Proposal for Setting up a BPO unit In Tribal Taluka of Chhota Udepur of District Vadodara For Doubling of the Income

of the people of the Area In 11th Five year plan

Submitted to: Government of Gujarat, Social Justice & Empowerment Department (Tribal Development Department) Gandhinagar.

December 2006

Submitted by: Shroffs Foundation Trust At & Post: Kalali, Tal. & Dist. Vadodara Ph. 0265 - 2680061, 2680702 Fax-0265 - 2680370

Contents 1. Introduction 2. Executive Summary 3. Overview of Outsourcing Industry 4. BPO in Chhota Udepur 5. Pre-requisites 6. Project Plan 7. Resource Requirements 8. Financial Plan 9. Financial Feasibility 10. Conclusion 3 4 6 11 12 14 15 16 18 20

Shroffs Foundation Trust


The obj ect ive of t his proposal is t o build capacit y among rural (t ribal) yout h t o become BPO agent s and get employment in t he BPO sect or which will primarily be in the rural location. Shroffs Foundation Trust 3 .1. Introduction This proposal t o set -up a BPO unit in Chhot a Udepur is envisaged as part of t he income generat ion program (doubling t he income of t he area) undert aken by SFT with private sector partnerships. The execut ive summary is given next which is followed by det ailed descript ion of the project including implementation plan and financials.

Room/office etc. in fact . envisaging a model where rural infrast ruct ure is used and process agent s are also drawn from rural yout h is one of t he most appropriat e ways of present ing such a low cost advant age t o t he cust omers who are wiling to outsource their processes. t hriving on such rural model. Educated workforce young people ready to work in shifts. Though connect ivit y can be est ablished wit h t he help of t elecom service providers in Shroffs Foundation Trust 4 . At least one IT technician/engineer for each shift. many BPO unit s have been set up in rural areas surrounding Chennai & Pondicherry and some cust omers out sourcing services are. 2. 3. Considering Chhot a Udepur. Broadband Connectivity. 5. The most import ant aspect s t o develop would be t he connect ivit y and local manpower capabilit ies. In India. A typical BPO unit set-up requires following: 1. In most cases. English language skills. at least good reading and writ ing skills in English language. Executive Summary This proposal is being made to set-up a BPO (Business Process Outsourcing) unit in Chhot a Udepur. Considering t hat t he prime driver for basic BPO services is cost advant age. Though a rural model for BPO services may look like a non-feasible opt ion as against a t ypical urban/ cit y BPO set -up. 7. 6. 4.2. preferably a leased line. a number of at t empt s have been made t o set up BPOs in rural areas and most of t hese at t empt s have been successful. Computer and Server set-up including various software. some of t he above facilit ies are already available and ot hers can be made available. At least one person with managerial skills (Team Leader) for each shift.

lease or purchase) and people cost (t he highest cost in a BPO) are much lower in rural areas compared t o urban sit uat ion. As a public-privat e part nership model. generally t ermed as KPO (Knowledge Process Shroffs Foundation Trust 5 . Transpek Indust ry Limit ed. a reasonable estimate of 9 months to 12 months should be taken for development of manpower t o be ready t o work as process agent s in t he BPO unit. For example. the pressures on city infrastructures are creating major roadblocks in expanding t he set-up in cit ies. it is envisaged t hat rural areas are going t o become focus of low-end BPO services and t he urban BPO services will t end t o move up t he value chain and over a period of t ime urban areas will become t he focus of high-end BPO services. severe t raffic j ams have become a norm in Bangalore. The main driver is cost as t he infrast ruct ure cost (physical space rent al. the biggest BPO hub in India. Outsourcing). This would also provide an early mover advant age as well as form a basis for replicat ion of t he model into the same and other rural locations. Moreover. t he cost of running BPO in a cit y is increasing and t he cost leverage t hat was t here five years back has considerably reduced. t he capacit y building of t he manpower is a development process and would t ake some t ime. it is proposed t o set -up a BPO unit in Chhot a Udepur on t he basis of a properly designed Proj ect Implement at ion Plan. wit h t he growt h of urban areas. Considering t he above. Considering t hat language skills are also t o be developed.short t ime. Vadodara was approached and t hey have agreed in principle t o t ake over t his unit direct ly or t hrough any of t heir associat e/group company aft er 12 mont hs and run it as a business unit wherein t he t ribal yout h will cont inue t o be employed and earn income. As we look forward. There are some good reasons for cust omers t o have rural BPOs at t ract ive from a business st andpoint . Also.

accuracy and security. t he nat ional compet it iveness and the business drivers for successful BPO. elect ronic media or an on-line ent ry syst em. ret rieval and ut ilizat ion of informat ion for an organizat ion. book.3. Opt ical Charact er Recognit ion (OCR) soft ware and hardware while ensuring t he utmost integrity. The lit erat ure is very rich in explaining t he concept s of out sourcing and t wo such concepts have been identified to explain the scope of the industry. t he ent erprise or commonly called t he vendor. cat alogue. delivers out sourced services. BPO is t he preparat ion. The BPO actors: Saunders et al. Overview of Outsourcing Industry Introduction This chapt er provides a general overview of t he Out sourcing Indust ry wit h part icular emphasis on Business Process Out sourcing (BPO). while simult aneously offering an int ernet -based dat a ent ry and query service. The process owner Shroffs Foundation Trust 6 . fax. Concepts of BPO and KPO Defined simply. Knowledge Process Out sourcing (KPO) is t he high-end services in out sourcing and it concerns t he applicat ion of knowledge t o business processes compared to low level skills in bottom-line BPO. warehouse. The first is t he cust omer or client who out sources his processes while t he second. capt ure. It analyses t he configurat ion of t he BPO indust ry in general. Dat a processing is accompanied by ext ract ing informat ion from a current or cust om designed form. (1997) recognize that outsourcing has two main act ors: t he out sourced and t he out sourcer . This service bureau concept alleviat es t he need for onsit e dat a ent ry personnel.

A further analysis made by Forrester reveals that: Shroffs Foundation Trust 7 . We can t herefore emphasize from t he very out set t hat BPO as an indust ry has t hree main act ors: t he client who requires t he service. Vent oro (2004) report s t hat t he out sourcing industry in general has the following configuration as at date: There are some 10. Forrest er (2004) said t hat while it believes the BPO market will grow to $146 billion in 2008. high-volume vert ical processes and niche vertical applications. the market place will fragment as vendors focus on individual BPO segment s like simple bulk t ransact ions. The t wo above concept s give a micro-economic dimension t o BPO as a management st rat egy. Cont ract s are usually long-t erm and.000 vendors offering some form of outsourcing There are offshore outsourcing vendors in over 175 countries There are some 500 Government Agencies. Outsourcing: The Status & Potential From a general point of view. broad shared services. we should include a t hird act or: t he Government or t he count ry in which t he service is being delivered. t he vendor who provides it and t he count ry which is the location from which the service is provided. maintaining and developing a business process or set s of funct ions. st aff responsible for t he out sourced function move across the customer to the provider. The BPO mechanism: Financial Times (2004) explains t he mechanism of BPO whereby a BPO provider assumes primary responsibilit y for t he organizat ional int erface of t he t wo ent erprises during all t he out sourcing activities. in some cases. Trade Groups and NGOs act ively campaigning to grab a larger share of the global outsourcing market Considering BPO on it s own as an indust ry. When we look at t he bigger pict ure and consider t he macro framework.

The largest segment in t he BPO market will be simple bulk t ransact ions and they predict that this segment will grow to $58 billion by 2008. $ 6 billion in 2008. The second largest segment will be broad shared services. represent ing a market of $57 billion in 2008 High-volume vert ical processes will represent a significant ly smaller segment . Managers can cut overall cost s by 25 t o 40% while building a more secure and more focused workforce in the U. The above st at ist ics no doubt confirm t he growt h of BPO as an Indust ry wit h a worldwide dimension Shroffs Foundation Trust 8 . U. The Times (August 2003) report s t hat by t aking advant age of lower wages overseas. Vert ical processes include policy administ rat ion. Market & Business Development (MBD) (2004) published a report on Business Comput ing in t he UK in Sept ember 2004 in which it highlight s t hat t he sharp growt h in t he value of IT Professional Services largely reflect s t he increased t rend t owards BPO.S. i.S. particularly third party work. claims and loan process applications etc.e. The report also st at es t hat BPO which has increased it s share of t he t ot al market for t he aforesaid services from 36% in 2000 t o a project ed 42% in 2004 is believed t o be t he fast est growing area in t he sect or.

The Economist (May 2004) report s t hat India s revenue from BPO grew by some 50% in 2003 t o reach $ 3. Shroffs Foundation Trust 9 . Rao. t he Chairman of NASSCOM. a feat it should repeat regularly. rat her t han it s muscles of fact ory labor t o cat apult it self int o a fast -growing economy. indicat es t hat some 85% of it s member s revenues are derived from America and Britain. The developed vendor market Rick L. t he Indian BPO-Indust ry lobby Associat ion. A typical BPO Services model is depicted in the following diagram. (2004) highlight five BPO int ernat ional spot s which have emerged around the globe.The Geographical Distribution of the Outsourcing Industry Out sourcing can be segregat ed int o t wo t ypical market s: t he developed vendor market s and t he emerging vendor market . Viz India China Mexico - - Financial. Click et al. It is not surprising t hat India is now recognized as t he world BPO leader. A short review of count ry locat ions and their specializations is opportune. Healthcare. Mr.6 billion. each with a field of specializations. Engineering & Technical Manufacturing and Technical Manufacturing Analysis and Creative Administrative Unites States Philippines St rat egic Direct ion (2004) argues t hat India could well be t he first developing count ry t hat has used it s brain power.

Typical BPO Services Client Interactive Services Back-Office Transactions Information Technologies & Software Financial & Accounting Services Human Resource Services Knowledge Management Services Call Center Marketing Services Telesales Order Processing Client Support Warranties Administration Client Feedback Checks & Credit Card Processing Debtors Recovery Supplies processing Transportation Distribution Logistics Warehouse Management Needs Management Applications Development Applications Testing Software development Invoicing Services Accounts Payable Accounts Receivable General Accounting Internal Audit Payroll Services Data Management Centre Data mining Data Warehousing Health care Services Recruitment Training Management Pension Fund Knowledge Databank Implementation Services IT Help Desk Shroffs Foundation Trust 10 .

BPO in Chhota Udepur The cit y of Chhot a Udepur is a dist rict cent er wit h reasonably good infrast ruct ure and availabilit y of young manpower. The key for winning cust omers in BPO is t o act ually demonst rat e t he capabilit ies of BPO and t herefore t raining and pilot t est s are crit ical fact ors for building such capabilities. but SSC pass can also do). It is also well connect ed by road with Vadodara. A BPO can be set up in Chhota Udepur with a view to build a profitable business model for privat e sect or and at t he same t ime harnessing t he yout h populat ion available. a cust omer likes t o st art at t he lowest end of t he services and would like t o move t o higher levels only when t he cust omer expect at ions about qualit y and efficiencies are met .4. The privat e sect or will get low cost skilled manpower and communit y will benefit by availability of employment opportunities. This is a win-win situation for the community and private sector. The next chapt er provides det ails about pre-requisit es t hat are needed t o develop and demonstrate such capabilities. in BPO business. Shroffs Foundation Trust 11 . Such a process is t ypically at t he bot t om level of BPO services and requires agent s t hat are school educat ed (HSC preferred. A t ypical BPO which provide basic dat a processing services is envisaged as a st art ing point . Once a confidence level is established. Generally. the customer would be willing to pass on higher end services which provide better revenues.

It is imperat ive t o have cont inuous connect ivit y t oget her wit h a back-up in case t he main like goes down. These are key equipment and would need t o be set -up as per specificat ions of t he cust omer. Broadband Connectivity. Therefore.5. Electricity It is necessary t o have cont inuous availabilit y of power t o run t he business. The server will need t o be kept in an air-conditioned and secure server room. The soft ware would include operat ing syst ems. Pre-requisites A BPO is a set -up around Informat ion Technology and Manpower. building and machinery required for a traditional industry. Therefore. The following are the pre-requisites for setting up a BPO business unit. This would include deskt ops. as a back-up a generator is must. Computer and Server set-up including various software. dat a st orage and firewalls. swit ches. rout ers. racks. per employee. Generally. a leased line is t he main set -up and back is provided with Broadband. A rough est imat e for space needed is t o have average 45 sq. A proper area like an office (not necessarily air-condit ioned) which has basic set -up like workst at ions (t ables-chairs et c. servers. preferably a leased line. ft. process soft ware and dat abase syst ems. the pre-requisites for BPO business are different from typical land. Room/office etc. Shroffs Foundation Trust 12 .) and elect ric connect ions wit h proper light ing.

At least one person wit h managerial skills (Senior Team Leader) for each shift. Educated workforce young people ready to work in shifts. a senior person wit h leadership and managerial capabilities is needed to manage the business. at least ). Shroffs Foundation Trust 13 . The key t o success lies in managing t he t eams of people which will have issues of working at odd hours. Wit hout educat ed workforce (higher secondary school. it is crit ical t o have availabilit y of IT engineer full t ime so as t o reduce down t ime as much as possible and also to maintain the set-up in proper condition. pressures of performance and monot ony of t he work being done. Therefore. Also. availabilit y of such manpower and t heir willing ness t o work in such an indust ry are crit ical. at least good reading and writ ing skills in English language. no process can be carried out .At least one IT technician/engineer for each shift Since t he set -up would be fully based on IT syst ems. In most cases. It may be necessary t o t rain t he employees in t he language before t hey go for t raining in t he comput ers or t he out sourced process itself. t he success of business is dependent on t he t raining and t herefore people wit h basic education are required so that they can be properly trained. English language skills. Most of t he out sourcing comes from US & UK and t herefore t he language of process is English. Therefore.

t he proj ect will be implement ed by Shroffs Foundat ion Trust . The project plan can be depicted in the following diagram: Project Implementation Road Map Availability of Funds Project Planning Business Development Tie-up Corporate in-principle to take over the unit. Transpek has provided a Letter of Intent to this effect which is attached herewith. Once t he t raining is over and capabilit ies are built .6. Current ly. t he unit will be t ransferred t o Transpek Indust ry Limit ed or any of it s associat e companies for running it as a business. Month 1/2 Month 2/3 Month 3/4 Month 4/5 Month Month 5/6/7/8 Month 8/9/10 11/12 Kick-off Recruitment Training Training in Computers Training in Language Pilots 1/2/3 Go Live Training in dummy processes. Shroffs Foundation Trust 14 . Project Plan The proj ect is planned t o be implement ed over a period of 9 t o 12 mont hs out of which about 90% of the time will be spent in training and pilot tests. for t he period of Training et c.. Infrastructure set-up including connectivity.

and network cabling. ft . firewall etc. per person. 104 Desktops. Appropriat e soft ware Database Application etc. Resources Required A building of about 7.000 t o 9. A building is available on rent and is not to be bought or constructed. Workstations 105 nos. Operat ing Syst ems. will be required considering an average space requirement of about 70 t o 90 sq. Routers. 2. ft .7. Shroffs Foundation Trust 15 .000 sq. Resource Requirements Basic Assumptions 1. Sever Applicat ion. 5 Servers. switches. The Unit would be of 100 seat s excluding the Team Leaders and Qualit y Assurance staff. Air Conditioned Server Room Electrification Software for Learning English Language. The unit will run on two shift basis.

50.000 1.000 1. Financial Planning A: Capital Expenditure Sr. 7.000 5.000 Voice Equipments Network Cabling Software Server.8.000 Firewall 1 @ 180000 Router 1 @ Rs. CALs. 1 2 3 4 5 6 7 8 9 10 11 12 Particulars Building Refurbishment (assumed can be finalized after the building is identified).80.000 7.000 5.000 9. Dat abase.000 B: Annual Recurring Expenses for IT/Internet Set up Sr.20.000 Shroffs Foundation Trust 16 .35.00. per server Server Room with AC including Racks Switches 6 @ 25.00. Operat ing Syst em + MS Office Electricity Generator Total Investment Amount Rs.000 3.000 per station Desktops 104 @ 23000 per desktop Servers 3 @ 2. 7. 8.000 1.000 10.000 4.000 3.00.000 23.000 75.000 19. Workstations 105 @ Rs. 1 2 3 4 Particulars BSNL Internet Connection Port Charges 2 MBPS BSNL Local Lead Annual Maintenance Software Licenses Total IT Recurring Amount Rs.42.000 1.00. 75. Quality Assurance Staff (2 for each shift) @ Rs.00.00.400 D: Management Fees for Project Rs.000 Total Cost Rs.00. 10.000 36.00.000 C: Training & Operating Expense Rs.20. Other expenses Contingencies @ 10% of total exp. 20.50.60. 10. 19.06.84. Trainee Stipend @ 1500 per month Traveling etc.00.000 9. 1.000 each.000 2.08. Rs.000 9.C: Operating & Training Expenses for 12 months Sr.000 per month It Technicians 2 (1 for each shift) @ Rs.000 each Online Testing Electricity Telecommunication (except Internet) Provision of Tea.64.000 2. 6. 12.400 1.00.000 1. 2.000 each.500 per month Computer Proficiency Teacher 8 @ Rs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Particulars Training Material & Assignments for 200 trainees English Language Teachers 8 @ Rs. Coffee etc. Total Expenses Amount Rs.400 D: Total Project Expenses A: Capital Expenditure Rs.000 2. 10.40.000 3.000 B: IT/Internet Expenses Rs.000 12. Team Leader 2 (1 for each shift) @ Rs.00.000 10.000 1.000 8.000 2.400 Shroffs Foundation Trust 17 .

Traveling etc.000 5.80. Total Expenses Amount Rs.01.000 Total Costs Rs.000 1. 1 2 3 4 Particulars BSNL Internet Connection Port Charges 2 MBPS BSNL Local Lead Annual Maintenance Software Licenses Total IT Recurring Amount Rs.000 1. Financial Feasibility Once t he proj ect is implement ed and capabilit ies are built .000 10.000 7. 5.00. English Language Teachers 1 @ Rs. 3. The financial feasibilit y for such a unit is shown as under: A: Annual Operating Expenses (two shifts) Sr.20. Coffee etc.00.20. 10.39.000 5.000 per month.00.500 Annual Depreciation Rs.00.00.71. Other expenses Contingencies @ 5% of total exp.500 per month Computer Proficiency Teacher 1 @ Rs.00. Manager s Salary 2 @ 30.00.500 Shroffs Foundation Trust 18 . 12.000 5. Agent Salary @ 3000 per mont h all inclusive for 180 agents Team Leader & Qualit y St aff Salary @ 4000 per month for 20 nos.000 2.9.000 19. 1 2 3 4 5 6 7 8 9 10 11 12 13 Particulars Continuing Training Material etc.000 Total Expenses Rs.000 2.000 per month Online Testing Electricity Telecommunication (except Internet) Provision of Tea. t he unit would be handed over t o t he privat e part ner. B: IT & Internet Cost Sr. 1.000 2.00. 8.550 1.000 6.20.000 9.000 1.

64. of hours per day per shift No.15. the unit can take up higher level processes that would generate much higher per Data Unit revenue. Daily Revenue for Break-even per agent Average no.500 300 8 4. 1 2 3 4 5 6 7 8 9 10 Particulars Total Annual Costs Total Working days No. of Dat a Unit s Processed daily per agent for a basic process Revenue per Data Unit Revenue per day per agent Net Surplus per agent per day Rs. 1.000 Rs. of man-hours for 180 agents Hourly Revenue Required per agent for Break-even. 1. 56 Thus. t he proj ect is viable f or even wit h a base level process. 38 Rs. As t he capabilities of agents are built.20 Rs. 304 300 Rs. Shroffs Foundation Trust 19 .Financial Feasibility Calculation Sr.32. 360 Rs.

10. Shroffs Foundation Trust 20 . it is recommended t o approve the project. Conclusion Considering t hat t he proj ect has all t he ingredient s for success and well as inherent possibilit y for replicat ion in ot her similar areas.

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