BPO A SWOT Analysis

Introduction India has enormous opportunities emerging from globalization and consequent lowering of tariff barriers. Information Technology has given India formidable brand equity in the global markets. Indian BPO companies have a unique distinction of providing efficient business solutions with cost and quality as an advantage by using state of art technology. Through joint efforts of Government and the Industry, software development and IT enabled services have emerged as niche opportunities for India in the global context. The Government has been making continuous efforts to make India a front-runner in the age of Information revolution. India today has the advantages of skilled manpower base, active and healthy competition amongst states in attracting investment in infrastructure as well as framing IT applications in areas such as egovernance, e-learning, e-commerce, entrepreneurship, software exports growth and a large potential in the domestic market. Information Technology Act dealing with Cyber Security, Cyber Crime and other information security related legal aspects is in place. As a result of technological convergence at the infrastructure, services and industry level; there has been a tremendous up-surge in new product / service industries. Definition BPO Business process outsourcing (BPO) is the leveraging of technology vendors to provide and manage a company's critical and/or non-critical enterprise applications. Through the business transformation process of service-oriented transformation, which leverages the technologies and standards of service-oriented architecture, companies can increasingly leverage third party companies that act as business service providers. Business process outsourcing can use off-shore resources, but is not required. Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service. Importance of Outsourcing Outsourcing system allows companies to contract for services that are not within the scope of their expertise, so that they can focus their time, money and energy on their core competencies instead of wasting valuable resources trying to gain Understanding of areas that are somebody elses expertise. Campbell and K.S.Luchs in Core Competency Based Strategy. SWOT analysis on Indian ITES sector Strengths Highly skilled, English-speaking workforce Abundant manpower Cheaper workforce than their Western counterparts According to Nasscom, The wage difference is as high as 70-80 percent when compared to their Western parts. Lower attrition rates than in the West. Dedicated workforce aiming at making a long-term career in the field

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Round-the-clock advantage for Western companies due to the huge time difference. Lower response time with efficient and effective service Operational excellence Conducive business environment Weaknesses Recent months have seen a rise in the level of attrition rates among outsourcing workers who are quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to pursue BPO as a full-time career. The cost of telecom and network infrastructure is much higher in India than in the US. Local infrastructure Political influence Opportunities To work closely with associations like Nasscom to portray India as the most favoured BPO destination in the world. India can be branded as a quality outsourcing destination. $69 billion ITES business by 2010 $97.5 billion IT (consulting, software solutions) market by 2010 Threats The anti-outsourcing legislation in the US state of New Jersey. Three more states in the United States are planning legislation against outsourcing Connecticut, Missouri and Wisconsin. Workers in British Telecom have protested against outsourcing of work to Indian BPO companies. Other BPO destinations such as China, Philippines and South Africa could have an edge on the cost factor. Indian Market size estimates The below table shows the off shore BPO revenue, Indian BPO revenue and the total market potential of the world BPO industry Revenue \ Year Offshore BPO Revenue Indian BPO Revenue Total BPO Market CAGR in % 2002-07 2002 1,322 912 2003 1,825 1,205 2004 3,017 1,961 2005 6,439 3,928 2006 12,563 7,412 2007 24,230 13,811 CAGR 78.91 69.35

110,167 121,687 131,171 143,090 157,033 173,070 9.45

Figures in $ Source: Gartner Dataquest million Gartner: $173 billion in 2007, of which $24.23 billion would be outsourced to offshore contractors Indian Market size estimates of BPO Nasscom has estimated that the Indian ITES industry will gross over $5.7 billion by 2005 (based on a conservative year-on-year growth of 65 percent by Nasscom).

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Nasscom-McKinsey: In 1999 they estimated by 2008 it will be $17 billion but it has been revised to $21-24 billion by 2008. Indian can capture 25% of global BPO offshore market and 12% of the market for other services such as animation, content development and design services. Gartner: $1 billion (2002), $1.2 billion (2003). $13.8 billion by 2007. Gartner does not incorporate animation, medical or other (legal) transcription services, GIS, market research, data search, research and development, network consultancy and other non-business processes in its estimates on the ITES market size and potential. US jobs moving offshore: The below table shows the number of jobs moving offshore from US Sl. No 1 2 3 4 5 6 7 8 9 Number of U.S. Jobs Moving Offshore Job Category Management Business Computer Architecture Life Sciences Legal Art, Design Sales Office Total 2000 0 10,787 3,498 0 1,793 818 4,619 2005 37,477 61,252 32,302 3,677 14,220 5,576 29,064 2010 117,835 161,722 276,954 83,237 14,478 34,673 13,846 97,321 791,034 2015 88,281 48,028 72,632 84,347 36,770 74,642 29,639 26,564 1,659,310 3,320,213

27,171 108,991

53,987 295,034

102,674 587,592 1,591,101

Source: U.S Department of Labour and Forrester Research, Inc. Competitive advantage of India in this sector: Cost savings Datamonitor, a leading UK-based business information company, research indicates that 67-72% of costs to call centers operating in the US/UK is directly linked to manpower costs. India, on the other hand spends only 33-40% of costs on manpower. This includes training, benefits and other incentives for labor. Abundant Human resource: It has been identified that there is a large computer literate population is available in our Indian population composition through the recently conducted census survey. Language Competence: India has got good English speaking cluster of population and all the higher studies are being taught in English. Infrastructure:

Indian government is showing a great concern for the development of infrastructural facilities in all the major cities of India and this gives a greater connectivity for the companies which are coming from off shore with their countries. Indian BPOs position among the worlds fifty best managed BPO vendors 1 IBM Global / Daksh* 26 Getronics 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Accenture Hewlett Packard MphasiS* Ernst & Young/Capgemini Wipro Spectramind* ICICI OneSource* eFunds Global Outsourcing Convergys Affiliated Computer Systems Sutherland Technologies Oracle Hewitt/Exult HCL Technologies* Xansa CSC Unisys Keane Satyam* CGI Cognizant* 24/7 Customer* Intelligroup* Northrop Grumman IT 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Covansys Syntel Ceridian Spherion ADP i-flex* Tata Consultancy Services* General Electric Siemens Business Services Atos Origin Intl B.V. InfoCrossing Datamatics Outsourced Partners Intl* TechBooks IGate* Office Tiger Perot EDS Patni Computer* Gevity HR Vcustomer* SourceNet Solutions WNS Global

25 Infosys* 50 Deloitte *Indian vendors. Serious competitor of India in BPO sector Philippines boasts of strong skills in finance and accounting. The other countries India is competing with are Mexico, Canada and Ireland. In terms of cost, Philippines and

Malaysia are competitive with India. However, India's main competitors in the BPO space produce a fraction of the graduates that India does. BPOs contribution towards Indian employment Company EXL Spectramind Daksh WNS vCustomer Tracmail HCL e-serve Epicentre ICICI OneSource GTL Number of Employees 4,500 2,600 2,000 1,600 1,500 1,365 870 700 650 650

Growth of Indian BPO Industry According to studies conducted by NASSCOM and leading business Intelligence Company, McKinsey & Co. the Indian IT/BPO segment is expected to employ over 1.1 million Indians by the year 2008. In the financial year 2005-2006, ITES-BPO companies were the largest recruiters in the IT/ITES sector, adding a total of about 70,000 jobs. An estimated 70,000 new Jobs expected in 2007 in the field pf ITES. Plus there will be additional hiring to replace industry attrition that is around 25%. On the other hand BPO and outsourcing services would generate around 1, 75,000 new Jobs in 2007. McKinsey & Co. predicts global market for IT-enabled services to be over $140 billion by 2008. In that the opportunity for India will be around $ 17 Billion. The industry will attain a growth rate of over 35% in the next few years, says Jainder Singh, Secretary, IT, Government of India. The contribution of IT and ITES to the GDP will rise to 7% by 2007-08 as against 4.8% in 2005-06, according to Jainder Singh, Secretary, Information Technology, Government of India. The market potential for Business Transformation Outsourcing (BTO) is expected to be around US $ 680bn by the end of March 2009. IT software exports, which grew at 32% during 2005-06 had a growth rate of 23.4% in the last couple of years, said the IT Secretary. IT and ITES will record a growth rate of over 40% with KPO and BTO services making further inroads into the IT sector. "The concept of BTO is new to India in particular. Its growth rate, estimated in most pessimistic form is expected to be around 5%. But as BTO gains popularity and vendors become more mature in providing these services, it is expected to grow at 9% to 10% per annum," said Singh.

The market potential for BTO is expected to be around US $ 680bn by 2008-09. Also, the percentage of BTO services in the outsourcing pie is expected to increase, from 19% in 2004 to 31% by 2009. IT Landscape of key Indian cities City Focus Prominent firms GE, American Express, STMicroelectronics, Wipro Spectramind, Convergys, Daksh, ExL

Delhi Call centres, transaction (includes processing, chip design, Gurgaon software and Noida) Mumbai Bangalore Financial research, back office, software Chip design, software, boiinformatics, call centres, IT consulting, tax processing

TCS, MphasiS, i-flex, Morgan Stanley, Citigroup Infosys, Wipro, Intel, IBM, SAP, SAS, Dell, Tisco, TI, Motorola, HP, Oracle, Yaho, AOL, E & Y, Accenture HSBC, Satyam, Microsoft Cognizant, World Bank, Standard Chartered, Polaris, EDS, Pentamedia PwC, IBM, ITC Infotech, TCS MsourcE, C-DAC, Persistent Systems, Zensar

Hyderabad Software, back office, product design Chennai Kolkata Pune Software, transaction processing, animation Consulting, software Call centres, chip design, embedded software

Conclusion: Every new opportunity has got its own blessings and curses like the same outsourcing industry has also got its own opportunities and threats in this post LPG era but it depends on our companies how well they are going to encounter the threats and how well the are going to capitalize the opportunities gifted by LPG.