally, these third party providers develop core

competencies in specific processes that can be applied across verticals. As a result, despite diversifying into other processes, the bulk of their revenues are derived from these core processes. For instance, ADP that started off with payroll services expanded its presence in other functions. However, HR services still account for over 60 percent of its revenues from payroll services. However there are also a number of BPO providers who instead of concentrating on specific processes on (for instance, functions payroll (for processing), instance HR concentrate specific

outsourcing). Examples of these include Exult, which focuses on HR services and synergy that has focused on administrative services. BROAD BASED SERVICE PROVIDERS A number of services companies that offer consulting and IT services have diversified into BPO services. Large consulting firms such as Accenture and PwC have established their presence in the BPO segment, due to their experience in business process re-engineering. IT services majors such as EDS, CSC and IBM Global also offer BPO services due to their experience in IT sourcing.

22 22 | BPO These firms have tried to leverage their existing client relationships, in order to expand their presence in the BPO segment. In addition, given the centralization of decision making and rationalization of vendor bases among global companies in the recent times, such vendors have been able to offer bundled contracts which offers to end to end outsourcing solutions i.e. IT services as well as process outsourcing solutions. Although in most cases, the revenues from BPO do not account for a very high proportion of the total revenues for these companies, the cross selling opportunities on offer have resulted in an increased focus on BPO operations

Global BPO Market by Industry

2000 2005

USD$ 119 Billion USD$ 234 Billion

2008 (est.)

USD$ 310 Billion

Global BPO Market by Geography Size of Global Outsourcing Market by Geography Export Revenues

In terms of markets, the US continues to be the main consumer of Indias ITES-BPO services (with a 66% share of the market), followed by Western Europe (including the UK), which accounted for 20% of export revenues. In terms of functional service offerings,

23 23 | BPO Customer Care and Support services contributed

approximately 34% of the industrys revenues with the other leading service lines including Finance (with a contribution of 22%), Administration (13%) and Content Development (19%). The global financial services vertical remained the largest user of Indian ITES-BPO services, followed by telecom, healthcare and airline segments. Captive units continued to dominate the ITES- BPO industry, accounting for over 65 percent of the value of the work off shored to India.

CHAPTER VI
BPO IN INDIA AN OVERVIEW India became familiar with Business Process

Outsourcing only in the early and mid 1990s, but now the entire country seems to be quivering with the BPO fever'. The foreign direct investment (FDI) in the country owes a lot to this sector, which is progressing at a break-neck speed. The different kinds of services offered by BPO's include Customer Support, Technical Support, Telemarketing, Insurance Processing, Data Processing, Internet / Online / Web Research and so on. The cheap labor costs and the pool of skilled, English-speaking Indians have always been the two foremost factors contributing to the BPO boom in the country. As the National Association of Software Services and Companies (NASSCOM) points out, the other equally motivating factors include strong quality orientation among players, ability to offer round-the-clock services based on the country's unique geographic location, positive policy environment which encourages investments and a friendly tax structure, which places the ITES/BPO industry on almost equal footing with IT services companies.

24 24 | BPO Key highlights of the Indian ITES-BPO Sector in India: ITES-BPO Exports ($bn) Domestic ($bn) Total employment The Business Process Outsourcing industry in India has grown by leaps and bounds and as its size increases so does its competitive advantage. Compared with 1996 when this Industry had started inroads into the United States with Outbound Tele-marketing campaigns, today the vehicle for these calls-the internet has become cheaper and more reliable for the average Indian business. 2002-03 2.5 0.2 171,000 2003-04 3.1 0.3 253000 2004-05 4.6 0.6 316000 2005-06 6.3 0.8 415,000

EVOLUTION OF THE INDIAN BPO INDUSTRY The BPO market size in India has increased by over 4 times. Indias several distinct advantages large pool of English speaking computer savvy graduates, substantial cost savings, favourable time zones and favourable government regulations has lead to its emergence as a leading global outsourcing hub. Though the Indian BPO industry is still in the early stages of growth, one can clearly distinguish its evolution in 2 distinct stages. Fig 1: Phase I of Evolution The Initial Years (Mid to Late 1990s)
Period Mid to late 1990s

25 25 | BPO
Focus Areas Web Based CRM, Healthcare BPO, Simple Transaction Processing Key Players Web Based CRM, Healthcare BPO Independent Players Simple Transaction Processing Captive Scale Of Operations Players Independent Vendors Typically less than 500 people Captive players (such as GE, American Express) Larger than Independent Vendors

High

SCALE

Medium

Phase I

Low Narrow Wide RANGE OF OFFERINGS Medium

Globally the concept of BPO ha been around for many years outsourcing of payroll services started as early as the late 1960s; voice contact centres have been providing customer support since several decades. However, India figured on the BPO map for the first time only in 1990s. The initial range of services offered was limited and consisted of niche areas such as web based CRM services

26 26 | BPO (email and chat) and Healthcare BPO services. The basic strategy of most BPO vendors was to obtain an entry into the space and establish a track record in a chosen focus area. For instance, in the 1990s, web based services and the Indian CRM services vendors stepped in to fill this gap, thereby obtaining a toehold in the space. The key players during this phase were captive players (typically, units of transnational companies primarily from the banking, financial services and airline industries). Some of the captive players scaled up to the several thousand people by the end of this phase and primarily focused on the simple transaction processing. Pure play, independent BPO vendors became active only towards the end of the first phase (the late 1990s) with the focus on web based CRM and healthcare BPO services. The basic strategy followed by independent vendors was to get started with processes that clients were comfortable off shoring and establish a track record of service delivery that could be leveraged for subsequent growth. Phase II saw the Indian BPO Vendors expand their range of offerings to include voice based CRM services and more complex forms of transaction processing such as insurance claims processing, mortgage processing and accounting services. The offshore IT services companies also entered the space during this period. These companies plan to leverage their existing client relationships and offshore delivery expertise to achieve success. The last two years have also seen some leading US players establishing delivery presence in India. Convergys has a captive unit of 1,900 seats near New Delhi. SITEL has entered into a Joint Venture with the Tata Group

27 27 | BPO for a contact centre in Mumbai and SR Teleperformance has set up a facility near New Delhi. Stream Solectron has a JV with Tracmail, a leading Indian contact centre. Teletech has also set entered into a BPO Joint Venture with the Bharti group.

Fig 2: Phase II of Evolution Expansion of Offerings (2000 2004)

Period Focus Areas Mid to late 1990s Voice CRM, Transaction Processing (Insurance Claims Processing, Mortgage Key Players Processing and finance & Accounting) Entry of new players I) Indian IT Services Companies, ii) US BPO Services companies and iii) Large Business Houses Scale Of Operations Independent Vendors Scale to over 2,000 people Captive Players Largest player at 15,000 people. others upto 3,000 people

High
Phase II

SCALE

Medium

Phase I

Low Narrow Wide Medium

28 28 | BPO

RANGE OF OFFERINGS

The Indian BPO market has grown significantly in this phase market size has increased at a CAGR (Cumulative Annual Growth Rate) of 80% in the 4 years up to 2002 2003 to touch USD 2.4 billion. Phase II has clearly established Indias credentials as a leading global outsourcing hubs. Several Fortune 500companies already use India as a delivery base GE, Citibank, Sprint, HSBC, American Express, AXA, Dell, British Airway, etc. Over USD 250 million of private equity capital has already been invested into the sector with more coming in. The Indian BPO industry has interesting parallels with the Indian IT Services industry. It is believed that the success achieved by India in IT services will be replicated in BPO services as well. CURRENT BPO LANDSCAPE IN INDIA The Indian BPO space consists viz. CRM, of a HR, variety Finance of &

heterogeneous

segments

Accounting, Transaction processing, Data Analysis, Supply Chain and Content Services. Indian players have been active in these segments such as CRM, Content Services and Transaction Processing for the last few years whereas other segments such as Supply Chain and HR have witnessed significantly lower level of activity.
Transacti CRM HR Financing & Accounting on Processin g

Data Analysi s

Supply Chain

Content Services

29 29 | BPO
Nascent Significan t traction. Overall Scenari o Active presence of all player categorie s. Size of Resour ce Pool Tele Basic Process es marketin g& Customer surveys Collection Value Added Process es , Customer Service & Technical support All categorie s Pure Play (limited) Benefits administra tion & Training Large Limited activity. Mainly domestical ly focused currently. Some basic processes being currently executed. Greater traction expected in future. segment currently . However can potential ly scale in the future Small to medium Pay Roll & Records managem ent Medium to large Medium Small Large Very limited activity Well establishe d sector. Will continue to be a focus area in India

Billing, Accounts & Reconciliation

Data Entry & Claims Validation

Custome r Survey Analysis

Order Fulfilme nt

Conversio n

Publishing Financial Statement Preparation & Fund Accounting Mortgage Processing , Claims Adjudicati on & Card Processing R&D, Clinical Researc h& Custome r Mining Pure Play (limited) Pure Play (limited) Material s Management , Medical transcripti on Legal transcripti on & Litigation Support Captive, Pure Play

Key Players

Captive, Pure Play (limited), IT Services (limited)

WHY INDIA? India is undoubtedly the most favored IT/BPO destination of the world. This raises the question why most of the big MNCs are interested in outsourcing their operations to BPOs in India. The answer is very simple- India is home to large and skilled human resources. India has inherent strengths, which have made it a major success as an outsourcing destination. India produces the largest number of graduates in the world. The name of India has become synonymous

30 30 | BPO with that of BPOs and IT industry hence the name BPO India. Besides being technically sound, the work force is proficient in English and work at lower wages in comparison to other developed countries of the world. India also has a distinct advantage of being in a different time zone that gives it flexibility in working hours. All these factors make the Indian BPOs more efficient and cost effective. In order to meet the growing international demand for lucrative, customerinteraction centers, many organizations worldwide are looking to BPO India. Robust communication infrastructure, a large Englishspeaking workforce, low labor costs, appropriate time-zone difference with the West and the brand equity built by the software services sector are compelling reasons for choosing India as the BPO destination. Some of them are explained below in detail: HUMAN RESOURCES Availability of suitable human resources is one of those factors which have made India one of the hotspots of BPO/IT industry. India is home to a vast pool of human resources consisting of educated, English speaking, tech-savvy personnel. Every year, approximately 19 million students are enrolled in high schools and 10 million students in pregraduate degree courses across India. Moreover, 2.1 million graduates and 0.3 million post-graduates pass out of India's non-engineering colleges. These figures very well give the idea of human resources availability in India. This great pool of human resources holds the key to IT/BPO destination i.e. India. If the flow from high schools to graduate courses increases even marginally, there will be a

31 31 | BPO massive increase in the number of skilled workers available to the IT/BPO industry. If we calculate the availability of human resources at current rates, there will approximately be 17 million people available to the IT industry by the year 2008. LANGUAGE India definitely enjoys the benefits of a vast pool of skilled workers who are proficient in English language. India produces the largest number of graduates every year and most of these graduates have the knowledge of English language. Thus, language is one of those factors which attract MNCs to contract out their business operations to Indian BPOs and IT companies. Though there are competitors like China which also have a large pool of skilled workers but they don't have enough graduates who have command over English language. In addition to this the Indian education system also places strong emphasis on mathematics and science. This has resulted into a large number of science and engineering graduates. Mastery over quantitative concepts coupled with English proficiency makes India one of the hot spots of the IT/BPO word. It has enabled the India to take advantage of the current international demand for IT. QUALITY MANPOWER In term of human resources, there are a number of countries who are at an advantageous position but the real difference between them and India is of quality man power. In the field of information technology and computer software India experts have proved their worth beyond doubt. India is rich not only in terms of number of qualified people but the quality of our professionals is also of international level.

32 32 | BPO Indian programmers are known for their strong technical skills and their eagerness to accommodate and engage clients. In some cases, clients outsource work to get access to more specialized engineering talent, particularly in the area of telecommunications. Expertise in English language is also a great strength of India and it has definitely helped India in increasing its manpower quality.

GOVERNMENT POLICIES The Indian government has the realizes to that influence Information extensive

Technology

potential

economic development in the country. IT is now one of the top priorities of the Indian government and favorable policies are being formulated to extract maximum benefits from the industry. Here, we are highlighting some of the government policies which have proved very beneficial in the growth of IT/BPO industry. These favorable government policies have gone a long way in making India a BPO/IT hub.

The reforms have reduced licensing requirements and made foreign technology accessible. The reforms have also removed restrictions on investment and made the process of investment easier. This has tremendously helped the IT/BPO industries.

The Indian government is actively promoting FDI and investments from NRIs (Non-Resident Indians). FDI can be brought in through the automatic route, based on powers accorded to the Reserve Bank of India.

33 33 | BPO

In pursuance of liberalization and globalization, the Indian government has been formulating and implementing more transparent and investment friendly policies. This is now reflecting in many areas. Till 1994, DOT was the sole provider of basic telecom services in India but the new telecom policy opened the field to the private operators as well. It has made India one of the fastest growing countries in the field of telecom.

Another significant example of the liberal policy of the Indian government is the IT Act. The IT Bill passed in 2000 provides a legal framework for the recognition of electronic contracts, prevention of computer crimes, electronic filing of documents, etc.

In pursuance of the liberal policies, the Indian government has been continuously proposing amendments in the Indian Evidence Act, Indian Penal Code and the RBI Act. The mechanism of digital signature has been proposed to address the issues of jurisdiction, authentication and origination.

Recognizing the importance of

Venture Capital

Funding, the Ministry of Information Technology has set up a National Venture Fund for the Software and IT Industry with a corpus of Rs. 100 crore. The main aim of the venture capital Fund is to provide Venture Capital to start up software professionals and small IT units.

Nasscom (most important promoter of the IT/BPO industry) has been playing a crucial role in helping the IT industry achieve the IT and ITES vision and

34 34 | BPO make India far ahead of other players in the field of IT and BPO.

Nasscom has helped the government implement almost all the original recommendations of the last Nasscom-McKinsey Report, 1999 concerning the capital markets, venture capitalists, SEBI and the Companies Act.

INFRASTRUCTURE Improved infrastructure is another important factor which has helped India to achieve tremendous success in the field of IT/BPO. There has been tremendous growth and improvement in telecom, power and roads infrastructure in the last few years in India. Relevant telecom facilities are an important precondition for the success of the software and BPO industry. The Indian government has taken numerous steps to improve the telecom infrastructure in the country. The international bandwidth situation has improved dramatically over the last 3 years. The privatization of the telecom Industry has resulted not only in significant drop in rates but also better services. The telecom costs have dropped by about 85% in 3 years. Similar changes have been observed in the power sector infrastructure as well. Power availability has also improved dramatically over the last few years. This has gone a long way in ensuring uninterrupted power supply to the IT/BPO destinations like Bangalore, Delhi, Chennai, Bombay, Pune and Calcutta. In addition to this state governments in India have undertaken reforms in the power sector to improve power supply to ITES companies.

35 35 | BPO The overall roads and highways infrastructure scenario in India has also witnessed major improvements over the last few years. We have now entered the arena of multi lane highways. Most of the cities and towns are connected and interlinked to each other. Major investments have gone into the development of highways, both on the side of the central and state Governments. COST-EFFECTIVE Cost effective man power is yet another important factor which makes India a hot spot of IT/BPO industry. With a vast pool of skilled human resources ready to work at lower wages in comparison to the European or American countries India is attracting business process outsourcing. In a call interaction center operation, manpower typically accounts for 55 to 60 percent of the total cost. Besides being cost effective, Indians are also skilled and fulfill all the requirements of the IT/BPO industry. In India, the manpower cost is approximately one-tenth of what it is overseas. For example, per agent cost in USA is approximately $40,000 while in India it is only $5,000. It is but natural that companies contract out their work to cost effective destinations like India. India produces about 100,000 engineers every year. These can be used in call centers for troubleshooting/tech support, as the salaries are dramatically lower than in Europe or the US. In such situations MNCs choose to outsource their business processes to cost effective India rather than off shoring to other costly destinations. TIME ZONE DIFFERENCE India has an 8-12 hour time zone difference with respect to the US and other developed markets. It is of great

36 36 | BPO advantage in BPO operations, which offers reduced

turnaround times, since processing services are performed at night hours in the developed countries. India is able to offer a 24x7 services and reduction in turnaround times by leveraging time zone differences. This difference in time zone is because of India's unique geographic location. When it is day in India, it is night in America and even as we go to bed, they rise and go to work. This time difference has been intelligently brought to centers/BPOs. Most of the Indian call centers servicing American customers have timings between 5:30 p.m. to 9:30 a.m. This time zone difference benefits not only the Americans but also the Indians. Not only does the time difference allow Indian companies/BPOs/Call centers to service American clients by working in the nights, it also helps in better utilization of their resources. The companies can utilize the same resources to serve other clients in India and abroad during the day. Thus the time zone difference also helps in sharing of resources which, in turn, saves costs and also earns call centers better revenues. SALARY IN INDIAN BPOS Another important factor which attracts MNCs to outsource their work to India is the salary in Indian BPOs and IT industry. Here is a brief summary of salary in Indian BPOs, according to different hierarchies. Besides the salary, Indian BPO employees are paid incentives depending upon many factors like attendance regularity, target achievements etc. Structure of salary in Indian BPOs is as follows.

their advantage by

the

call

Customer Care Representatives- Rs 8,000 - Rs 15,000 per month Team Leaders- Rs 17,000 - Rs 26,000 per month Managers- Rs 3 Lakhs - Rs 5.5 Lakhs per annum

37 37 | BPO

Training Heads- Rs 8 Lakhs - Rs 12 Lakhs per annum Training Managers- Rs 5 Lakhs - Rs 8 Lakhs per annum Trainees- Rs 2 Lakhs - Rs 5 Lakhs per annum

CHAPTER VII
BPO SERVICES BEING OFFERED Business Process Outsourcing is successfully being applied to an incredibly wide range of non-core enterprise functions; BPO portfolio includes end-to-end solutions across a spectrum of industries including transportation, human resources, customer service, creative services and even recruiting etc. we can divide the outsourcing services into 2 types namely:

1) Management and Support Services Outsourcing

1. Accounting Process Outsourcing 2. Corporate Services Outsourcing 3. Document Management Outsourcing 4. Energy Management Outsourcing 5. Facility Services Outsourcing 6. Financial Management Outsourcing 7. Healthcare Information Technology Outsourcing 8. Human Resource Outsourcing 9. Information and Communication Technology Outsourcing 10.Real Estate and Capital Asset Management Outsourcing 2) OPERATIONAL SERVICES OUTSOURCING 1. Component Manufacturing Outsourcing 2. Customer Care and Contact Centre Outsourcing 3. Field Sales Outsourcing

38 38 | BPO 4. Logistics, Warehousing, and Distribution Outsourcing 5. Marketing Outsourcing 6. Product Research & Development Outsourcing

Some of the BPO services explained in detail: FINANCIAL MANAGEMENT OUTSOURCING A major component of BPO involves Finance and Accounting outsourcing- the management of transaction processing and procedure driven finance functions of business units. The finance and accounting business process including Accounting functions, (Bookkeeping, Financial Bank and Statement Reporting General Treasury

Consolidation, Payroll and Tax returns, Internal Audit, Analysis (Balance Sheet Analysis), Non-Profit Accounting, check processing is expected to be the most widely outsourced business categories in the near future. By 2007 research predicts F&A outsourcing will represent 10% of the total worldwide market for outsourced services. This shows the growing importance of finance and accounting and it is one of the fastest growing segments of BPO industry. THE INCREASING IMPORTANCE OF BOOKKEEPING Book Keeping and Accounting: Bookkeeping is an important process in any organization. However, not everyone has the resources or skills to conduct this work in house. Bookkeeping involves various skills. Nowadays, companies

39 39 | BPO computerize their financial records and bookkeepers use specialized accounting software. They post charges to accounts on computer spreadsheets and databases, as manual posting to general ledgers is becoming obsolete. Increase in the use of computers has also enabled bookkeeping clerks to take on additional responsibilities, such as payroll, procurement, and billing. They also require good communication skills as they need to correspond through letters, e mail, and make phone calls to customers and clients. HOW TO HANDLE BOOKKEEPING NEEDS EFFECTIVELY? It is evident that bookkeeping is important in any organization. But what if you do not have the required resources or professionals in house to handle your bookkeeping needs? To train certain employees or to even hire an accountant or bookkeeper could exhaust your company resources. It also prevents you from focusing on your core business. If you are facing a scenario where your financial records are in need of expert and professional management and you cannot spare the resources or money to conduct this work yourself, it is wise to outsource. India is a popular outsourcing location with its growing expertise in the IT domain. It is a country with an educated and professional workforce, who can handle projects of varying complexity and produce cost effective quality results. So it is no surprise that several global companies have chosen India as an offshore outsourcing destination for different business processes. OUTSOURCE BOOK KEEPING TO INDIA

40 40 | BPO If you do not have the resources or expertise to carry out the maintenance of your financial records it is profitable and wise to outsource this work. To outsource bookkeeping to India is to get quality and cost effective service. Indian bookkeeping companies focus exclusively on using the best technology solutions & expert accounting processes to deliver an effective alternative to a bookkeeper. They will develop a clear and concise roadmap to enable you to get there. A combination of tested methodologies, continuous quality improvement & extensive technological & domain knowledge enables them to deliver tangible bottom-line benefits. Outsource bookkeeping advantages: Measurable benefits Cost savings up to 40-50% Guaranteed quality Faster closure of books Focus to grow the business Peace of mind Better books, better profits

BOOKKEEPING PROCESS - QUALITY AND SECURITY Indian bookkeeping companies have a process that

guarantees the accuracy, quality, and security of your data. To be truly effective, they have a very user friendly process in place. You can send your paper documents through an efax or by scanning & emailing it. Once they receive the scanned image of the document, it is filed in a document management system & the transaction is posted in the accounting software of your choice. Indian bookkeeping

41 41 | BPO companies ensure that all the documents that you send are secure & encrypted through the Internet. Indian bookkeeping companies use a multi tier

authentication, to ensure the strongest measures of security for safeguarding your data. There are several striking features of the Indian business environment that make it congenial for outsourcing business processes. Bookkeeping is no exception: Infrastructure 100% redundant power supply systems Secure high speed internet connectivity

People Well defined training processes Experienced operations team Highly skilled agent profile 100% graduates, 100% English speaking Processes Highest priority to management of Resources & safeguarding of client data Data security & Protection Act compliant Information

42 42 | BPO

HUMAN RESOURCE OUTSOURCING An increasing number of major businesses are outsourcing their human resource operations today. Some of the services on offer are Payroll operations, benefits administration, employee data records and management, asset management services. WHY OUTSOURCE HR OPERATIONS TO INDIA? One of the reasons to outsource HR operations is to streamline processes and make them more transparent to employees. Technology is usually a key enabler in achieving this transparency. It also helps preserve the sanctity of information between employee and employer. Indian Internet IT service companies (software and web developers) are considered a viable outsourcing option today. What they offer is a strategic initiative to cut costs and access to intellectual capital not available in-house. The increasing emphasis on customer response activities in the West have made Indian outsourcing service providers reinvent themselves and extend their web development activities to ASP (Application Service Providing) and other high-end outsourcing solutions.

43 43 | BPO HR FUNCTIONS THAT CAN BE OUTSOURCED

Comprehensive HR outsourcing services that can be outsourced to India: Performance Measurement and Evaluation Performance management process Employee retention programs Long term incentive/equity stock option programs Job description process

Recruiting services Retained Search Job Description Development Strategy Ad Placement Applicant Screening Reference and Background Check Candidate Interviews and Recommendations

44 44 | BPO Development and Coordination of Offer Integration of New Hire Exit interviews

Documentation Maintenance of personnel records Annual review and revision of employee

handbook Training and development Culture development Executive Coaching Succession Planning Employee development program Employee Morale Building

Compensation and Benefits administration Brokerage Services Compensation plan review Custom Benefit Plan Strategies and Design Benefit analysis, cost control and reduction Development of Employee Communications Eligibility and Enrollment Services Employee claims resolution Monthly invoice audit and reconciliation On-line employee access to benefits

recommendations

information Legal issues and Personnel Policies

45 45 | BPO Implementation procedures Audit of HR strategies, policies and procedures of employment/termination

MEASURES OF SUCCESSFUL HR OUTSOURCING The HR department traditionally has been a cost-consuming function, but is now slowly contributing significantly to a company's bottom line. This has led to outsourcing tasks like payroll, benefits, education/training, recruiting, personnel administration, organizational development and workforce management. The outsourcing market is beginning to see HR as a preferred choice. A Gartner Focus Report (Outsourcing: Time to Deliver Results) echoes that thought: "Only those companies ready to address the necessary transformation of their HR processes will find that outsourcing will bring access to world-class processes, competitive advantage, and increased shareholder value." Technology compatibility, confidentiality and cost are other challenges that both sides must work on. Mutual trust is critical, as it's a long haul commitment. It is imperative that senior management is involved right from the beginning and also drives the initiative. In addition, a clear understanding of requirements and expectations from both sides is an important platform in building the relationship.

HEALTH CARE OUTSOURCING HEALTH CARE SERVICES OUTSOURCING PROCESS

46 46 | BPO

Step 1
The company sends the consumer details of its capability

Step 2
It understand customer requirements and studies its work samples

Step 3
Customer checks with references to validate companys capability

Step 4
A free trial helps consumer establish proof of concept.

Step 8
They start operations

Step 7
Customer finalizes the delivery model and sign SLA

Step 6
Onsite training if required

Step 5
Consumer evaluates and approves the proposal

THE CURRENT HEALTHCARE ENVIRONMENT The healthcare environment today faces challenges that it has never seen before. The industry is under attack from every possible direction from cost containment, HIPAA (Health Insurance Portability & Accountability Act) compliance, lack of stability, to an uncertain future. After trying various managed cares techniques and concepts the onus to contain costs is now on the healthcare consumer. Concepts such as defined contribution mutated into various consumer driven health plans are being touted as the nirvana pill for an aching industry. Medical and disease

47 47 | BPO management is expected to play a key role for payers as they try to manage healthcare delivery. While executives are trying to grope for answers in an ever changing environment, the light at the end of the tunnel seems far away and a dim one at that. Regardless of the concepts that will or will not be around three years from now, one thing is certain; the degree of complexity is increasing by the day. THE NEED FOR OUTSOURCING IN HEALTHCARE INDUSTRY A new study by the Gartner Group revealed that more than 50% of surveyed health insurers fully or partially outsource some of their IT/back office business processes. This is up from 15%just a few years back. Given the rate of change and the new challenges faced by the industry, the role of outsourcing within the healthcare value chain is being further enhanced. A recent driver for outsourcing has also been HIPAA compliance. Many payor organizations and other Covered Entities have taken this opportunity to outsource some of their IT/business processes and have the vendor meet compliance requirements. As organizations move towards a strategy that focuses their effort on those aspects of its business model that are core to its strategy, they are increasingly finding that they cannot be bothered with the day-to-day issues that arise from non-core business functions. This rationale has been the main driver for growth of ASP (Application Service Provider) & BPO services. The common question asked by all managers today is, What is our core competency and does that match with our internal operations? Business functions that do not align with this objective are being subjected to scrutiny to determine operational impact and value addition. Outsourcing results in middle management having

48 48 | BPO only oversight responsibilities and thus freeing up most of its time for strategic planning and execution. The flux in the industry has also attracted new players who bring with them a totally different paradigm. They have a strong read on the future direction that this industry is moving in and have the flexibility to adapt quickly in a changing environment. It is their business model that gives them this ability to be flexible. Given the inherent process intensive nature of he industry, outsourcing is and will become more and more important as plans move towards concentrating their efforts on activities hat help them differentiate from competition. These organizations are not only looking at pure ASP solutions for their IT infrastructure but are also pursuing BPO opportunities to help them become flexible and impact the bottom line. WHY OUTSOURCE HEALTHCARE SERVICES TO INDIA? Indian Service Providers offer the best of services in the area of Medical Billing with little margin, turn-around time, and quality services with accuracy rate of 100%. They offer the following benefits like: Revenue Enhancement: Streamlined processing and follow-up, fewer denials, and short cycle times Stability: offer 100% satisfaction to the clientele in giving long term realistic by serving them with full energy and zeal. Healthcare Expertise: Healthcare compliance

processes and a highly trained, college educated operations team with experience in Coding, Medical Billing, government regulations, and software applications.

49 49 | BPO Risk Reduction: Productivity, accuracy and turnaround time (TAT) guarantees with quick starts for new clients, high volume, and overflow. Technology: Proprietary interactive workflow

technology that puts you in control 24/7. Security of Data: We provide security of the patient records with a dedicated VPN (Virtual Private Network) for each client. Their process management and consulting services can reduce costs up to 50% and actually raise revenues for U.S based healthcare service providers, medical billing etc. companies, You will hospitals, get payor organizations state-of-the-art

technology and real-time service from their centers. They have expertise in a range of services, from Medical Transcription to Accounts Receivable for US Physicians. They are: Medical coding Indian Service Providers ensure an increased accuracy in code selections causing a smoother billing process with quicker and better reimbursement. They keep themselves updated on changes in the coding industry with first hand experience books on coding like CPT, ICD-9, HCPCS, and C+ +. These Indian companies work in accordance with the requirements of their clients and with the standards set by HIPAA regulations to assure turn around time. Coding professionals are dedicated and act according to AHIMA rules. The major advantage of outsourcing your medical coding work to India is that the coding team uses the best coding software, tools, and resources in the business.

50 50 | BPO Medical Billing Today's medical billing industry is a highly competitive environment. Indian Service Providers have invested in technology, methodology and people and have gained expertise by obtaining US training in all aspects of medical billing. Their knowledge in medical billing and technology can help you obtain a competitive edge and you can save on your current staffing related expenditures. Charge Entry Indian companies provide 24-hour turn-around time for large or small accounts across multiple specialties like patient account creation, charge entry and payment posting. Payment Posting: Payments will be analyzed and posted into the Hospital Information Management System. For partial payments, analysis is done and corrective action is taken Denial Analysis Some of the Indian agents, with substantial experience in the U.S healthcare industry, analyze the EOBs and the claims and take the necessary actions to recover the due amount. Their services include: Patient registration - Manual Patient registration - Hospital Interface Payment posting - Manual Payment posting - Electronic Payer Interface Denial posting

51 51 | BPO Reconciliation Returned mail Refunds Provider data updates Project based adjustments and write-off

Accounts Receivables Follow-up The synergy of cutting-edge technology and highly qualified staff allows Indian Service Providers to increase and accelerate your cash flow, reduce Days in A/R, improve collection ratio and increase the probability of payment through timely follow up. In the call centers, employees are trained to identify patient accounts that require follow-up, analyze the possibilities for the delay, follow-up with the insurance carrier to address the problem, and rectify the identified problem. Services include: Receivables Analysis Payer Follow-up Denials management Practice Analysis Reporting

The scope and depth of these services can vary, based on the providers' access to the clients' system, the flexibility of the system, access to source documents, and the level of services ordered

52 52 | BPO Patient Record Management Healthcare is dependent on data entry services. It

emphasizes on speed and accuracy as this has a direct impact on their efficiency, resources and profits. For small one-time keyboarding requirements to complex order processing & entry, Indian Service Providers can cater to a range of clients. They convert the patient's entire medical and demographic records from the paper format to the electronic media. As a result of HIPAA, records are secured, encrypted and have the facility of e-signature. Document management fills in the gap between a mere creation of an electronic version of patient records and a complete PRS (Patient Records System) where data can be centrally archived, distributed, mined and authenticated by e-signatures. The newest technology supports remote coding, indexing and claims processing. The application will electronically track a patient encounter in a central database from the time the patient enters the system until the final payment is made on their insurance claim.

53 53 | BPO CONTACT CENTER OUTSOURCING Contact Centre is the numero uno of the off shore BPO industry. Its importance is highlighted by the fact that almost 70% of the total 3, 50,000 jobs in the Indian BPO industry are in Contact Centres. Benefits of Outsourcing Call Center Services Domain Knowledge - Shorter lead times to set up tech support help desks / call centers and higher customer satisfaction Optimized Tech Support and Training processes Learn ability, Operational Efficiencies and lower risk Emphasis on Automation - Cost Savings and Scale to global operations faster CALL CENTER OUTSOURCING PROCESS

Step 1 Response to customers enquiry by sending details of companys capability

Step 2 Phone conversation with customer to understand requirements

Step 3 The customer talks to and pre-qualifies the call center agents

Step 6 Pilot project started after customers approval of agents

Step 5 Training and customer certification of

Step 4 Price finalization and reference check

54 54 | BPO quality TYPES OF CALL CENTRES A) Inbound Call Center This type of call center handles calls from customers and is responsible for either retaining existing customers through appropriate solutions to their problems and queries or converting queries into sales and thereby creating new clients. Examples include technical support, customer care, post-sales service pre-sales enquires etc. Outsource Inbound Call Center Services to India Customer support has become integral to organizational success. It is for this reason that call centers have made a niche for themselves. In a world of ruthless competition, survival is the keyword - which involves not only a vibrant and dynamic attitude while carrying out business but also ensuring a flawless customer support service. This is why the need for an inbound call center service is inevitable. B) Outbound Call centre This type of call center is responsible for calling customers for the purpose of telemarketing, pre-sales, collections etc. How can an Inbound Call Center in India enhance Business? Let a state-of-the-art inbound call center in India handle the phones. Every missed call can be a missed opportunity. Whether you need to answer 100 calls in a day, or 10,000, you will find an inbound call center to be a professional and cost effective extension of your business. The customer support agents in an Indian inbound call center will always respond to your clients, customers or prospects in a timely, agents

55 55 | BPO polite and professional manner. Let them use their experience to help you make your business more successful. Inbound call center services will cater to your customer support needs and an answering service will also allow you to be confident when you are away from your office and not worry about your business...knowing that your calls are being answered promptly, professionally, and courteously. Ensure the satisfaction of today's demanding customer, through an Indian inbound call center service.

What are the advantages of outsourcing to an Indian Inbound Call Center? An Indian inbound call center service can offer communication services specifically designed to maximize the efficiency of your direct marketing efforts or to be a part of your technical support team They will work together with you as a partner building a strong, successful long-lasting relationship with your customers. What benefits can an inbound call center in India offer? An inbound call center in India can offer: Skilled, professional, customer support and technical service representatives Improved market coverage Faster ramp-up, launch, and roll-out of new campaigns

56 56 | BPO Experience with programs similar to yours Rapid response to market conditions Account management expertise Enhanced reporting capabilities Market testing capabilities Remote call monitoring

Why not just have answering machines to answer queries? Answering machines or voice mail can be perceived as cold and impersonal. Live telephone answering services like inbound call centers give you a more professional image. Statistics show the percentage of hang-ups on answering machines is significantly greater than a live answering service.

THE HUMAN ISSUE IN CALL CENTERS For todays youngsters, the call centers are a welcome addiction. The industry has woven such magic around the entire nation that these days a city without a call centre would be hard to find. Call centers contribute a fair share to the revenue of the Indian BPO industry. About 70% of the BPO industrys revenue comes from call-centers, 20% from high-volume, low-value data work and the remaining 10% from higher-value information work.

57 57 | BPO The average Indians attitude towards life has undergone a drastic change in the last few years. The motto of todays young Indian generation is Live life king size. The changing lifestyles, demand for luxury and emergence of high-income spending groups coupled with a thoroughly cosmopolitan outlook of life are changing the modern Indian. Call centers are a major turn on for young graduates. In addition to providing employment, the call centres offer excellent benefits, good working environment and attractive remuneration packages. So who wouldnt choose to be a call centre employee? WHY PEOPLE PREFER TO JOIN CALL CENTERS? In general a person with any graduation can join any of the BPO. Some BPO's like to take people with MBA but then again the specialization are of an individual hardly makes any difference. Again, this is the industry; where there is no reference checks and very often people don't even specify there exact age. Lets me share with you some of the reasons as why people prefer to join a BPO: Did not get a better job. Find nothing better to do. Education level doesn't matter Good work environment Good Benefits Flexibility of time Attractive life style Transport facility

58 58 | BPO WHY PEOPLE LEAVE THE CALL CENTERS? When there are so many benefits associated with BPO industry.when there are so many privileges for the BPO employees than what makes them to change the company/industry?? Is it only MONEY that matters or anything else as well?? Here are some of the reasons for a BPO professional to change his/her job. No growth opportunity/lack of promotion For higher Salary For Higher education Misguidance by the company Policies and procedures are not conducive No personal life Physical strains Uneasy relationship with peers or managers

WHAT THEY HAVE TO SAY? With so much of uncertainty in the market, people are trying their best to stop or to at least have a control on the attrition rate. Let me share with you the opinion of the real gurus of the industry. Career growth in the industry is robust and there is a long-term opportunity. The great growth momentum that the industry is witnessing is creating both vertical and lateral career opportunities. There also exists enough growth opportunities in the middle-management and supervisory level within the industry". - Aadesh Goyal, Executive Vice President & GM, Hughes BPO Services "It will not be possible for the industry to arrive at a blanket agreement on poaching but bilateral agreements between

59 59 | BPO companies are being signed. Basic norms are being put in place and code of ethics is being stressed upon by industry players within the sector with respect to HR practices. We are encouraging companies to adopt responsible behavior in order to ensure that the industry does not become a victim of its own actions. Industry needs to go aggressive but not cannibalistic." - Mr. Suren Singh Rasaily, Senior Vice President, NIIT Ltd. and Head, Plantworkz. EMPLOYEE BENEFITS PROVIDED BY MAJORIY OF THE BPO COMPANIES Provident Fund: As per the statutory guidelines, the employee is required to contribute a percentage of his basic salary and DA to a common fund. The employer for this fund contributes as well. The employee can use the amount deposited in this fund for various personal purposes such as purchase of a new house, marriage etc. Gratuity: Gratuity is one of the retrial benefits given to the employee in which the employer every year contributes a particular amount. The fund created can be used by the employee for the purpose of longterm investment in various things such as a house etc. Group Mediclaim Insurance Scheme: This insurance scheme is to provide adequate insurance coverage of employees for expenses related to hospitalization due to illness, disease or injury or pregnancy in case of female employees or spouse of male employees. All employees and their dependent family members are eligible. Dependent family members include spouse, non-earning parents and children above three months

60 60 | BPO Personal Accident Insurance Scheme: This scheme is to provide adequate expenses insurance arising coverage out of for Hospitalization injuries

sustained in an accident. It is applicable to all the employees of JFWTC and covers total / partial disablement / death due to accident and due to accidents. Subsidized Food and Transportation: The

organizations provide transportation facility to all the employees from home till office at subsidized rates. The lunch provided is also subsidized. Company Leased Accommodation: Some of the companies provides shared accommodation for all the out station employees, in fact some of the BPO companies also undertakes to pay electricity/water bills as well as the Society charges for the shared accommodation. The purpose is to provide to the employees to lead a more comfortable work life balance. Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities include pool tables, chess tables and coffee bars. Companies also have well equipped gyms, personal trainers and showers at facilities. Corporate Credit Card: The main purpose of the corporate credit card is enable the timely and efficient payment of official expenses which the employees undertake for purposes such as travel related expenses like Hotel bills, Air tickets etc Cellular Phone / Laptop: Cellular phone and / or Laptop is provided to the employees on the basis of

61 61 | BPO business need. The employee is responsible for the maintenance and safeguarding of the asset. Personal Health Care (Regular medical check-ups): Some of the BPO'S provides the facility for extensive health check-up. For employees with above 40 years of age, the medical check-up can be done once a year. Loans: Many BPO companies provide loan facility on three different occasions: Employees are provided with financial assistance in case of a medical emergency. Employees are also provided with financial assistance at the time of their wedding. And, The new recruits are provided with interest free loans to assist them in their initial settlement at the work location. Educational Benefits: Many BPO companies have this policy to develop the personality and knowledge level of their employees and hence reimburses the expenses incurred towards tuition fees, examination fees, and purchase of books subject, for pursuing MBA, and/or other management qualification at India's top most Business Schools. Performance based incentives: In many BPO

companies they have plans for , performance based incentive scheme. The parameters for calculation are process performance of each i.e. speed, accuracy The Pay and for productivity process.

Performance can be as much as 22% of the salary. Flexi-time: The main objective of the flextime policy is to provide opportunity to employees to work with flexible work schedules and set out conditions for

62 62 | BPO availing this provision. Flexible work schedules are initiated by employees and approved by management to meet business commitments while supporting employee personal life needs .The factors on which Flexi time is allowed to an employee include: Child or Parent care, Health situation, Maternity, Formal education program Flexible Salary Benefits: Its main objective is to provide flexibility to the employees to plan a taxeffective compensation structure by balancing the monthly net income, yearly benefits and income tax payable. It is applicable of all the employees of the organization. The Salary consists of Basic, DA and Conveyance Allowance. The Flexible Benefit Plan consists of: House Rent Allowance, Leave Travel Assistance, Allowance Regular Get together and other cultural programs: The companies organizes cultural program as and when possible but most of the times, once in a quarter, in which all the employees are given an opportunity to display their talents in dramatics, singing, acting, dancing etc. Apart from that the organizations also conduct various sports programs such as Cricket, football, etc and regularly play matches with the teams of other organizations and colleges. Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/- based on their level in the organization. Medical Reimbursement, Special

63 63 | BPO Employee Referral Scheme: In several companies employee referral scheme is implemented to encourage employees to refer friends and relatives for employment in the organization. Paid Days Off Maternity Leave Employees Stock Option Plan (ESOPs)

In spite of all these benefits, the attrition rate in BPO industry is very high, why? What is the reason for an employee still to leave? These and many more are the questions that need immediate attention from the industrial gurus.

64 64 | BPO

CHAPTER VIII
PROBLEMS OF THE INDIAN BPO INDUSTRY It is true that the Indian BPO sector is witnessing an unprecedented boom but the flip side of the industry cannot be ignored. While infrastructural bottlenecks, especially on the technology domain, have significantly come down in India, there are several roadblocks in BPOs growth path. These range from nascent licensing policies, labour law restrictions, interconnectivity and technological restrictions, power supply problems, bureaucratic delays, inadequate regulatory support, ambiguous laws on e-business, data protection and privacy, unclear definition of ITES/BPO and lack of training infrastructure. For sometime, the Indian BPO industry has been battling certain complex problems such as labour attrition, poor infrastructure and lack of data protection laws. Some of them are discussed in detail below: RECKLESS START UPS Companies rush into BPO market without understanding the kind of operational and marketing issues they would have to cope with, and the kind of gestation periods to be expected before profits can start flowing in consistently. As a result, many facilities that were set up are lying vacant, and the failed enterprises have to either close down or get acquired, as they have neither funds nor clients. Some companies, which jumped BPO market in India, are now looking to sell their assets being unable to scale operations up to the required level. As per the NASSCOM

65 65 | BPO report, recently there were about 200 Indian companies offering BPO and related services looking for buyers. A vast majority of the 310 start-ups are headed for a deadend (according to Nasscom). Their capacity utilization is less than one of the three shifts. Many of these companies that converted their empty basements and warehouses into BPO units or firms with $10 million-20 million VC funds that ran out of cash without creating anything more than white elephants. They have driven down prices to grab business, but have failed to deliver. They were always clueless about people, processes or technologies- the three key elements of the BPO business. POOR INFRASTRUCTURE Another major concern for the Indian BPO industry is infrastructure. While telecom networks are state of the art, getting a connection still takes up to three months. Moreover, the cost of telecom and network infrastructure is much higher in India than in the US. Unreliable power supply is forcing units to create their own back-ups. Roads are bad and airports are in dire need of repairs and upgrades. DATA SECURITY Data security, lack of product/domain expertise and inability to deliver results consistently pose major threats to the growth of the Indian BPO (business process outsourcing) sector, said Srikanth Karra, Human Resources Leader, GE Capital, India. The sector should work on these issues immediately to grab a larger pie of the global BPO market, he said.

66 66 | BPO Quoting a survey by a research firm, Karra said that 83 per cent of Indian business reported a security breach (42 per cent of these had three or more breaches), against 64 per cent globally. Article: BPO EXECUTIVE SELLS DATA TO DAWOOD GANG TIMES NEWS NETWORK [SATURDAY, SEPTEMBER 23, 2006 12:48:42 AM] MUMBAI: The pesky call centre employee trying to sell you a credit card or mobile phone has suddenly acquired more sinister dimensions: S/he could well be misusing the personal information. A 25-year-old call centre employee from a BPO in Tardeo did just that recently, passing on the personal profiles of customers to members of the Dawood Ibrahim gang. On Friday, Mumbai crime branch arrested the executive, Hasan, for allegedly pilfering confidential personal information of mobile phone customers and passing it on to Dawood aide Fahim Machmach, who runs an extortion racket from Karachi. Deputy police commissioner (crime) Dhananjay Kamlakar said the involvement of a call centre executive in an underworld extortion racket was a serious indicator of how the personal data of lakhs of customers of mobile phone and credit card companies was at grave risk. DCP (crime) Dhananjay Kamlakar said police will now put BPOs under their scanner. BPO heads will be asked to step up internal vigilance and verify the bonafides of employees before providing them with access to sensitive information. Hasans modus operandi was to provide the residential and

67 67 | BPO office addresses of mobile phone customers to the

Machmach gang at a fee of Rs 20,000 per address. Machmach would give his cronies Iqbal, Mustaq and Salim Babu Qureshi the phone number for extortion, said Kamlakar. They would give Hasan the number and he would ferret out the data of the customer, who would then route them to Machmach. Machmach would then call up his victims, who were surprised when the Karachi-based gangster rattled off information about them. Machmach also posted his henchmen outside the residence and offices of victims to study their daily schedule, Kamlakar said. Four such prominent businessmen (names not disclosed) from south Mumbai were threatened and asked to pay up amounts ranging between Rs 50 lakh and Rs 1 crore. Acting on a complaint by one of the businessmen, the antiextortion team laid a trap and arrested Salim, Mustaq and Iqbal. The last two are next-door neighbours of Machmach in Pathanwadi in Dongri. While Salim was earlier apprehended in Delhi, Mustaq has ten cases against him in the JJ, Pydhonie and Dongri areas and Iqbal is wanted in four serious offences. The three were on a monthly payroll of Rs 5,000 in the D-company, besides the incentives after every operation, the police said. Hence, the need of the hour is to have a strong risk assessment, network and desktop security, business continuity planning (like disaster recovery procedures and standard tests) and standards or information security management, he said.

68 68 | BPO The following are some of the measures of preventing leakage of data:

Managing Data Security Risks Security certifications e.g. BS 7799, ISO 17799, COBIT Non-disclosure agreements between clients employees Clean-Desk policies no paper, no pens on workstations Disabled technologies e.g. floppy drives, CD drives Employee screening for cell-phones Dedicated seating Firewall arrangements Employee awareness programs and

RISING EMPLOYEE ATTRITION In the beginning, global companies were attracted to the call centre business in India due to low costs and lower attrition rates. The manpower costs in India were estimated to be around one tenth of that in the US, while attrition was lower both because of the initial attractiveness of a new kind of a job and the significantly lower number of call centre companies. In addition, jobs were offered to fresh graduates at salary levels higher than those of comparable jobs at the same time. But since 2002-2003, the call centres in India has been plagued with high rates of employee attrition. The overall attrition rate of call centres was 2025% in 2002, which increased to 30-35% in the following year, which then shot up to as much as around 60-80% in 2005-2006. Attrition rate in India is considered to be highest in the Asia Pacific region, compared to 15% in China, 18% in Philippines, 22% in Singapore and 25% of Malaysia.

69 69 | BPO Imagine you are a BPO and have a work force of 16000. Also imagine that, of them, 1300 quit every month. At Wipro BPO, where 8 per cent of the workforce turns over every month, the HR team doesnt have to imagine. Employee attrition is something that it needs to deal with every day, in fact every hour. Dont feel sorry for Wipro BPO. Its actually one of the luckier players. At Satyam Computer Services BPO arm, Nipuna, the attrition rate is a terrifying 70 per cent per annum in voice and less than 20 per cent in non-voice; at Infosys BPO, Progean, the attrition rate on an annual basis is 41 per cent, admits the company CEO & MD, Amitabh Chaudhry. It is not getting business or managing customers; the single thing I worry about is attracting, retaining and motivating employees, avers Mr. S Nagarjan, Co-founder & COO, 24/7 Customer, where attrition rate is 35 per cent. The high attrition rate in the industry is primarily because of restricted career options or growth opportunities for the youngsters. Fear of stagnation is a major factor that forces the employees to quit the industry. While some leave their career mid-way in pursuit of higher education, others are drawn in by the higher pay packages offered elsewhere. The new entrants into the BPO sector, who are consistently on the look out for trained youngsters, offer higher remuneration. With the employees moving to other jobs in less than a year, the industry has to confront the gnawing problem of attrition. Another key problem is the stressful work schedule, particularly night shifts, which may create both physical and mental disorders in the long run. Other reasons for the attrition problem include misguidance by the company, nonconducive policies and procedures, mental strain brought

70 70 | BPO about by reclusive lifestyle and difficult relationships with peers or managers. According to analysts, labour attrition rates in the outsourcing industry vary between 20 and 40 per cent in certain companies while at top firms its around an average of 15 per cent. If the current attrition rate continues, the outsourcing industry is likely to face a shortage of 262,000 professionals by 2012. BPO firms are trying to solve this big problem by: By hiring mature talent (i.e. people over 35 Hire outstation candidates (from small towns) Offer management diplomas and MBA courses. Only 5 out of 150 employees become team

years in age). and provided them with shared accommodation.

leaders in a year, hence a cash incentive is one way to keep the employees happy. IBM Daksh shells out about Rs. 4,000 bonus per month to almost 85% of its workforce. Use psychometric tests to get people who can work at night for long hours and handle the monotonous work. Arranging stress management programmes and making them mandatory for all the employees and part of their training. Providing job security to employees and enhancing their jobs by way of job enrichment and job enlargement. WOMENS SAFETY IN BPOS The recent incidents of crime against women employed in the BPO sector have raised many questions about their

71 71 | BPO safety. Gone are those days where IT companies, worrying about data security and privacy, demanded the government to enact legislation in this regard. Intense debates that ran round data security phenomenon led to the evolution of a solution called firewalls; this may find relevance once again. Women working round the clock in corporate undertakings may also need firewalls this time. Another incident falling I line with the issue of women safety in the BPO industry, is reported from Pune where a cabbie, Kailash Sitaram Adagale, made an acid attack on Neha Malvaiya, a 22 year BPO employee working with Mphasis. This happened within a short span of her joining Mphasis after leaving Wipros Hinjewadi call center for better prospects. It ruined my prospects instead, alleged Neha emotionally, The acid attack incinerated major parts of her face. Her smile vanished and she remains silent most of the time. The cabbie involved in the crime belonged to her previous employer Wipro, which indicates that something needs to be done for streamlining the transport logistics pertaining to pick-up and drop facility in the BPO industry. When hospitals or hospitality sectors, which have night shifts for women, are able to manage without having any hassles, why is there such a hue and cry about BPOs alone? It is high time the government, NASSCOM and the industry join together and create a mechanism for ensuring women employees safety in the booming BPO sector. This alone restores their faith in the corporate ideology. The sensitiveness of women safety should not be politicized, but has to be handled carefully without any scope for radical thoughts like trade unionism and employee solidarity. Article: BPOs OPEN MORE DOORS TO WOMEN

72 72 | BPO TIMES NEWS NETWORK [FRIDAY, SEPTEMBER 15, 2006 01:12:58 AM] NEW DELHI: Move over Penelope Cruz, BPOs are giving a more relevant meaning to the phrase Woman on Top. Anxious to be fair to the fairer sex, BPOs in India are implementing innovative ideas to hike the ratio of woman employees in their workforce. Doing the rounds are measures like training women to get into senior management positions, giving higher monetary incentives for women referrals and higher perks for placement agencies to draw women candidates to interviews. IBM Daksh, which employs 20,000 professionals in India, is taking a cue from its parent IBM, and focusing on a `diversity program. IBM Daksh will look at putting women in senior positions over the next quarter, says DP Singh, VP Strategic HR, IBM Daksh Business Process Services. The message is all about an inclusive leadership that does not lower the quality or qualification criteria for clinching a job. For instance, compared to a standard rate offered to placement agencies for a candidate, we pay 1% higher in case of women candidates, adds Anita Guha, Diversity Lead, IBM India. Similarly, against an average Rs 5,000 incentive for successful referrals, employees referring successful woman candidates get Rs 6,000. Genpacts president and CEO Pramod Bhasin admits that industrys healthy mix of male and female workers in associate and middle management does not reflect in senior staff. Genpact is planning to restart the practice of setting targets for various businesses on what ratio to hit for women leaders, he says. HP Global e-Business is also striving to increase ratio of women at mid and senior levels. We have been able to raise the percentage of mid and

73 73 | BPO senior level women staff in the last few months, says Sanjay Singh, director, India Business Centres, HP Global. Article: NOW, BPOS PUT WOMEN IN DRIVER'S SEAT TIMES NEWS NETWORK [TUESDAY, AUGUST 29, 2006 02:26:03 AM] NEW DELHI: The BPO industry is planning to put women in the driving seat, literally. In an attempt to assuage security fears of female employees working late night shifts in BPOs, CII-affiliate Young Indians, along with Dr Reddys Livelihood Advancement Business School (LABS), is experimenting with the idea of employing women as drivers. Young Indians (Yi), with membership of 550 young entrepreneurs, and LABS have signed an MoU to skill underprivileged women in Andhra Pradesh. The first initiative is providing driving lessons to 100 women in Hyderabad. The BPO industry has already offered to employ these women. Drawn from the disadvantaged sections of the society, these women will take the three month-long training course after clearing a formal test. The project will start soon and if successful, will be replicated in other cities. In a study done by the Hyderabad chapter of Yi, it was found that a BPO would need about 5,000 cab drivers for its various branches across the country. Training women drivers for the industry, the organization felt, was a great way to deal with the security concerns of an industry with a large female employee base. We work by matching industry needs with training programmes. That is how we feel employability problems can be solved, says Narayan Sethuramon, national chairman, Young Indians.

74 74 | BPO Women constitute about 60% of those employed by the BPO industry, according to Nasscom data. The industry has been plagued by security fears. In December last year, a female employee of a Bangalore-based BPO was raped and murdered by the BPOs cab driver.

WHAT THE INDIAN BPO INDUSTRY NEEDS The two-day Global Offshoring Outsourcing Summit (GOOS) 2005 presented by the Indo-American Chamber of Commerce concluded in Mumbai on Friday, emerging with strong recommendations for the Indian BPO Industry. The theme of the summit was 'Offshoring: The Scaling Challenge' wherein ground realities and attendant problems were showcased that play a crucial role in shaping the outsourcing industry in India today. In spite of more high-end processes being outsourced to India and security issues being addressed, India's 'sunshine industry' has been going through rough waters. It has been facing daunting problems like attrition as high as 20-80 per cent and an imbalance in the demand and supply of skilled and talented workforce. According to a McKinsey report, the business process outsourcing industry is set to grow up to $1.2 billion from the current $0.3 billion, in the next two years. However, with the services industry growing at 10-11 per cent with emerging careers in the hotel, airline and banking industries, Indian BPOs are likely to face a manpower shortage, especially at the mid-management level by 2008. Before making the recommendations for India's BPO industry, GOOS 2005 provided the ideal forum for industry

75 75 | BPO representatives to discuss debate and acknowledge the teething problems of the Indian BPO industry: The BPO industry was initially built around the model of cost effectiveness. In recent times, with wages continuing to rise at 10-15 per cent coupled with shortage of skilled manpower, the model no longer holds good. One of the most serious threats for BPO companies in India comes from the hidden cost of sub-standard infrastructure. As business processes are distributed across complex the globe through diverse mobile and increasingly

networks and fast growing industries, imperatives and challenges of creating a secure environment becomes paramount. India's true competitive advantage lies in the ability to apply technology to business processes. As of today, that potential is largely untapped. The BPO industry is capital intensive and requires huge additional capital infusion to fuel its growth. Last and most critical is the scarcity of the appropriate skills gained through the education system, which is low on quality and relevance. This is a major

76 76 | BPO limiting factor for the long-term growth of the industry. In lieu of the current limitations, the Indo-American Chamber of Commerce at the GOOS 2005 has made the following recommendations for the Indian BPO industry: 1. A rebranding exercise India should no longer be presented as a cost-effective destination alone, but one that is driven by skills and quality. The industry is however, still in its nascent stages of consolidation and needs to rebrand itself in terms of value addition, competition and innovation. 2. A conscious effort towards sound infrastructure Public and private investment in infrastructure, with all concerned bodies adopting a customized approach to meeting the needs of the BPO industry. 3. Setting the benchmark for information security Public and private partnerships need to be developed in strengthening the courts understanding of security issues. In addition, a robust and effective mechanism needs to be implemented for information sharing among industry, government and other interested parties. Timely dispensation of justice, including concrete alternative

dispute resolution mechanism is also an imperative. Industry and the government must work together to make legally viable standards of due diligence. 4. Staying on top of technology India's scientific and research establishments should be encouraged to devote greater attention to the new class of technology that is emerging to enable secure and increase

77 77 | BPO efficiency of remotely delivered services. Private

investment should be encouraged in development and commercialization of technology.

5. Availability of risk capital and flexibility in taxation Credit institutions need to develop customized norms for the BPO industry. The availability of risk capital needs to be enhanced in early stage ventures. Third party hosted infrastructure sector. 6. Raising the bar for education system Industry in association with management schools should develop BPO specific graduate level programmes for midmanagement and modify curriculum and the quality of instruction in entry-level educational institutions. Technical institutions should develop competency around the specialized technology required for the BPO industry. Ashank Desai, Chairman, GOOS, asserted, "When you have a customer be bold, be brave and demand to go up the next level with them." Co-chairman, GOOS, Atul Nishar added, "The BPO industry has emerged as the biggest employment generator in the country and it will create a million more jobs over the next few years." BPO companies should be eligible to favorable tax treatment afforded to the infrastructure

78 78 | BPO

CHAPTER IX
CHALLENGES FACING THE INDIAN BPO INDUSTRY Although the latest Nasscom-McKinsey study on India's information-technology and business-process outsourcing projects a scorching 25-percent growth a year for the next five years, it adds that achieving that growth isn't going to be easy. A huge shortage of talent, infrastructural deficiencies and external political problems like a backlash from European and North American markets could pose formidable challenges. "India's economic growth will be greatly accelerated if the India-based IT and BPO industries sustain their global leadership and are able to generate approximately $60 billion in export revenues by 2010," the report released Monday said. "But India's offshore industries have to overcome major challenges to continue their heady growth and sustain their share relative to other competing countries," it added. Some of the challenges faced by India are as follows: DEMAND GROWTH The first major challenge is that the demand growth may slow down. According to Noshir Kaka, principal of McKinsey and a co-author of the report, global companies are now at a crossroads point: "Increasingly there is a realization that changing business processes to accommodate large offshore workforces is a difficult, time-consuming task and often produces lower than expected savings."

79 79 | BPO For instance, he says that it can take a year or two before performance stabilizes and the volume of work ramps up, which slows the payoff. And, as union and political opposition to offshoring grows, companies in Europe and North America are growing more wary of sending thousands of jobs to India. Indeed, during the recent referendums on the European Constitution, as well as the 2004 U.S. presidential campaign, job losses from offshoring were a major issue. "There are also concerns about service quality and security, in the wake of several well-publicized security breaches," said Kaka, "and these put together are making many companies think twice before moving functions offshore." URBAN INFRASTRUCTURE The second major challenge confronting India is that of Urban Infrastructure. This is a challenge bigger than that of demand growth, which the IT sector faces. After all, India's offshoring industries are dealing with bottlenecks ranging from power to cafeteria services, the most glaring example of which is Bangalore, which is considered to be the "Silicon Valley" of India, is almost on the verge of collapse. Most larger Indian cities have reached saturation in terms of supporting the IT sector, and further growth will have to come from entirely new business districts outside of the Tier I and Tier II cities such as Bangalore, Madras (now called Chennai), Gurgoan (near New Delhi) and Pune (near Bombay). LOSS OF CONTROL Loss of control on offshored operations is an area that clients have traditionally been concerned of in light of the

80 80 | BPO cultural, administrative and geographic distance between the client and the service-provider. The anxiety accrues due to two prime factors respondents cite perceived inability to influence the quality of the service and the inability to determine what is going wrong due to inadequate or inaccurate information. The implication of the perceived loss of control has been on high expectations from service providers and the detailed drafting of SLAs with respect to quality controls and communication flows. Although SLAs encompass all areas of client and service-provider rights and responsibilities, the expected quality of the service and the evaluation criteria for measuring the service delivery is the one of the most critical aspects of the contract. In addition to the traditional metrics of quality such as accuracy levels, rejection rates, field error rates, turnaround time etc., the role of softer aspects of quality such as client and end-user satisfaction is being highlighted. This change is being stressed in light of the maturing drivers of offshoring, moving away from a pure cost-saving objective of one enhancing overall productivity and quality of service. Although leading service providers invest continually in quality initiatives such as six sigma, COPC, lean-service models, respondents foresee that in the years to come, these initiatives will progress from being service differentiators to must-haves. To corroborate adherence to the defined quality standards, respondents state that the role of presenting accurate, consistent and timely information has also become critical. Dashboard and MIS report structures are defined for each stage of the project clearly specifying aspects such as frequency, time, content, initiator, participants and medium. In addition, escalation timelines and levels are specified to insure de-bottling of communication flows. In terms of operational communications, immense importance is being attached to

81 81 | BPO the documentation of communication flows between the clients and service providers. SHORTAGE OF SKILLED WORKERS Equally importantly for the BPO sector, India also confronts a potential shortage of skilled workers in the next decade. The BPO skill gap is equally worrisome. India will need a 2.3 million-strong IT and BPO workforce by 2010 to maintain its current market share it And our supply projections indicate a potential shortfall of nearly 0.5 million qualified employees nearly 70 percent of which will be concentrated in the BPO industry. For developing BPO skills, the target audience is likely to be non-graduate people often with 10th to 12th class education levels and not very familiar with English. The two main challenges will be to firstly, design a curriculum, create facilities and pedagogy suitable for the above education levels and secondly, create an infrastructure which can deliver the education nationally with uniform quality and affordability. While suffering from years of neglect, the ITI infrastructure is probably best suited to implement this program at the required scale. There are nearly 5,000 ITI(s) with 750,000 training seats present in India. Currently only about 25 percent of the country's technical graduates and 10 percent to 15 percent of general college graduates are suitable for employment in the offshore IT and BPO industries respectively. As countries from around the world enter the market and competition for offshoring contracts intensify, India must improve the quality and skills of its workforce. For instance, India lacks large numbers of workers who are fluent in French, German, Japanese and Spanish, making China and

82 82 | BPO Eastern Europe more attractive offshoring destinations for Japanese and Western European companies, respectively. HIDDEN COSTS In the financial domain, clients are becoming wary of include hidden costs not foreseen in initial stages of projects. Respondents cite examples of the costs of evaluating vendors, managing major contracts, traveling to offshore sites, enhancing security, and paying severance for laid-off workers as instances of hidden costs. Exit costs are another hidden risk, as ending an arrangement prematurely exposes both buyer and provider to litigation. Clients are resorting to careful cost modeling and scenario planning which costing. THE NEED TO CONTINUOUSLY INNOVATE AND IMPROVE The final challenge facing Indian IT-BPO service providers, according to the report, is the need to continuously innovate in developing new service lines and improving their operating processes. "Traditional service lines such as call-centers are under pressure," says Jayant Sinha, a partner at McKinsey. And given the latest rise in wages and other costs that are rising by 15 percent per year, India-based IT and BPO providers will need to keep finding ways to reduce total costs so that "they can continue to offer customers 30 percent to 40 percent cost savings." Additionally, the model of offshore replication of existing onsite processes limit providers from capturing the full value from offshoring. include benchmarked information and sound understanding of current activity-based performance and

83 83 | BPO Nevertheless, it is also true that the addressable market for global offshoring is huge and offers India an opportunity of dramatic growth if the country can meet these challenges. "Our research suggests that rapid growth is likely to continue in the global offshore IT and BPO industries," the report said. The Nasscom-McKinsey study, which examined the offshoring potential for each service line in the IT market and for each vertical industry in the BPO market, indicated that the addressable market for global offshoring is above $300 billion, split almost evenly between IT and BPO. And India has realized "only around 10 percent or so of this addressable market until now leaving ample headroom for future growth." Small wonder then that S. Ramadorai, CEO of TCS, the country's largest IT services company, believes the country's IT sector could become "one of the biggest examples of export-led growth in the world, rivaling the oil exports from the Gulf."

84 84 | BPO

INTELLIGENT OUTSOURCING With the proliferation of outsourcing already in place, Greenfield outsourcing agreements are not the norms. The steps presented below lead through the process of intelligent outsourcing model, but they can be applied to an existing situation just as easily. In addition, these steps can be applied to any type of outsourcing. The key is to begin with a service alignment of IT and business, followed by a string focus on the process interfaces necessary to make the outsourcing model work. The five major steps to intelligent outsourcing are: 1) SERVICE DISCOVERY: Identifying the actual IT services and their interface to the business. 2) MATURITY BASELINE: Measuring the capabilities, gaps and weaknesses. 3) PROCESS AND GOVERNANCE DESIGN: Detailed interface and measurement plans. 4) CONTRACT: Securing a business agreement based on the governance model. 5) IMPLEMENTATION: Putting the entire plan into motion.
Five Steps of Intelligent Outsourcing

Service Discov ery

Maturi ty Baseli ne

Process & Governa nce Design

Contr act

Implem ent

85 85 | BPO

Outsourcing can be very beneficial to an enterprise if done correctly. The concept of intelligent outsourcing provides a vehicle for companies making use of outsourcing, vendors to begin reaping the benefits of a service-based approach to IT. In practice, the steps required for an outsourced situation are only slightly different than a completely internal It organization, with the addition of a legal contract to govern payment. Service providers as well as the enterprise actually benefit from this model in that a closer bond if formed between the two partners. Despite anecdotal-based opinions, service providers have a vested interest in the success of their clients ability to perpetuate ongoing business activity. By more closely aligning the services they provide with the business needs of enterprise clients, both parties result in a mere beneficial relationship. Of the ideas promulgated in the intelligent outsourcing approach, the most important is the Service approach to IT delivery and support. Even in fully internal organizations pursuing this approach, the largest cause of failure and reduced benefit is in a failure to fully grasp what comprises fully IT services. Even without the benefits of the advance process maturity provided by the model, embracing a services approach to It can help improve service quality and increase the value of IT to the business. The importance and benefit of service identification cannot be overstated. Utilizing outsourced services for It functions, whether transactional, operational, or utility in nature, must in the end take a process focus. A broken process or underperforming It organization cannot be fixed simply by engaging an outsourcing vendor to make the problem go

86 86 | BPO away. True operational improvement only happens when proven process fundamentals and solid governance are applied with a careful eye to business alignment.

87 87 | BPO

CHAPTER X
INDIAN BPO PLAYERS Genpact, WNS and Wipro BPO are the top three third-party ITES-BPO companies in India, according to a Nasscom survey released on Monday, 08 June 2006. The National Association of Software and Services

Companies (Nasscom), the premier trade body and 'voice' of the IT software and service industry in India, released the rankings of the top 15 third party ITES-BPO companies on Monday. The rankings are based on revenues for 2005-06 reported as per the annual Nasscom survey on IT industry performance. A few companies (e-funds, Sutherland Global Services) did not provide India revenues as reported to STPI (Software Technology Parks of India). If the global revenues of such firms had been considered, they would have featured in the
India's Top 15 BPO firms Top 5 companies. 1 Genpact (Rs. 2218.5 crore) 2 WNS (Rs. 921.15 crore) In FY 2005-06, the Indian ITES-BPO 3 Wipo BPO (762.67 crore) segment grew by 37 per cent 4 HCL BPO Services (Rs. 587 crore) 5 ICICI OneSource (Rs. 553.5 crore) contributing $6.3 billion to the total 6 IBM Daksh software and services exports of 7 Progeon (Rs. 380.84 crore) 8 Aegis BPO Services (Rs. 309.15 $23.6 billion. 9 10 11 12 13 14 15 crore) EXL Service Holdings 24/7 Customer MphasiS BPO Intelenet Global Services GTL TCS BPO Transworks N.A.: Not Available N.A. N.A. N.A. N.A. N.A. N.A. N.A.

Speaking survey, size The

on

the

findings president

of

the Kiran our

Nasscom growth

Karnik said: "In 2005-06, the industry and entire exceeded and forecasts, reflecting strong demand. software services

industry is expected to record revenues of $36-38 billion in

88 88 | BPO FY07; we expect the ITES-BPO segment to continue its growth momentum and expect exports to cross $8 billion during FY07. The growth in the sector is being driven by steady increase in scale and depth of existing service lines; the addition of newer vertical-specific and emerging niche business services; continued expansion of service portfolios and higher value processes."

INDIAN BPO PLAYERS: CLASSIFICATION GENPACT Gurgaon-based Genpact, Indias biggest business process outsourcing company has a problem: it needs to reduce dependence on power-to-plastics conglomerate General Electric, its parent until November 2004, for its revenues. Only then will investors accord it the valuation it seeks when it will go public. Of the $490 million sales and thats nearly three times its nearest competitor, Mumbai-headed WNS Group Genpact reported in calendar 2005, 85% came from GE covering tele-calling, financial services, technical support and a myriad range of services. The Genpact transition is the subject of considerable interest in the outsourcing world, says Kiran Karnik, president of the National Association of Software and Services Companies. If you have to turn third party from a captive (model), you need to change your mindset completely from a cost-based model to worrying about your bottom line and distance yourself from the parent. The whole world is watching Genpacts moves. State-of-the-art infrastructure with a robust telecommunications network

89 89 | BPO (redundant route diverse fiber network) connects Genpact to its clients across the globe. Genpact is the largest private user of international bandwidth in India. A stringent physical and data security system, round-the-clock crisis management help lines, backup devices and recovery sites, and readiness for general emergency form the core of its Business Continuity Planning (BCP) and Disaster Recovery Planning (DRP) initiatives. SERVICE OFFERINGS The India operations offer a wide range of services including the following product lines: Finance and Accounting Sales and Marketing Analytics Customer Service Financial Service Collections/ Supply Chain and Procurement Information Technology Services Enterprise Application Services and Programme

Management Genpact has also developed extensive expertise in many industrial verticals such as Insurance, Consumer Banking & Retail Finance, Commercial Finance, Healthcare and Manufacturing & Industrial with comprehensive offerings across their value chain. Article: GENPACT OPENS SECOND CENTRE IN JAIPUR

90 90 | BPO TIMES NEWS NETWORK [FRIDAY, AUGUST 18, 2006 12:16:24 AM] MUMBAI: Genpact, the largest BPO in India, on Thursday announced the opening of its second centre in Jaipur. The centre was inaugurated by Rajasthan CM Vasundhara Raje. Spread over 2.84 acres, the centre has been set up for an investment of over Rs 75 crore. The new facility will seat over 1,300 associates who will provide services to banking, insurance, healthcare and manufacturing sectors. Genpact opened the first centre in Jaipur in 02 and currently employs around 2,000 people there but there are plans to raise the headcount to 3,000 by 07. We are exploring the option of setting up an IT SEZ in Jaipur and are in consultations with the state government, said Pramod Bhasin, president and CEO of Genpact. The company is also working with government nodal agencies such as RIICO and STPI to use their incubation centres in smaller towns like Jodhpur to offer similar training programmes. These programmes are helping students in the Rajasthan to develop the necessary skills required to be employable in BPOs. The company invests $8m annually in employee training. Genpact has also rolled out its Gen Gyan initiative in Jaipur, under which the company would provide basic computer education to the underprivileged sections of society. The company has invested close to Rs 1.5 crore in buses which feature state-of-the-art technology, including 18

91 91 | BPO computers, a projector, a public address system and power backup facility for the mobile classrooms. These Gen Gyan buses travel across Jaipur to offer classroom training sessions provided by the faculty of the state education department.

WNS WNS is a leading provider of offshore BPO services. We deliver value to our customers by bringing operational excellence and deep industry and functional knowledge to their critical business processes. We provide high-quality execution of client processes, monitor these processes against multiple performance metrics, and seek to improve them on an ongoing basis. We serve several industries, including travel, banking, financial services, insurance, manufacturing, retail, logistics, utilities and professional services. In addition to industryspecific services, we offer a range of services across multiple industries, in areas such as finance and accounting; human resources; supply-chain management; market, business and financial research, and analytical services. SERVICE OFFERINGS Our service offerings provide end-to-end support to our clients across consulting services, BPO delivery and IT solutions. They are given as under: Industry Specilizations Travel Insurance

92 92 | BPO Financial Services Healthcare Professional Services Manufacturing / Retail Logistics

Functional Specializations WIPRO Wipro BPO incepted in 2001, provides a broad range of services from customer relationship management, back office transaction processing to industry specific solutions. The key element of services delivery is an integrated approach towards providing increasing value over the entire course of its client relationships. This involves a phased approach towards process standardization, process optimization and process re-engineering. For example, by outsourcing finance & accounts to them, they helped a leader in mobile data communications consolidate the finance and accounting process, standardize policies and procedures and improve turnaround time for activities. At Wipro, years of experience with the world's leading companies has helped understand on how to appreciate the uniqueness of each process and the associated business objectives. Our proven transition methodology encompasses multiple processes across diverse verticals to Finance & Accounting Research & Analytics Customer Service

93 93 | BPO take the surprise out of projects and enabling smooth operations. Wipro service delivery model For BPO projects, the employees follow the Wipro Service Delivery Model, which is a robustly defined framework to manage the complete BPO process migration and transition management and has been developed based on the experience gained from migrating more than 400 remote business processes to India over the past ten years. This proven service transfer platform is designed to ensure process integrity and minimize inherent migration risks. The model includes a tried and tested Transition Toolkit to support transition management by ensuring that there is a documented methodology with formats, tools, guidelines and past learnings in place to aid the transition team in derisking the transition of a customer's processes and reducing the pain of migration as much as possible. A coordinated project management system captures critical client documentation and incorporates an extensive knowledge base that assists the transition management team in understanding, duplicating, and migrating missioncritical business processes.

Article: WIPRO BPO BAGS EXCELLENCE AWARD GETS ''BEST OFFSHORE''. BPO News line, NASSCOM [Thursday, June 08, 2006]

94 94 | BPO BANGALORE: Wipro BPO recently bagged the 2006 Best Offshore in the Outsourcing Excellence Awards. The award was given to the BPO arm of Wipro Technologies for its partnership with Delta Airlines. This year eight relationships won the award, which was formerly known Editor's Choice Awards. Both Wipro BPO and Delta Air Lines have developed a number of solutions that made the latter to effectively manage business processes. "Wipro has demonstrated real ownership and commitment to deliver for our customers and its this dedication that makes our relationship work and produces winning results,'' said Gloria Richard, general manager, Call Center Partner Relations for Delta. TK Kurien, CEO, Wipro BPO said, "Right from the start, Delta embraced us as a partner rather than a vendor. Open communications and working together toward a common goal has ensured that we deliver a great customer experience. This is definitely a wonderful partnership.''

95 95 | BPO HCL BPO Services HCL BPO Services represents HCL Technologies most significant strategic business extension and investment to date. HCL BPO Services represents HCL Technologies most significant strategic business extension and investment to date. HCL BPO Services currently operates out of various locations in India, Malaysia and Northern Ireland. The focus on and commitment to BPO is based on the following assets and attributes: Global Client Base & Relationships - HCL-Ts global relationship base consists of approximately 454 clients, including 61 Fortune 500 organizations, in such high propensity to and potential of outsourcing Sectors as IT / I.S / Insurance/ Financial Services / Retail. Global Presence & Reach - HCL-T operates in 15 Countries across 20 locations between U.S.A, Europe and Asia-Pacific, deploying over 100 Customer Relationship Managers (over 70 of whom are located in the U.S.A). This network ensures effective and responsive Client Relationship Management. Related Technology Domain Expertise - HCL-T has developed extensive expertise in a wide range of emergent and mainstream Technology Domains. Some of these Domains bear a direct relationship to a wide range of B.P.O services - e.g. CRM/ ERP/ SCM/ Imaging & Workflow etc. Relevant Industry Practices - In addition to Technology Domain expertise, HCL-T has also developed a number of

96 96 | BPO Industry Practices, including Banking / Funds Management / Insurance / Retail. Funding & Scalability - HCLs BPO Services operations have been totally enabling funded the from internally ramp-up of generated delivery resources, rapid

infrastructure in diverse locations and countries as well as significant enhancements in delivery Reliability, Security and Quality.

SERVICE OFFERINGS HCL BPO Services provides a comprehensive range of Voice/Web base Contact and Front Office Services that span Collections, Sales & Marketing, Technical Help Desk and Customer deliver Care. services Highly that trained consistently Associates meet under experienced supervision and stringent quality standards customer expectations and Process SLA's. Multi-lingual support in 8 European languages - Dutch , French, German, Norwegian, Swedish, Spanish and Portugese - is available from the Belfast Delivery Center. Sales & Marketing Order Entry Replenishment Lead Generation Product/ Service Sales Market Research

97 97 | BPO Market Entry Support Customer Profile Development Satisfaction Tracking Post Sales Service

Tech. Help Desk L1, L2, L3 Support Ticket Management Product Installation Troubleshooting Remote Diagonistics

Collection Services Early / Late Stage Skip Tracing NSF Check Processing

ICICI ONE SOURCE LTD ICICI OneSource, founded in December 2001, is one of the largest and fastest growing Indian BPO providers, with more than 5000 employees and 4000 seats across five operational centers located in Bangalore, Mumbai and United States. KP Balaraj is a Managing Director with Sequoia Capital India. The company has around 1800 employees at the moment with around 90% being billable agents. The company has around 1800 employees at the moment with around 90% being billable agents. The ICICI group has earmarked Rs. 2000 million as funding for ICICI OneSource. Around $ 19.3 million was spent in acquisition of customerasset.com. Since the company has set up more

98 98 | BPO than 950 more seats with an investment of around $ 800010000 per seat. The company handles between 30-40 processes in contact centre and BPO services. Around 60% of the revenues are derived from voice processes and the rest 40% from the BPO processes. Around 30% of the revenues are derived from financial services with the remaining coming from the other verticals. Around 80% of the revenues are derived from the UK and around 20% from the US. The company has 10 clients, which include Prudential, ICICI Bank, a top 5 US telecom service provider, a US based Credit Card Company, a UK based bank, a UK based Catalogue Company, a UK based TV broadcaster and a European travel company. The company has 3 centres. The centre in Bangalore has a capacity of 350 and 450 seats, whereas the one in Bombay has a capacity of 500 seats. The company has marketing offices in the US, UK, Germany among others. The company plans to focus on the contact centre horizontal and be primarily present in the financial services industry. It also plans to increase the amount of work outsourced from ICICI Bank.

99 99 | BPO

TRANSWORKS TransWorks is one of India's leading outsourcing companies operating in the BPO/ CRM space providing a high-quality, cost-effective solution to Global 1000 companies. TransWorks provides a complete blend of CRM services inbound customer service, including technical support, email / web-chat support, and outbound telemarketing. BPO services include transaction processing as well as finance and accounting related services. TransWorks is a fully owned subsidiary of the Aditya Birla Nuvo (part of the Aditya Birla Group), (www.adityabirla.com), one of India's largest business houses. Operating in India for over five decades and globally for nearly thirty years, the AVB Group has a turnover in excess of US $ 7.6 billion. The group has 72,000 employees with businesses spread across 40 countries, with a third of its revenues coming from operations outside India. TransWorks, a 100% subsidiary, represents the Group's strategic interest in being a leader in the offshore BPO/CRM space. Founded in 1999, TransWorks has operations facilities in Mumbai and Bangalore in India as well as offices in the United States and United Kingdom. TransWorks' foundation is built on four key strengths robust infrastructure,experienced people, strong processes and state-of-the-art technology. MANAGEMENT TransWorks Servicing. has a dynamic management team with

strengths in Technology, Operations, Sales and Client

100 100 | BPO Atul Kunwar - Chief Executive Officer Sharad Junghare - Joint President & Chief Officer Operations Siva Ganapathi - Joint President - Corporate Strategy & Development N Gajapathy (NG) - Chief Technology Officer Kailas Agrawal - Sr. Vice President and Financial Controller

SERVICE OFFERINGS Transaction processing TransWorks can support a range of transaction processing services. In particular, TransWorks can provide 3 key types of processing services - order processing, claims processing and loan/ mortgage processing. Claims processing capture, services information refers to electronic eligibility

information

verification,

determination, and reporting of information. In addition, there are future opportunities for providing higher-end services such as data mining and analysis. Loan/ Mortgage processing services involve information capture, verification of information on loan/ mortgage applications forms, and screening applications against predefined criteria. Order processing services include processing of

application forms (both paper and electronic), information verification, authorization and confirmation.

101 101 | BPO TransWorks has vertical market expertise in several areas including - banking, credit card, insurance, and mortgage. Financing and accounting TransWorks' services focus on 3 key dimensions: Purchase To Pay (P2P) Order To Cash (O2C) Accounting To Reporting (A2R)

HR services The key area of focus in the HR services space includes payroll and benefits administration, recruitment support and record management. Payroll and benefits processing services include capturing, analyzing and reporting employee-related and performance data. In addition, the services include managing the compensation and benefits program to help our clients reduce internal processes and administration burdens.

102 102 | BPO

CHAPTER XI
DESTINATION INDIA India has fast emerged as a winner in this outsourcing services hype. Many US companies are in favor of India when it comes to off shoring. Indias developments in the areas of communication, power and software developments do not need to be elucidated. Today, India Exports Software to over 95 countries and ranks second in the world for this service. India is one of the preferred destinations for offshore outsourcing. One would now find major global giants going for offshore outsourcing to India. Leading global business intelligence and consultancy firms such as Giga, Forrester Research and McKinsey & Co. have cited various reasons for the increase of offshore outsourcing by MNCs to India. India's quality and cost benefit edge is one of the major draws for these organizations, analysts say. According to a NASSCOMMcKinsey report, the IT-enabled services export from India is expected to grow to more than $21 billion by 2008. Revenues from the export of IT-enabled services from India are expected to increase from 19% in 2002 to 27% by 2008, as a proportion of the total revenues from export of IT services from India. The preferred location in terms of off shoring and nearshoring are tabulated as below: Offshore Leaders Near Shore Leaders

India (IT enabled services), China (manufacturing)

Canada

103 103 | BPO

China, Czech Republic, Hungary, Ireland, Israel, Mexico, Northern Ireland, Philippines, Poland, Russia, South Africa Belarus, Brazil, Caribbean, Egypt, Estonia, Latvia, Lithuania, Malaysia, New Zealand, Singapore, Ukraine, Venezuela Bangladesh, Cuba, Ghana, Korea, Malaysia, Mauritius, Nepal, Senegal, Sri Lanka, Taiwan, Thailand, Vietnam

Challengers

Next in Line

Beginners

India is considered to be an ideal offshore destination due to a variety of advantages it has over other countries. These have been categorized into: ADAPTABILITY One of the great qualities that people in India have is adaptability. They are open to change, always willing to learn. Indians are also open to cultures; this makes Indians cordial people to work with. SKILLED MANPOWER Manpower is India's trump card. People in India possess all qualities that would make it a global outsourcing hub. The greatest advantage with Indians is their communication skills. India has second largest number of English speaking people in the world. Indians are respected and acknowledged for there technical skills round the world. The Indian education system provides a unique blend of technical knowledge, and communication skills. It is due to the education system that India has, and is producing one of the most talented software programmers in the world today. TOP QUALITY RESOURCES

104 104 | BPO If you talk about manpower, Indians are undoubtedly one of the most talented in the world. In India one gets best of brains, at most competitive rates. This acts as a magnet for organizations. In the past few years, the Indian IT industry has pursued the goal of attaining the highest international standards of quality. A World Bank funded study conducted as early as 1992 to discuss Indian software strategies had concluded that more and more vendors in the US prefer to get their software developed undertaken in India for its quality and cost advantage. Indian players have created a strong value proposition in the IT software and services arena. India enjoys advantages of people sophistication in terms of a very large pool of English speaking scientific personnel, varied and extensive skill sets in terms of technology, and offering services at globally competitive costs. India also boasts vendor sophistication - with more than 200 companies being quality accredited and serving the needs of over 255 Fortune 500 companies. Today, the world looks towards the Indian IT software and services industry for its good quality and high price performance. According to McKinsey & Co., India has and will continue to have a growing number of vendors successfully working on complex projects across all areas of software and services, and performing at levels comparable to those of leading global players. As of 31st March 2002, India had 42 companies at SEI CMM Level 5 assessment. The quality maturity of the Indian software industry can be measured from the fact that already 316 Indian software companies have acquired

105 105 | BPO quality certifications and more companies are in pipeline to do so. The other heartening feature has been the growing acceptance and adoption of the newly emerging PeopleCapability Maturity Model (People-CMM) by the Indian software industry. For a country like India, with its large assets in the form of skilled human resources, the relevance of People CMM needs no emphasis. A large number of Indian IT software and services companies have been quick to realize this and have either implemented or initiated programs. COMPETITIVE PRICES Cost of qualified personnel is amongst the lowest in the world in India. Data monitor, a leading UK-based business information company; research indicates that 67-72% of costs to call centers operating in the US/UK are directly linked to man power costs. India, on the other hand spends only 33-40% of costs on man power. This includes training, benefits and other incentives for labor. A study, which compared the prevalent hourly wages in the U.S. and India, was published in Berkeley News, a university publication. For instance, a telephone operator in the U.S. makes $12.57 an hour while his counterpart in India makes less than $1 an hour.

106 106 | BPO

Comparative Cost per Employee US$ Cost per FTE (Full-Time Employee) Personnel G&A Expense Telecom Property Rentals Depreciation Total Expenses United States 42,927 8,571 1,500 2,600 3,000 58,598 India 6,179 1,000 2,328 847 1,500 11,854 India as % of US costs 14% 12% 155% 33% 50% 20%

Similarly other comparisons are: Health record technologist/medical India wages:

transcription $1.50-$2.00; Payroll clerk

($13.17),

($15.17)

India

wages:

$1.50-$2.00; Accountant ($23-$35) India wages:

$6.00-$15.00; Financial researcher/analyst ($33-$35) India wages: $6.00-$15.00; Legal assistant/paralegal ($17.86) India wages: $6.00-$8.00 EXCELLENT INFRASTRUCTURE AND TECHNOLOGY SUPPORT

107 107 | BPO Credit for India's rapid growth in the IT software services and ITES/BPO domains must go in part to the availability of a robust infrastructure (telecom, power and Roads) in the country. Relevant telecom facilities are an important prerequisite for the success of the software industry and over the years, the Government has taken steps to ensure that telecom remains a priority area. Similarly, regular, reliable, uninterrupted power, a major necessity for running IT software and services businesses, has also received substantial attention from the Government. Recent steps to privatize the distribution of power and bring in greater efficiencies and customer centricity in the market have been welcomed by the IT industry. The overall roads and highways scenario in India has also witnessed major improvements over the last few years. Most cities and fist and second tier towns are connected and interlinked to each other. Major investments have gone into the development of highways, both on the side of the central and state Governments. Clearly, the Indian Government has understood the importance of infrastructure to industries such as IT and created a conducive environment for its development and expansion. TIME DIFFERENTIAL - 24 X 7 WORKING MODEL ADVANTAGE A virtual 12-hour time zone difference with USA, a 5 hour difference with UK and other major markets for IT-enabled Services helps in creating a virtual office which works for 24 hours a day, 365 days a year. This is one of the best advantage companies have, when they outsource to India. Work would never stop for them. When people in America sleep, Indians work. Thus, organizations can increase the

108 108 | BPO standards of customer support due to this working model. Quarries of valued customers would never go unanswered. GOVERNMENT POLICIES Apart from the above-mentioned advantages, favorable policies of Indian government are also a huge advantage for foreign companies. Government is pulling a lot of FDI (foreign direct investment) into the country. The liberalization taken and by deregulation the Indian

initiatives

government are aimed at supporting growth and integration with the global economy. The reforms have reduced licensing foreign requirements technology and made The accessible.

reforms have also removed restrictions on investment and made the process of investment easier. The government is actively promoting FDI, investments from NRIs (NonResident Indians) including Overseas Corporate Bodies (OCB's) owned by the NRIs. FDI can be brought in through the automatic route, based on powers accorded to the Reserve Bank of India. Amendments have also been proposed in the Indian Evidence Act, Indian Penal Code and the RBI Act. The mechanism of digital signature has been proposed to address the issues of jurisdiction, authentication and origination.

109 109 | BPO Recognizing the importance of Venture Capital Funding, the Ministry of Information Technology has set up a National Venture Fund for the Software and IT Industry with a corpus of Rs.100 crore in association with the Small Industries Development Bank of India (SIDBI) and Industrial Development Bank of India (IDBI). The aim of the Fund is to provide Venture Capital to start up software professionals and IT units in the small-scale sector. Nasscom has been playing a crucial role in helping the IT industry achieve the ITS and ITES vision. Along with the government, Nasscom has taken many steps towards efficient implementation of the above mentioned government policies. The abundant skilled manpower has made India a target destination for multinationals to back end their operations in India. India ranks high in areas such as qualifications, capabilities, quality of work, linguistic capabilities and work ethics, and thus is ahead of competitors such as China, Philippines, Ireland, Australia, Canada, etc.

110 110 | BPO

CHAPTER XII
THE FUTURE India's IT and business process outsourcing (BPO) revenues are expected to reach anywhere from $36 billion to $38 billion in fiscal year 2007, according to a survey from India's National Association of Software & Services Companies (NASSCOM). In the past fiscal year, NASSCOM estimated that Indian companies registered $29.6 billion in IT/BPO revenues, with $23.6 billion of that spend generated in the export market. Nearly nine-tenths of India's BPO revenue comes from finance and accounting (F&A), human resources administration, and customer service. While the actual and projected revenue of India's IT/BPO vendors is impressive, one thing to bear in mind is that relative growth rates are slowing. Indian IT/BPO grew 33 percent in fiscal 2006, but is projected to grow 28 percent (assuming revenues of $38 billion, the high end of NASSCOM's projection) in fiscal 2007. That's a noticeable slowdown in growth rates, if not absolute value. The slowdown is not, according to NASSCOM, attributable to saturation. Kiran Karnik, President of NASSCOM, believes that only 10 percent of the global IT/BPO marketplace has been captured, and cites a NASSCOM/McKinsey report that predicts $60 billion in Indian IT/BPO revenue by fiscal year 2010. Even after that timeframe, recent research has shown that the economics of the Indian sustainable for at least a generation, pointing to the potential for longer- offshore market is term growth. Karnik himself believes that impending M&A activity in India may create "world major

111 111 | BPO Indian software company to class players," in BPO and there is also the potential for its emergence. According to a study conducted by National Council of Applied Economic Research (NCAER), ITES-BPO is to contribute 7% of GDP by 2008. Also, the IT Enabled Services (ITES) will become one of the largest sectors of the Indian economy by 2008. The contribution of ITES-BPO to GDP in 2001 was 1.4 per cent. But now ITES-BPO will contribute seven per cent of India's Gross Domestic Product (GDP) by 2008. The industry is also estimated to account for 19 per cent of the incremental GDP growth till 2008,'' the NCAER said. In terms of foreign exchange inflows, ITES-BPO exports will contribute more than 30 per cent as against the present eight per cent, said Dr D K Pant in his report. NCAER says it expects BPO and ITES each to create one million jobs directly and around two million jobs indirectly. ''More important is the fact that employment growth will be at the mass level in the BPO sector, employing simply graduates or even non-graduates with a working knowledge of English and basic computer skills,'' says Dr P Ghosh, joint author of the report. With existing customers scaling up their level of sourcing from India, it is likely that more firms from these countries would join the bandwagon. ''India should also look at the potential markets of Canada and other non-English markets like Japan, Germany, France and Italy whose aggregate spend accounts for 27 per cent of the world's IT services and which will create business worth over 4.5 billion dollars by 2008,'' the report says.

112 112 | BPO The NASSCOM - Mc. Kinsey Report 2005 indicates that the addressable market for global offshore including BPO is

around $300 billion presently, whereas we are only tapping 10% of this addressable market. As estimated the contribution of offshore IT and BPO industries can account for 17% of Indias GDP growth and 44% Indias export growth between 2005 and 2010. If we have to reach the goal of $200 billion by 2010 we have to work to refine the overall available addressable market across the world and create awareness among the clients about the win-win situation of outsourcing the tasks with quality delivery. Globally, North America and Western Europe were the major market, together accounting for more than threefourth of the global IT-ITES market. In this process if we can convert $400 billion of addressable market in 2010 into actual market, India should aim to do business at least 50% of the potential market. How to attain the target:

113 113 | BPO 1) Indias with its cost leadership in software products now it has to aim to the competitive in quality of the products and just in time delivery. countries competing for continuously has to aim high. 2) A major drive has to be undertaken in capacity building of graduates with the aim to provide value added IT Services, ITES and BPO. 3) Encourage innovation and creativity among our IT personnel and thereby contributing towards attractive solution to the customer resulting in higher return on investment in their business process. 4) Focus our ICT market also towards Asia Pacific, ASEAN and African countries so that we are more competitive than any other nation due to the human resource potential and cost advantage capability with our core competence in ICT sector. 5) Turn your focus on India, which has one billion people as market force who needs potential in education, healthcare, e-governance and e-business. Certainly, it is the responsibility of the Government, NASSCOM and the Indian industries to enable a level playing field for the growth of small and medium ICT industries to contribute for bringing down the digital divide. 6) India has a Focus AFRICA policy and there is a Since there are number of the $300 million market,

commitment to assist Africa development. In 2004 when I addressed the Pan African Parliament I announced Indias willingness to establish a Pan- African e-network for connecting 53 countries for providing tele-education, telemedicine services and also connecting the Heads of State. Already the project is in progress, Indian ICT industry has a

114 114 | BPO great potential to participate through this platform for creation of new market. 7) During my recent visit to Singapore, Philippines and This will bring the core-competence of the World Knowledge

Republic of Korea, I proposed the World Knowledge Platform. partnering nations for design, development, production knowledge products and systems. Platforms also envisages evolution of new market through

e-business network. I consider that this collective and integrated action in all these areas will enable us to reach the targeted goal of $200 billion of business in the IT, ITES and BPO sector during the year 2010.

CHAPTER XIII
CASE STUDY: INDIAN BPO INDUSTRY- THE NEXT STEPS With the revenues of $3.9 bn and a 40% growth rate, the Indian BPO Industry has assumed center stage in the world arena. Today, India is still associated with call center stage outsourcing. While this is largely true, the BPO Industry is striving to reach a higher level of maturity. Knowledge processes, banking and financial services and healthcare are some of the upcoming sectors in the space. But there are a numerous issues that need to be resolved before this growth can be realized. This debate includes seven experts at NASSCOM 2005. Participants include: Stephanie Moore, VP, Forrester Research. Raman Roy, Chairman and MD, Wipro Spectramind. Sunil Mehta, VP, NASSCOM.

115 115 | BPO Sumit Bhattacharya, Head, HCL BPO Arno Franz, Partner and MD, TPI Asia. Michel Clark, CEO, GTL Limited. Dennis Callahan, EVP/CIO, Guardian Life Insurance Company of America. ____________________________________________________________ _____________________ Stephanie, tell us about the demand side of equation. How do you see the demand for BPO services out of India unfolding? Moore: Clearly the demand is great. Most companies started with IT services. Theyve had positive experiences and now many of them are looking to translate those into BPO successes. Low level processes like call center outsourcing are the obvious starting point but some of my clients are beginning to do high-level vertically-focused business process outsourcing offshore. That I think is a very interesting development. Yes, there are some issues with the Indian BPO industry. As we know there is terrible attrition, which is cause of great concern to clients. There is turnover in the US call center space as well but I dont think it is as dramatic as some of the attrition rates weve seen here. Roy: But weve got processes in from customers where we have seen 10% attrition rates per month, which works out to be 120% a year. I am a little perplexed about what you are hearing from the customer. Moore: It depends on the type of call center work thats going on. The more commoditized the service is, the less troublesome attrition is from the client perspective. But just

116 116 | BPO as in the It sector, as the work becomes more complex and it requires more skill for the operator or technician to be able to execute, it is a much more troubling issue. Roy: At the higher end, attrition is exceedingly low. Moore: Depends on the vendor. Some vendors have very good attrition rates and some have terrible problems. This is also true for the It side. Some of the vendors are facing high attrition rates in the high 20s and some have low attrition rates based on their reputation and ability to attract and retain their staff. Bhattacharya: For us, attrition has a direct correlation to process complexity. The lower the process complexity, the more commoditized the process, the higher the attrition because thats when you get transient profile of people for whom these two years are just an in-between phase. We have some processes which have an excess 65% attrition and we have processes where it is less than 10% a year. I regard this as a quite positive for my company and the country. Its forcing us to look and invest in higher processes. Moore: As demand goes up for complex process skills, there is going to be attrition in that too, which could be as high as it is in IT services. Bhattarcharya: I think the pace is going to be far lower and one of the challenges we have as an industry is how to deskill processes and how to create replicability and scalability as part of the people in the industry.

117 117 | BPO Sunil, what steps is NASSCOM taking to deal with this issue of attrition? Mehta: This is the number one issue we are concentrating on. We are tackling it from the demand side as well as from the supply side. On the demand side, from our market research we have found that young graduates do not look upon BPO as a career option. But within the industry, people are very excited about their jobs. There is only intercompany attrition. For the industry, as a whole, the attrition level is 15% and that is usually because people leave to get married or pursue higher education. NASSCOM is planning a communication campaign to address young graduates as well as those who influence their decisions to take up BPO careers. What steps are you taking to position BPO careers as a long-term option? Mehta: From our research we found that of the 100 people who are interviewed at a call center or BPO only three to six eventually get hired. There are about 18-20 who are potentially employable but the cost incurred by the vendor to train is not economically feasible for them. For the 1820% of the pool that exists today, we are trying to introduce a certification program which will run parallel to the training program. There are a whole host of training institutes that are interested in this. In this collaboration with the industry, we have put together a formal skill set and also identified additional curriculum requirements. What this will do is bring down both training as well as the recruiting costs for the companies. Is there any evidence that customers are leaving because of attrition? Are they voting with their dollars?

118 118 | BPO Mehta: The truth of the matter is that the industry in these 12 months is likely to grow by 40% to approximately $5.1 billion. Roy: But it is also true that we are unable to achieve the potential growth because of the apprehension that Stephanie spoke about. Also, if we are able to increase our supply base by an additional 15% as a result of the certification program, then the attrition problem might disappear altogether. Callahan: Attrition is a fact of life. The question is how deep is it and how well is it managed? Do companies plan for it? Are they constantly hiring replacements and cross training them in other areas. So if someone from one department leaves, someone else can take their place. Are they including this in the terms and conditions of the contract? Dennis, what would be your top concern as a customer? Callahan: My top concern would be regulatory

environment. Thats where Indian has its biggest challenge. Most clients are concerned about security and privacy. Today, Indian firms are voluntarily doing everything to deal with these issues, but nevertheless it is voluntary and it doesnt have the force of law in the eyes of the prospective customer. Mehta: I believe its more of a perception issue because our physical security and information security standards far exceed the end customers requirements. All contracts are under US law or UK law, and are covered by insurance. In any case, we have looked at the US, the UK and EU laws, and gauged the gaps that need to be plugged within our

119 119 | BPO laws. We are submitting these to the ministry by the end of this month and hopefully in the next few weeks it will be on the floor of the Parliament. The minister has assured us that he is 100% behind it. Another issue is the emerging competition of India as a BPO destination. Arno, do you see other countries eating out of Indias rice bowl? Franz: Certainly. There is competition from other

economies but they havent reached the stage of maturity that India has and we dont know how long they will take. Of course, there are countries like China, Central and Eastern Europe, Latin America, Canada, Mexico, the Philippines and other countries in Asia. But there is still a window of opportunity available for the Indian BPO business. It is not an India vs. China or India vs. Eastern Europe discussion. Its about how India acts globally. Most clients are global corporations with global footprints. Indian service providers must have global politics to win global contracts. Bhattacharya: We started our business in BPO by buying a company in Belfast. We always regarded the UK as a potential market and it was clear to us that unless you had a brand association in UK, you wouldnt get anywhere. What came as a bonus was the well-educated, multilingual population of Belfast which has two prominent universities. And from our facilities in Malaysia, we do six Asean languages. Totally, we do 15 languages, which has given us sufficient traction in the industry.

120 120 | BPO Increasingly, Indian companies are offering an integrated IT-BPO front-end package. What does this mean for the stand-alone BPO service providers in the future? Roy: There is a market for stand-alone BPOs as well as for the integrated offering. We have fights internally between our departments as to what part of the million dollars are the IT departments and what part belongs to our BPO division. The truth is that each segment is mammoth and our penetration as a country as of last year is only 1%. There is a huge opportunity and enough to go around for everyone. I think its the companys imperative to decide whether they want to offer an integrated service or a niche one. What is the scope for moving up the value chain from the commoditized end of call centres to handling entire processes? Clark: First, you have to prove yourself in the most difficult area of business (Telemarketing). For other stuff, you need to have mindshare with the client. You need to be inside the walls with market planners so that we know what they are driving for. Unfortunately, a common practice in India is to let the customer rule. Is there an opportunity to move from BPO to BPR (Business Process Re-engineering) as the third wave? Roy: That is still some way into the future. For that we would have to handle 80-90% of the clients transactions. The most Ive seen so far is 42% in India. In order to reach that far or reengineer, we still have to build those competencies and gain their credibility. Currently, what we

121 121 | BPO are being called to do is more like refinement or fine-tuning. We still have to evolve to the reengineering position. It has to be earned and that can only happen with time. Bhattacharya: In that sense, working with the SMEs is far easier than working with the Fortune 500 companies. You start talking to the decision-maker far earlier in the process and dont have to wait one year to speak to the person who manages their toilets. Plus, they are upfront about their requirements. Theyll ask you straight off. How can you help me? Furthermore, SMEs are fairly-sized organizations ranging from $500 million to a billion dollars, so its a fairly promising market.

How would you sum up the future prospects in the light of what weve discussed so far? Mehta: There is a huge opportunity out there. Weve almost got our act together but a lot more needs to be done. Clark: The industry was built around low cost, low tech, low skill, and low value addition. But we are finding out that it could well be the opposite of all of that.

122 122 | BPO

CHAPTER XIV
COMPETITION BEYOND BORDERS While non-English operations are one reason why Indian companies are spreading geographically, dispersing the location risk is another. BPO clients increasingly insist on disaster-recovery back-ups or mirror sites from where the operations can continue uninterrupted in the event of a disruption in India. Even those who dont have their own centres in other places need to have tie-ups for disaster management. Similarly, Progeon is setting up a centre in Eastern Europe to service a potential client. CEO Akshay Bhargava says: The quicker you spread out, the better it is from the point of view of completeness of services. Also, the single biggest issue is to address the perception of risk in the mind of the customer. A multi-country operation mitigates that. Lets take a look at the opportunities various destinations offer in terms of setting up English-speaking BPO facilities to derisk India operations. CHINA China is one of the biggest competitors facing India as far as the outsourcing arena is concerned. In a possible threat to India's prowess in the Information Technology field, China is fast rising as a service outsourcing hub and could catch up with India by 2007, according to Business Week "Gartner predicts by 2007, China will pull in $27 billion for IT services including call centres and back-office work, matching India", the magazine said in its recent issue China is joining English-speaking countries like India and Philippines as key destination for outsourced service jobs,

123 123 | BPO Business Week said. "So far China is focused on providing back-office support for financial service, telecom software and retail companies in neighboring Asian countries where operators can easily talk in Japanese and Korean languages. But now it is making inroads as an outsource base for English speaking nations too", it said. China's low cost talent is also another advantage, the issue points out. Although India is a powerhouse in high-end IT services, late comers these days must pay higher wages for experienced engineers. In this context the magazine gave the example of BearingPoint, formerly KPMG Consulting, which opened a software development centre in Shanghai and quoted its Greater China president Bryan Huang saying "BearingPoint pays $500 a month for engineers in Shanghai. In India, the pay would be $700 and in US it would be $4000. Foreign IT services companies are also using China as a base to grab business in Asia. Consultancy firm Accenture saying it is much easier for our people in China than for those in India or the Philippines. According to Business Week, several US manufacturing companies like Sweetheart Cup and E5 Systems are convinced that China was the only place. It says according to Sweetheart figures, it saves 40 per cent by sourcing in China rather than India and in a business where pennies matter, cost is a greater consideration. Relatively poor skill in English and a lack of high level international quality certification have held Chinese back but these may be overcome with training and experience. At the same time expertise in written and spoken Asian languages will remain an edge. Indian companies are also tapping Chinese market for their own advantage. Fourteen

124 124 | BPO big Indian IT services companies have set up shops in China and Indian firms would eventually control 40 per cent China's IT services exports, Gartner says. THE PHILIPPINES The countrys outsourcing revenues are just $350 million compared to Indias $2.3 billion. But the land of the I Love You virus has some talented software engineers who speak English and are familiar with American culture. A former US protectorate, it has an excellent telecom infrastructure thanks to the US militarys Clark Air Force Base and Subic Bay Naval Station. The US military pulled out of the Philippines in 1992, but left behind the strong telecom backbone. Cost savings are about 30-50% over the US operations but wages are nearly 12% more than in India. Accenture has a facility in the Philippines; AOJL-Time Warner, Barnes & Nobel Online and Federal Express have call centres there, as do Caltex, AIG, Amex, Citibank and Procter & Gamble. The Philippines is known for low attrition rates. Compared to India, it has fewer people (population: 81 million) and higher labor costs. P&G set up a 650-people accounting service there almost three years back. The Philippines is ideally suited for such processes as it has plenty of accountants trained in US accounting standards. But then, ramping up is a problem. As a result, nearly all facilities have fewer than 1,000 people.

CANADA AND IRELAND The biggest advantage that these English-speaking

countries offer is their similarity to the US in terms of

125 125 | BPO people and culture. They also have good infrastructure and low economic and political risks. Ireland has a labor force of just 1.8 million and professionals are expensive ($23,000 per year against $2,500-5,000 in India). Canadas advantage is low real estate prices and low salaries compared to the US, but they are high compared to India. Vis--vis the US, clients can save up to 25% in Canada. Canadian villages are also well suited for 200-300-people operations. In India, savings are higher but US firms feel reduced risk is worth the extra money. Canada is suited for complex businesses that require proximity to the US. It has superior employee retention rates and BPO experience. BP Amoco, Siemens and Compaq have opted for Canada. Compaq realized 15% savings by locating five call centres in Canada. Keane Inc., CGI Group, DMR Consulting Group and Unisys Canada also offer nearshore options. Keane has acquired CMM Level 4 certification for its Halifax, Nova Scotia facility. BRAZIL AND MEXICO Mexico and Brazil have an edge because their time zones are similar to the US and they are also close to the US. Also, labor costs are low (around $1,300 per annum). But proficiency in English is poor and skill levels are very low. Thus, scalability is the major concern. They are, however, ideal for operations like document management that require proximity to the US. Brazils strengths include huge investments in IT and telecom and a large low-cost labor pool, which is cheaper than Mexicos. But Mexicos forte is Spanish language skills. US companies have saved 25-40% by outsourcing their work to Mexico However, Mexico lacks technical and mathematical skills. But for low-cost, lowmaintenance data-entry type of work, it is the best bet.

126 126 | BPO SOUTH AFRICA South Africa is emerging as a hot BPO destination because it has a time zone compatible with Europe and a 17-million strong labor pool (compared to Indias 270 million). The governments support to BPO activities and a robust English-based education system are attractive propositions for US firms to move their operations to this nation. Computer Sciences Corporation has set up a facility in South Africa. Costs are about 25% lower than in Europe. But skills are not as easily available. Dimension Data, a South Africa-headquartered IT services company, runs call centres in six regions and has had centres in South Africa since 1996. It has just set up an 800-seat call centre for a US customer.

CONCLUDING REMARKS
Despite the growth that this industry is witnessing, there are certain areas that require greater attention going forward from service providers to ensure that the industry remains firmly on the growth path. This survey was conducted with the objective of analyzing some of the key trends that will drive the future direction of the industry. We have endeavored to highlight some of the key challenges that the industry faces and will face as the industry evolves. I have also discussed the corresponding risk-mitigants that service providers and companies are focusing on, to manage the risks. The BPO industry is drawing significant attention and India, by virtue of its dominance in this sector is at the center of

127 127 | BPO this attention. The shift of the Indian economy towards more service-orientation suggests that in the long term, India will continue to be a major player in the global BPO industry.