1

ACKNOWLEDGEMENT

First of all, I would like to thank our college for giving us the opportunity to deal with
projects as a part of the BMS curriculum.

I would like to take this opportunity to express our humble gratitude to our respected
professors, for the creative support and motivation we received from them.

It was very reflective learning with them and I am sure that it will be very helpful in my
further studies and fields of work. I am grateful to them as they helped me in all the
necessary requirements of my project. Thus, this is my sincere thanks to the professor for
the guidance and support and for imparting me with great knowledge.

Thanking you

Rahul Agarwal

TYBMS

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 Index

Contents Page no
What is outsourcing 4-5
Why companies outsource 6
Knowledge process outsourcing 7
Pros and cons of outsourcing 8-9
What is BPO 10-11
BPO Chronologically 12-13
The BPO Industry 14
Why BPO? 15
What constitutes BPO? 16-18
Global BPO Industry overview 19
BPO Trends 20
Why India? 21
Indian BPO Highlights 22-23
Types Of BPO Services 24-25
BPO business models 26
What does BPO Includes? 27
Top 10BPOs in India 28
Important areas of training in BPO 29
Employee attrition in BPO 30-31
Influence of foreign exchange on BPO 32
Challenges before BPO in India 33-36
Impact of recession on BPO 37-38
Role of BPO in India’s economic growth 38-40
BPO Benefits 41-47
BPO Threats 48
Problems in BPO 49-50
BPO Backlash 51
Scope of BPO sector in future 52

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Future opportunities for India 53-56
Conclusion 57

What is Outsourcing?

Outsourcing is contracting with another company or person to do a particular

function. Almost every organization outsources in some way. Typically, the
function being outsourced is considered non-core to the business. An insurance
company, for example, might outsource its janitorial and landscaping operations to
firms that specialize in those types of work since they are not related to insurance
or strategic to the business. The outside firms that are providing the outsourcing
services are third-party providers, or as they are more commonly called, service
providers Although outsourcing has been around as long as work specialization has
existed, in recent history, companies began employing the outsourcing model to
carry out narrow functions, such as payroll, billing and data entry. Those processes
could be done more efficiently and therefore more cost-effectively, by other
companies with specialized tools and facilities and specially trained personnel.
Currently, outsourcing takes many forms. Organizations still hire service providers
to handle distinct business processes, such as benefits management. But some
organizations outsource whole operations. The most common forms are
information technology outsourcing (ITO) and business process outsourcing
(BPO).
Business process outsourcing encompasses call centre outsourcing, human
resources outsourcing (HRO), finance and accounting outsourcing, and claims
processing outsourcing. These outsourcing deals involve multi-year contracts that
can run into hundreds of millions of dollars. Frequently, the people performing the
work internally for the client firm are transferred and become employees for the
service provider. Dominant outsourcing service providers in the information
technology outsourcing and business process outsourcing fields include IBM, EDS,
CSC, HP, ACS, Accenture and Capgemini.
Some nimble companies that are short on time and money, such as start-up
software publishers, apply multisourcing -- using both internal and service provider

4
staff -- in order to speed up the time to launch. They hire a multitude of
outsourcing service providers to handle almost all aspects of a new project, from
product design, to software coding, to testing, to localization, and even to
marketing and sales.
The process of outsourcing generally encompasses four stages: 1) strategic
thinking, to develop the organization's philosophy about the role of outsourcing in
its activities; 2) evaluation and selection, to decide on the appropriate outsourcing
projects and potential locations for the work to
be done and service providers to do it; 3) contract development, to work out the
legal, pricing and service level agreement (SLA) terms; and 4) outsourcing
management or governance, to refine the ongoing working relationship between
the client and outsourcing service providers.
In all cases, outsourcing success depends on three factors: executive-level support
in the client organization for the outsourcing mission; ample communication to
affected employees; and the client's ability to manage its service providers. The
outsourcing professionals in charge of the work on both the client and provider
sides need a combination of skills in such areas as negotiation, communication,
project management, the ability to understand the terms and
conditions of the contracts and service level agreements (SLAs), and, above all, the
willingness to be flexible as business needs change. The challenges of outsourcing
become especially acute when the work is being done in a different country (off
shored), since that involves language, cultural and time zone differences
“The strategic use of outside resources to perform activities traditionally
handled by internal staff and resources”.

It is also defined as, the process of transferring an existing business activity,

including relevant assets, to a third party.

5
 Why Companies Outsource?

Outsourcing can be divided into two broad categories:

 BPO
 KPO
Apart from BPO and KPO, ITO or Information Technology Outsourcing is
another major category.

6
 KPO or Knowledge Process
Outsourcing

 Typically calls for work that needs higher Levels of involvement from the
worker.

 The worker has to employ advanced levels of research, analytical and

technical skills and has to make decisions of a higher order than BPO work.
Examples: pharmaceutical research and development, patent/ intellectual
property research, animation and simulation. Data research and analysis, legal
services, content writing and development and database
development services.
 KPO industry is less old and mature than the BPO sector.

7
 Moving towards KPO
India KPO services market is expected to:
 Grow from $1.2 Bn to $15.5 Bn in 2010 Latent opportunities
 CAGR of 43% • Equity Research
 Hold 71% of global KPO market in 2010 • Logistics management
from 56% in 2004
• Consulting services
Rapidly evolving opportunities • Monitoring services
• Network management • Legal advice
• Distribution product • Medical advice
Established opportunities
development
• Data search, integration and
• Customer interaction analysis
services • Marketing services
• Finance and accounts • Secretarial services
services
• Web site services
• Engineering design services
• Remote education
• HR services Source: NASSCOM McKinsey Study- India IT
• Customer Analytics Strategies, Evalueserve
• Animation
• Translation, transcription
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and localisation

Reasons for outsourcing

 Cost savings
 Focus on Core Business.
 Cost restructuring.
 Improve quality.
 Knowledge
 Contract
 Operational expertise
 Access to talent
 Capacity management.
 Catalyst for change.

8
  Enhance capacity for innovation..
 Reduce time to market
 Commodification.
 Risk management.
 Venture Capital.
 Tax Benefit

The pros and cons of Outsourcing

It is imperative for business houses to be knowledgeable about the pros and cons
of Outsourcing before they decide to jump the outsourcing bandwagon. As
outsourcing while certainly an attractive proposition on paper, can spring many a
nasty surprise on company in practice.
It is important to take a good look at both the advantages and disadvantages of
the outsourcing before taking the decision on whether to outsource or not.
Company should make sure that they know exactly what they stand to gain or
lose by outsourcing their work.
First of all, the advantages of outsourcing for one’s business are that one will be
able to get done some of the less important jobs cheaper. For instance, if one is
finding that one do not have enough money in his budget to make necessary
changes in order to keep ones business afloat, then he should probably find a
way to reduce the amount of money that he is spending.
Another advantage of outsourcing is that there are actually other companies and
places where one can get the work done better than in his own company. Not
only that, but if one have a company that requires a large number of different
products or services in order to function, it might take less time for him to find a
good outsourcer than it would take him to train new people.
There are a few disadvantages to outsourcing, however, and one should
definitely take those into account as well. For one thing, if one outsource, it
means that he is going to have to work very closely with the company that one
outsource your work to. Otherwise, you won't get the finished work as soon as

9
 you need it. Having another company involved in ones business might get
tiresome after a while.
Another thing that one should consider is that depending on where he outsource
to, it might hurt your business. This is generally only a big deal if who one’s
customers are really matters. Some people shop at small businesses because
they're local - and if one has a business like that, then outsourcing might be to his
disadvantage.
In the end, however, one can only answer the question of whether or not
outsourcing is right for his business?

What is Business Process Outsourcing?

What is business process outsourcing? Business process outsourcing otherwise

know as BPO is the process of leveraging technology vendors in various third
world or developing nations for doing job which was once the responsibility of the
enterprise or simply put, it is the process of shitting an internal job process
outside/external company which might have a completely different geographical
location.
BPO usually consisted of outsourcing processes such as payroll. Then it grew to
include employee benefits management. Now it encompasses a number of
functions that are considered "non-core" to the primary business strategy. It is
common for organizations to outsource financial and administration (F&A)

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processes, human resources (HR) functions, call center and customer service
activities and accounting and payroll.These outsourcing deals frequently involve
multi-year contracts that can run into hundreds of millions of dollars. Often, the
people performing the work internally for the client firm are transferred and
become employees for the service provider. Dominant outsourcing service
providers in the BPO fields (some of which also dominate the IT outsourcing
business) include US companies IBM, Accenture, and Hewitt Associates, as well
as European and Asian companies Capgemini, Genpact, TCS, Wipro and Infosys.
Generally the processes being outsourcing as part of BPO are backend jobs like
call/help centres, medical transcription, billing, payroll processing, data entry and
the like. Most of these jobs are outsourcing by first world nations like USA and
UK to third world nations like India, Philippines, China, Malaysia and some
eastern European countries.
These nations have a good pool of English speaking youth who receive accent and
job related training before they are inducted at a salary which is much lesser than
what their counterparts in first world nations would demand. This allows first
world organizations to get higher profits and provide better services by lowering
the prices and by recruiting more labour than they could possibly do otherwise. In
addition to benefiting the first world nations, business process outsourcing has also
benefited third world nations by generating much needed jobs.

Hence, Business Process Outsourcing and can be aptly defined as “The act of
utilizing the services of a third party by a company in order to perform its
back office operations that might be payroll administration, customer help
desks/ call centres, tele- marketing, accounting, billing; the list is endless.”
Business process outsourcing (BPO) is typically categorized into back office
outsourcing - which includes internal business functions such as human resources
or finance and accounting, and front office outsourcing - which includes customer-
related services such as contact center services. BPO that is contracted outside a
company's country is called offshore outsourcing. BPO that is contracted to a
company's neighboring (or nearby) country is called near shore outsourcing.
Given the proximity of BPO to the information technology industry, it is also
categorized as an information technology enabled servicer ITES. Knowledge
process outsourcing (KPO) and legal process outsourcing (LPO) are some of the
sub-segments of business process outsourcing industry
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Business process outsourcing (BPO) in other Words is, “The act of giving a
third-party the responsibility of running what would otherwise be an internal
system or service.”

For instance, an insurance company might outsource their claims processing

program or a bank might outsource their loan processing system. Other common
examples of BPO are call centre and payroll outsourcing.

Typically, companies that are looking at business process outsourcing are hoping
to achieve cost savings by handing the work to a third-party that can take
advantage of economies of scale by doing the same work for many companies. Or
perhaps the cost savings can be achieved because labor costs are lower due to
different costs of living in different countries. In exchange for the potential cost
savings, the company in question must relinquish control over an aspect of their
business which explains why business process outsourcing is often reserved for
non-critical, non-core type of work.

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 BPO: India chronologically
The Birth(1995-2000)

 1995
Pramod Bhasin and Nigel Andrews of GE make a case for captive back
office operations in India. GE M & A asks Anderson Consulting to explore
the market for third party vendors.

 1996
British Airways sets up a 30 people captive back office in Mumbai to
undertake data entry work. American Express assigns Raman Roy the task
of setting up a call centre in Gurgaon. The same year, Anderson submits its
verdict to GE: captive is the way to go.

 1997
GE flags off captive BPO operations in Gurgaon through subsidiary GE
Capital International Services (Gecis). Raman Roy is signed on as CEO.
Gecis starts operations with basic data entry work.

 1999
Driven by the Internet boom, Sanjeeev Agarwal, backed by $3 million
venture funding from CDC Capital Partners, sets up Daksh eServices in
Gurgaon and begins offering email support service.

 2000
Raman Roy quits Gecis to set up Spectramind in Gurgaon. CustomerAsset
and 24/7 Customer setup shop in Bangalore. All three rope in venture capital
investment and follow Daksh’s lead in fashioning teir business models
around email support services. The third party industry is born.

The Gold Rush(2000-02)

 2001
The dotcom crash is followed by boom in demand for voice bsed services.
Customer support and telemarketing services fuel boom in call centres.
Captives like Dell, HSBC, Standard Chartered, AOL, and HP lead the boom.
Multinational third partystart upsl land big ticket customers- Daksh-Sprint,
Spectramind- American Express.

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  2002
Private equity investors, Indian IT sevices majors and large corporate houses
rush into third party BPO. Warburg Pincus acquires a 70percent stake in
British Airways’ captive. WNS Global Services is born. General Atlantic
pumps $21 million into Daksh. Oak Hill Capital backs a management
buyout of the Conseco group’s stake in EXL Services. Indian IT majors
enter the space Wipro buys Spectramind for $100 million, Infosys sets up
Progeon and Satyam announces Nipuna. ICICI subsidiary I-One Source
buys CustomerAsset. India’s BPO revenues surge to $2.7 billion as on
March 2003 and voice corners 60 percent of the market.

Consolidation(2002-04)

 2003
Third party firms begin to scale up revenues and diversify service lines
through aggressive M&A led strategies. WNS buys UK based Town and
Country and US based ClaimsBPO to enter insurance segment. I-One
Source buys British Telecom’s call centre in Ireland. Transworks is acquired
by Aditya Birla Group.

 2004
WNS becomes the first Indian third party BPO firm to hit $100 million
revenues. IBM buys Daksh for $130 million. Signals the entry of the Global
Big Five in India’s BPO market. GE sells 60 per cent in Gecis to private
equity firms General Atlantic and Oak Hill Capital for $500 million. Gecis
becomes the largest third party Indian BPO firm.

Coming of Age

 2005 onwards
M& A – driven consolidation leads to emergence of four third party camps.
Indian scale players with multiple service lines across the value chain-
Genpact, I-One Source, EXL, WNS, MNC third party players – Convergys,
ADP, Hewitt. Integrated IT and BPO services offering – Infosys, Wipro,
IBM, Accenture, Niche players – Evalueserve, Office Tiger, Marketrx,
Indecomm.

 Captives continue to set up operations but are now looking at different

models – BOT, hybrid (third party and captive). The next phase of BPO will
see players in all categories moving towards high end, knowledge based
services like analytics and market research.

14
 The BPO Industry
The BPO industry has flourished at a frantic pace in the last few years and
companies have ended up with huge savings by being a part of the industry. By
outsourcing their back office business processes to cheaper nations like China,
India, Philippines, Mexico, South Africa etc companies can cut costs, better
concentrate on their core businesses and strengths, ensure better customer
satisfaction and in a way get an edge over their competitors. A report suggests that
US firms have saved nearly $8 billion through outsourcing to third world nations
like India

Industry size
India has revenues of 10.9 billion USD from offshore BPO and 30 billion USD
from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of
the total BPO Industry, but a commanding 63% share of the offshore component.
This 63% is a drop from the 70% offshore share that India enjoyed , despite the
industry growing 38% in India last year, other locations like Eastern Europe,
Philippines, Morocco, Egypt and South Africa have emerged to take a share of the
market.
China is also trying to grow from a very small base in this industry. However,
while the BPO industry is expected to continue to grow in India, its market share
of the offshore piece is expected to decline. Important centers in India are
Bangalore, Hyderabad, Kolkata, Mumbai, Pune, Chennai and New Delhi.
The top five Indian BPO exporters for 2006-2007 according to NASSCOM are
Genpact, WNS Global Services, Transworks Information Services, IBM Daksh,
and TCS BPO.
According to McKinsey, the global "addressable" BPO market is worth $122 -
$154 billion, of which:35-40 retail banking, 25-35 insurance, 10-12
travel/hospitality, 10-12 auto, 8-10 telecoms, 8 pharma,10-15 others and 20-25 is
finance, accounting and HR. Moreover, they estimate that 8% of that capacity was
utilized as of 2006.

15
 Why BPO?

 It has been expensive to hire best people in company.

 Therefore many companies have chosen to outsource various aspects of MIS

functions.

 A specialized firm can always offer better services at better price.

 Worldwide spending on BPO services reached $405 billion in 2003, an

increase of about 8% from 2002.
Revenues are expected to grow at a compound annual rate of 11% through
2008, when they will total $682.5 billion.

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 What constitutes BPO?

BPO deals mainly with non-core processes of an organization. Some of

these processes have been briefly explained below.
 Administrative support: Outsourcing of administrative support functions
includes data entry, document conversion, forms processing, document
scanning, indexing, secretarial tasks support, etc.
 Customer relationship management: Customer service outsourcing
includes outsourcing of functions such as customer support, order taking,
customer service, product support, technical help desk, collections and
market research.
 Document processes: Document process outsourcing includes
outsourcing of customer facing, technical, marketing and communications,
financial accounting, and regulatory compliance documents.
 Finance and accounting: Finance and accounting outsourcing includes
services such as internal auditing, time and expense management, travel
expenses, credit and debt analysis, collections, invoicing, accounts payable,
accounts receivable and billing-dispute resolution.
 Human resources and training: Human resources (HR) is one of the most
critical assets of a company and companies need to carry out various tasks
such as recruitment, training, attrition/retention, database management,
contract-worker management, etc., for their employees. Carrying out these
tasks through an internal HR department is costly and diverts the attention of
the management from its core business issues. Hence, companies are now
resorting to HR outsourcing big time.
 Intellectual property research and documentation: Outsourcing in
intellectual property research and documentation includes filing and drafting
of patent applications, prior art research, licensing support, and patent
portfolio analysis.
 Legal services: Legal process outsourcing (LPO) involves consulting,
research, transcription, documents management, billing, translation and
other administrative and secretarial support services required for various

17
 legal functions such as commercial litigation, arbitration and mediation,
appeals, government contracts, legal risk evaluation, etc.
 Medical transcription: Medical transcription is writing down medical
records dictated by physicians and other healthcare professionals. These
records include patient history and physical reports, clinic notes, therapeutic
procedures, clinical course, diagnosis, prognosis, discharge summaries, etc.
 Payroll maintenance and other transaction processing: This segment
includes payroll, payment, check, credit card and stock trade processing.
Forester research predicts transaction processing to be a large segment
within the BPO industry soon, with a market size of USD 58 billion in 2008.
Some vertical processes such as mortgage, loans and insurance claims
processing are also being outsourced.
 Product development: Companies need to constantly innovate to remain
competitive in the market. With the increasing specialization of expertise
required to carry out product development, companies choose to outsource
their R&D functions to vendors who have expertise in a given field. Over
the past few years, numerous MNCs have initiated offshoring R&D to other
countries including India which is emerging as a hub for R&D outsourcing.
 Publishing: Publishing outsourcing involves outsourcing of publishing
functions such as book design, book digitization, e-publishing, drawings and
graphics, indexing, journal administration, etc.
 Research and analysis: Companies require data and its analysis for making
informed strategic decisions. These companies have started outsourcing their
research and analysis requirements to vendors who specialize in typical
research and analysis work such data analytics, financial analytics, market
research, secondary research, primary research, industry overview,
competitive intelligence, etc.
 Sales and marketing (including telemarketing): Sale and marketing
outsourcing involves delegating parts of sales and marketing functions such
as cold calling, email pitches, telephone surveys, lead generation, lead
qualifying, appointment setting, sales team management, etc.
 Security: Companies have to search for new technologies and employ
qualified security professionals to keep their data secure from theft.
Maintaining these resources and implementing a fool-proof security policy is

18
 a difficult task which can be better handled by experienced third party
security agencies. Security outsourcing involves management of
investigative services, physical security, electronic security systems,
computer and network security, etc.
 Supply chain management: Outsourcing in supply chain management
involves logistics, procurement, warehouse management, contract
management, supply chain relationship management, etc.

19
Global BPO industry Overview

TOP 25 BPOs -Global

20
 BPO Trends

The BPO industry is a developing sector and is being studied by analysts

and researchers all over the world. Analysts tracking BPO have observed
the following trends in the industry:
 The BPO market worldwide is expanding with new services getting added
to the list of business processes that are outsourced and new locations
coming up as potential offshore destinations, India being the most preferred
destination for offshore BPO.
 Cost savings is one of the most important drivers now. Information
security, execution capability and financial stability are important
considerations while selecting a vendor.
 According to IDC, customer care and logistics are mature segments, while
procurement and training are emerging markets and are expected to have a
growth of more than 10 percent in the next five years.
 It is also observed the latest trend of offshore insourcing , in which firms
establish their own offshore captive centers. These captive centers are
generally shared service centers and allow the firms to retain control over
the processes.

21
 Capabilities: Why go to India?
The driving forces that account for the increase in foreign investments through
the BPOs in India are:

 Language major attraction for

multinationals advantage over
competitors.
 Educated Employees large number
of qualified workers Proven to be
the best in the IT and computer
software fields
 Strong technical skills
 Eagerness to engage clients
 Emphasis on quality services
 Skilled sets and workers
 Cost effectiveness
 Quality products

22
 English speaking manpower

Business Functions or Process that can be Outsourced

 Human Resource
 Sales, Marketing and Customer /service
 Payment Service
 Finance
 Administration
 Maintenance
 Manufacturing

Indian BPO market: Key highlights and trends

23
 Indian BPO Exports
14
11.82
12
USD Billio n

10 8.63
8
6.30
6 4.60
4 3.10

2
-
FY 2004 FY 2005 FY 2006 (E) FY 2007 (E) FY 2008 (E)

Break-up of Indian BPOs

11% 11%
3% Customer Interaction 3% Customer Interaction
Services Services
F&A F&A
46% 46%
HR HR

40% Others 40% Others

 BPO in India is growing at 32% and is estimated to cross $ 8.63 billion in

2007

24
  Direct employment in BPO was 415,000 in 2006 and is expected to cross
545,000 in 2007
 Indian IT-BPO industry has helped create an additional 3 million job
opportunities through indirect and induced employment, which will go
upto 6.5 million by 2010
 The contribution of BPO & IT to India’s GDP will rise to 5.4% by 2007,
against 1.2% in 1998
 The industry is moving from transaction processing & voice to complex
knowledge based services

Types of BPO Services

BPO services are generally categorized into horizontal and vertical services. These
have been explained below:

1. Horizontal BPO: Horizontal BPO involves function centric outsourcing. The

vendor specializes in carrying out particular functions across different
industry domains. Examples of horizontal BPO are outsourcing in
procurement, payroll processing, HR, facilities management and similar
functions. Automatic Data Processing (ADP) is an example of a horizontal

25
 BPO vendor. ADP focuses on providing services in horizontal functions
such as payroll, HR, benefit administration, tax solutions, etc. However,
according to Gartner, companies should focus on providing vertical services
as the market matures.

2. Vertical BPO: A vertical BPO focuses on proving various functional

services in a limited number of industry domains. Healthcare, financial
services, manufacturing and retail are examples of vertical BPO domains.
EXL Service Holdings is a vertical BPO having focus on industry domains
such as healthcare, business services, utilities and energy and manufacturing.

26
 BPO Business Models
Over the years, different models have been used for conducting business in BPO.
The regular outsourcing models of on-shoring, near-shoring and offshoring are
seen in BPO as well. TPI, a sourcing advisory, has observed that in addition to on-
shoring, near-shoring and offshoring, BPO operations are also conducted through
the following three business models:

•  Transactional BPO: Transactional BPO handles one aspect of a process only.

The customer has to carry out a significant part of the process in-house and hence
the customer owns the risk of the process. Also, outsourcing many aspects of the
process in a transactional mode leads to complex fragmentation which can pose as
a threat to productive delivery.

•  Niche BPO: A niche BPO carries out 3-4 aspects of a process. A niche BPO,
which also makes certain investments in the customer's process, aims at improving
the efficiency of the process. The vendor in a niche BPO works in close
coordination with the buyer, sometimes seeking the services of the customer's
employees. Both the vendor and the buyer share the risk of the process.

•  Comprehensive BPO: A comprehensive BPO handles both transactional and

administrative tasks in a process and takes 70 percent responsibility of the output.
The vendor purchases the buyer's assets and also hires most of its employees.
Comprehensive BPO has bulk deals lasting for 7-10 years.

27
Business Process Outsourcing includes the following areas and a lot
more…...

 Back office operations

 Customer Relationship Management

 Call Centers and telemarketing

 Tele-servicing and product support

 Payroll maintenance

 Finance / Accounting/billing

 Human Resources

 Logistics Management

 Supply Chain Management

 Medical transcription

 Back Office Operations

 Insurance Claims Processing

 Legal database maintenance

28
 Top 10 BPO companies India
Sr. Revenue
No Companies* (In Cr)
1 Genpact India Pvt Ltd 2220
2 Transworks 1510
IBM-Daksh Business Process 1260
3
Services Pvt. Ltd.
4 Tata Consultancy Services BPO 1107
5 Cambridge solutions 1000
6 WNS Global services 990
7 Wipro BPO 935
8 Convergys India 890
9 First source 809
10 HCL BPO 756

29
 Important areas of training in BPO

 Accent training
 Accent training
 Communication skills
 Telephone etiquette
 Tele sales
 CR and
 Call centre terminology.

30
 Employee Attrition in BPO: Top 5 Reasons
The attrition rate in BPO was always a cause of concern for the companies. Before
they can settle down with a stable team of call center agents and get on with their
work, there are employees leaving for greener pastures. While the reason for the
attrition rate being high varies from one Telemarketing Company to another, there
are some common reasons as well. In this article, let’s pin down the top 5 reasons
that can be applied to explain the high attrition rate in almost all the call centers.
These reasons are not specific to a particular call center BPO and the generalized
reasons can be added to the specific ones as well. Here they are:

1. Pay: The salary of the call center agents is a bug source of employee attrition in
the BPO sector. BPO service employees are generally paid more than employees of
other industries. The reports of the International Labor Organization (ILO) prove
that. Yet, payment is a primary reason for the answering service agents to change
their turf. The payments may be good at one center, but it generally is better in
some other unit. Lead generation companies are always willing to pay extra for
31
trained agents if they are invincible to the project. And if the agent finds the raise
more than what he expects from the current company, he/she readily quits.

2. Stress: The working conditions of BPO units are far from ideal. You can again
fall back on the ILO reports to confirm that call centers don’t really have an
amicable and competitive working atmosphere. There is too much of stress in the
air, causing a lot of the call center agents to fear burnout. After working for some
months at a stretch, working additional hours and handling more than meets the
eye, the answering service agents get so stressed that they feel they need a break.
And a change of conditions and projects is just what they need, more often than
not.

3. Timings: The timing of call centers is another reason. Call center agents have to
work graveyard shifts for months. Timing for the call center services don’t really
change unless the project gets over. There is no way a BPO agent can change his
shift time to more convenient ones unless they move to another unit. Seeing no
other way, they end up doing so.

4. Health: The crazy shift, the stress and the body clock going for a toss are health
crashers for the call center agents. It’s not a very comforting idea to keep working
under these conditions and not take a body blow. Many BPO agents have been
advised by their doctors to quit working and take a break.

5. Better Opportunities: The lack of internal growth opportunities have a lot to do

with attrition. When a call center employee finds that the next step is beyond
means, it’s time to leap over to another unit. Growth prospects and the opportunity
to learn new skills in technology, telemarketing or answering service, is always a
prime mover.

32
 INFLUENCE OF FOREIGN EXCHANGE ON BPO SECTOR

The sharp appreciation of the rupee in relation to the dollar and, to a lesser extent,
the euro, the pound and the yen has naturally affected the booming software
exports and the BPO industry. The rupee could become even stronger. The BPO
industries are reportedly operating on thin margins.

An analysis of the recently released first quarter (April-June 2007) results of the
top four information technology (IT) companies — Infosys, TCS, Wipro, and
Satyam — is noteworthy for two reasons. First, it shows how these companies
fared at a time the dollar lost more than 7 per cent in rupee terms. Secondly, it
provides insights into how they might cope with a dearer rupee over the medium
term. It needs to be stressed that the financial performance of these companies
continues to be impressive, although it may not have matched the lofty standards
the share market has routinely come to expect of them. These four companies
account for more than 40 per cent of receipts from software exports that totaled
over $29 billion in 2006-07. For the domestic stock markets the relevance of these
33
companies can hardly be overstated. A company such as Infosys counts not only
in an evaluation of other IT stocks but also in deciding the behaviour of the stock
market as a whole.
Unlike merchandise exporters who secured a partial relief by way of a Rs.1400
crores package of concessions, the IT and the ITES sectors will have to grapple
with the consequences of a stronger rupee in a number of more nuanced, and often
unique.

Challenges before BPOs in India

In the domain of Business Process Outsourcing (BPO), the countries competing
with India are Mexico, Philippines, Malaysia, China, and Canada. These countries
have obviously placed several challenges before BPOs in India. The challenges
that India faces from these countries include availability of workers who are more
skilled and educated.

BPOs in India are also facing challenges since the competing countries have
several advantages over India. It's not that India cannot or does not provide these
advantages but it's sufficient to say that these amenities in India are still at a
nascent stage. These include:

 Infrastructure for providing good telecom facilities

 Finding workers who are aware of the American culture
 Setting up new service lines
 Improving operating processes

34
  Further cost reduction

The workers in Philippines are more conversant with foreign languages like
Spanish, German, French, and Japanese and are used to the American culture too.
It is also a challenge for India to continue maintaining its talented task force in the
BPO sector because it is facing competition with China in this area. The good
news, however, is that not all Chinese worker can speak English as fluently as
Indians can.
Challenges before BPOs in India include possibility of a backlash from European
and North American markets which are posing a great threat to the Indian BPO
industry. India is looking forward to take up huge offshoring ventures but it's
difficult to set up the infrastructural requirements for this. The other reason behind
the slowing down of offshoring in India is due to the political reasons concerning
markets of Europe and North America.
In 2004, many jobs were lost in the offshoring venture due to these reasons. India
is faced by the challenge to provide secure and quality offshore services. The
services include power and cafeteria services which are important for facilitating
employee well-being.

As already mentioned above, India is facing difficulties in finding skilled workers

for BPO jobs and statistics of 2004 show that out of all the students graduating in
India, only the following are suitable for BPO jobs:

 25% of technical graduates

 10-15% of non-technical graduates

The challenges before BPOs in India are increasing rapidly but that could be the
motivating factor for India. BPOs in India need to improve the workforce by
emphasizing areas such as foreign languages as well as streamlining operational
procedures.

Some other Challenges faced by BPos in India

35
 Challenges for India
Rising competition

 In the next ten years, China will replace India in its number 1 position in the
global ITES-BPO industry.

 Rising costs and low efficiency in many cities like Bangalore will make
software outsourcing less attractive in future. The giants may show a drop in
earnings.

 India ’s terrible Infrastructure will continue to be a drag on the potential of

India giving other countries the competitive advantage.

36
  Other competing countries providing low-cost outsourcing options will exert
a downward push on costs – East Europe, Latin America, South Africa

Infrastructure

 India ’s ability to develop infrastructure is far outpaced by neighboring

China
 Metro cities are getting saturated and costs are rising -- Tier II towns
need to develop infrastructure but India’s track record does not bode well
for fast development.

Human resources and training

 The demand-supply gap in India for knowledge workers is being felt now in
Bangalore but may peak India wide in 2008-2009

 The education system needs transformation to produce people with skill sets
that match industry needs.

 The transition to knowledge processing will be a much bigger challenge for

the Indian company and employee than it was for BPO services. The typical
college graduate many not have background or flexibility to understand
global issues required by this type of service.

Drivers, Inhibitors & Challenges for the Indian BPO Industry

37
IMPACT OF RECESSION ON BPO SECTOR

38
Consequences of US recession on India job market

Worst affected because of US recession will be the service industry of India. Under
service industries come BPO, KPO, IT, ITeS etc. Service industry contributes
about 52% to India's GDP growth. Now if that is going to get hurt then it will also
hurt India's overall growth but very slightly. India is not going to face a major
impact due to US recession. People may say that there is going to be a huge job
loss due to recession. and will cite the example of TCS firing about 500 employees
but these were employees who didn’t perform and for cost cutting one have to
reduce Non performing asset and that exactly what has been done. There is no
threat to the skilled people. According to NASSCOM India will have a shortage of
about 5 million skilled people in IT/ITeS. So there are lots of opportunities.75 per
cent of its revenues come from the US. Low demand for services may force most
Indian Fortune 500 companies to slash their IT budgets. Zinnov Consulting, a
research and offshore advisory, says that besides companies from ITeS and BPO,
automotive components will be affected. During a full recession, US companies in
health care, financial services and all consumers demand driven firms are likely to
cut down on their spending. Among other sectors, manufacturing and financial
institutions are moderately vulnerable. If the service sector takes a serious hit,
India may have to revise its GDP to about 8 to 8.5 per cent or even less.

As per Raman Roy, Father of Indian BPO industry, recession is not a decrease in
consumption. it is just that the rate of growth has changed. Recession actually
provides the opportunity to create value for customers at different price points.
According to Lokendra Tomar, senior vice-president, Integreon, a BPO firm, says
recession is likely to have a dual impact on the outsourcing industry. Appreciating
rupee along with poor performance of US companies will affect the bottom line of
the outsourcing industry. Small BPOs, which are operating at a net margin of 7-8
per cent, will find it difficult to survive. According to Dharmakirti Joshi, director
and principal economist of CRISIL, along and severe recession will seriously
affect the portfolio and fixed investment flows.

Corporates will also suffer from volatility in foreign exchange rates. The export
sector will have to devise new strategies to enhance productivity.

39
 EFECT OF RECCESSION ON THE MARKET LEADERS IN
BPO SECTOR
In a year when outsourcing of application development and maintenance projects
has slowed down, top customers such as Bank of America, JPMorgan and Citibank
continue to send more back office projects to India, as they seek to lower their cost
of operations by up to 40 percent.
According to Nasscom, India’s back office outsourcing industry will grow at 18.4
percent this year to reach $14.8 billion. Outsourcing of IT services will clock a
lower growth at around 13.5 percent this year, and could even decline to single
digit growth if the situation does not improve.“The Indian BPO industry is likely to
maintain double digit growth rate as most of the work done by them is ‘keeping the
lights on’ or non-discretionary,” said Everest Group principal & country head
Gaurav Gupta. The current recession is forcing companies from other verticals
such as media, entertainment, healthcare, energy and utilities to consider
outsourcing of back office work.“BPObusiness is largely annuity in nature where
the contracts are for a longer term making it slightly more immune from economic
recession,” said Intelenet EVP Sandeep Aggarwal says. “A CFO is constantly
looking at gaining control on the cost structure,” said Gartner senior research
analyst Arup Roy. According to a Gartner study released in April, 2009, Indian
BPO providers have proved to be stiff competition to western BPO providers,
accounting for 5 percent of market revenue generated among the top 150 providers
in 2008. Gartner expects this increase in revenue to be maintained, with the BPO
market share of Indian vendors expected to nearly double by 2010.Meanwhile,
Infosys BPO CEO Amitabh Chaudhry said that the BPO growth story is primarily
driven by captive outsourcing. Captives have not stopped outsourcing; they have in
fact increased their pie,”

REVENUE GENERATION IN BPO SECTOR

Revenue is generated on the basis of volume / seats a BPO has or is required for
any process.
40
 For eg. If a process is outsourced to a vendor, client provides the data on the
volume and a charge per unit is defined in the agreement. Then the vendor is paid
on the basis of volume (no. of calls*price per call). The average revenue earned by
BPO industry in 2007 in India was $ 13,811 million.

BPO Role in India's Economic Growth

Indian revenues from BPO are estimated to have grown 107% to $ 583 million.
Leading Competitors: - Philippines, Mexico, Canada, China and Ireland. 67-72%
of costs to call centres operating in the US/UK is directly linked to manpower
costs. India only spends 33-40% of costs on man power. This includes training,
benefits and other incentives for labour.

The Business Process Outsourcing (BPO) industry in India has been growing 70
percent a year and is now worth $1.6 billion, employing more than 100,000 people.
The role played by BPOs in boosting India’s economy shows that the IT and ITeS
sector have been contributing largely to the economic growth of India. The growth
in the contribution of BPOs to Gross Domestic Product has shown a steady rise
from 1.2% to 5.4%. It is hence evident that the BPO industry is making an impact
on the Indian economy.

BPOs are aiming at contributing towards bringing in more earnings to the country
and IP creation. Currently, BPOs in India are focused on the domestic segments
and offshoring. The benefit to the local economy is subject to judicious
exploitation of resources existing in these areas. The following are some useful
statistics with regard to the growth of the IT-BPO sector during the past 10 years:
1997-98: US$ 4.8 billion

 2006-07: US$ 47.8 billion

 Current rate of growth is 28%
 Employment to be generated -1.6 million

41
BPO Role in India’s economic growth is set towards making a significant impact
in the time to come as well. The driving forces that account for the increase in
foreign investments through the BPOs in India are:

 Emphasis on quality services

 Skilled sets and workers
 Cost effectiveness
 Quality products
 English speaking manpower

These features of the Indian BPO industry attract long-term contracts and as a
result, there are high earnings which in turn result in major contribution to
economic growth. As a matter of fact, the Indian BPO industry is leading in the
market and is improving in the area of training professionals in learning foreign
languages and increasing the number of skilled workers. This will give India the
ability to sustain its global leadership and probably generate export revenues of
USD 10 billion by 2010.
The setting up of more BPOs is also bringing in more job opportunities for the
Indian youth. BPO role in India's economic growth will even facilitate great
maneuvering in the country’s balance of payments.
BPO role in India's economic growth is definitely at the growth stage but is all set
for a major contribution to the Indian economy, especially if the government
supports the sector in terms of financial growth, openness to trade, rural-urban
migration, and education. The BPO industry is expected to continue to grow in
India, its market share of the offshore piece is expected to decline. Important
centers in India are Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, Pune and
New Delhi.

BPO Benefits

42
BPO benefits i.e. benefits accrued as a result of outsourcing are numerous. 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 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. Following are some benefits from Business process
outsourcing:

1) Productivity Improvements:

An important facet of business process outsourcing is its ability to free corporate

executives from some of their day-to-day process management responsibilities.
Conventionally, executives spend 80 percent of their time in management of
details and only 20 percent on formulating strategies. But the scenario is
remarkably different when the business process is outsourced. Once a process is
successfully outsourced, the ratio can be easily reversed. In such situations,
executives get more time. This saved time helps them tremendously to explore new
revenue areas, accelerate other projects and focus on their customers. This, beyond
doubt, leads to productivity improvements.

Companies that outsource their business processes are often able to capture new
efficiencies and in the process improve upon their productivity. They are in a better
position to reallocate their resources to other important projects. This also helps
their employees to increase their efficiency and productivity. In most cases, high-
43
caliber subject-matter experts are brought in to design and manage these processes.
They bring with them increased productivity and years of experience that most
companies don't have access to or can't afford on their own. Availability of highly
qualified skill pool and faster adoption of well-defined business processes leads to
productivity improvements without compromising on quality.

2) Cost Savings:
One of the most important benefits and advantages of outsourcing the business
processes is in terms of cost savings. The companies that outsource their work
have the access to the best of talent and expertise in the BPO field and that too
at very low wages. Various studies have indicated that for every one dollar
invested in BPOs across India, the value derived by the US economy is between
$12-14. This is what makes the outsourcing to India an irreversible process. It is
a reality that the companies which have shifted their BPO work to India have
garnered savings of around 40-50% till now.

American BFSI (Banking & Financial Services Industry) companies have saved
more than $6 billion in the last four years by outsourcing their business to India.
It is a simple fact that if a bank shifts work of 1000 people from US to India it
can save about $18 million a year due to lower costs in India. Similarly, in the
field of pharma research and development, firms can reduce the cost of
developing a new drug, currently estimated at between $600 million and $900
million by as much as $200 million if development work is outsourced to India.
In the US/UK 67-72% of costs incurred by call centres are directly linked to
man power costs whereas call centres in India spend only 33-40% of costs on
man power. This includes spending on training, benefits and other incentives
for labour

3) Improved HR:
Improved HR is another great advantage of outsourcing business processes.
Several market studies have shown that HR outsourcing can lead to cost
savings in the range of 20-40 percent for customers. It also leads to improved
HR. HR Business Process Outsourcing (HR BPO) is a market that has
experienced substantial growth over the past few years and is now set for even
more rapid expansion. This is based on the fact that gradually more companies
are looking at outsourcing transactions and processes to create a more
strategically focused HR function.

Clearly, companies all over the world are getting motivated to outsource their

44
HR processes and transactions to run their HR functions more efficiently, free
the HR function to focus on strategic people practices that drive growth and add
to the organization's long term success and facilitate their professionals to add
value to their business. Companies today, require complete domestic and global
HR delivery through systems and processes that can generate economies of
scale to reduce or eliminate their need to make future investments in quickly
outdated technology. Companies can save between 20-40 percent of their HR
costs, depending on their business priorities and the pace at which they want to
move.

4) Focus on Core Competency

Business Process Outsourcing gives tremendous help to the companies to
concentrate more on the core areas of their business. The most important factor
behind the growth in the BPO market world wide today is an increase in the
number of enterprises that are reviewing their internal operations in an attempt
to fully understand their true core competencies. In the process they are able to
focus more on their core competencies. Business Process Outsourcing gives
more freedom to the management to focus more time, energy, and resources on
building the company's core businesses. It is because the BPOs assume full
responsibility for managing the day-to-day back-office operations.

Once outsourcing of certain processes take place it becomes easier for the
company to compare and evaluate the efficiency and effectiveness of services
that are being delivered from outside and inside. This decision-making process
often includes an evaluation of the cost of owning technology - with its
associated support costs, that are not core to the enterprise (HR is one such
example). This trend is leading to an increased keenness to outsource processes
that are considered non-core, yet critical activities. These critical activities
include claims administration, HR services and payment services.

5) Increase in Capabilities:
Apart from other advantages, business process outsourcing has another big
advantage which leads to increase in capabilities of the employees and the
company. Companies that want to grow internationally must continuously
invest in infrastructure and find talent around the world and this is possible only
trough business process outsourcing. Many outsourcing providers are already
established globally and help in increasing the capabilities of the companies
that are outsourcing their work to these BPOs.

45
 Employee Benefits Offered by BPOs

Employee Benefits Offered by BPOs:

Along with Provident Fund, Gratuity, Group Mediclaim Insurance Scheme,

Personal Accident Insurance Scheme, Paid Days Off, Maternity Leave,
Employee Stock Option Plan, etc., some other benefits are provided to the
employees in a BPO. For example:

Food: Breakfast, lunch, snacks and dinner are provided to the employees to
facilitate work in irregular shifts.

Transportation: Pick and drop facility is provided to employees.

Recreation, cafeteria, ATM: Facilities like pool table, chess, coffee shops,
gym, ATM, etc are provided in the office.

Regular health check-ups: BPOs provide health check-ups for their employees
once or twice in a year.

46
 BPO Benefits and some Limitations

One of the most important advantages of BPO is the way in which it helps to
increase a company’s
flexibility. However, several sources have different ways in which they perceive
organizational flexibility. Therefore business process outsourcing enhances the
flexibility of an organization in different ways.

Most services provided by BPO vendors are offered on a fee-for-service basis. This
helps a company becoming more flexible by transforming fixed into variable costs.
A variable cost structure helps a company responding to changes in required
capacity and does not require a company to invest in assets, thereby making the
company more flexible. Outsourcing may provide a firm with increased flexibility
in its resource management and may reduce response times to major environmental
changes

Another advantage of BPO is the way in which it helps to

increase a company’s flexibility. However, several sources
have different ways in which they perceive organizational
flexibility. Therefore business process outsourcing enhances
the flexibility of an organization in different ways.

 Most services provided by BPO vendors are offered

on a fee-for-service basis. This can help a company
becoming more flexible by transforming fixed into
variable costs. A variable cost structure helps a
company responding to changes in required capacity and does not require a
company to invest in assets, thereby making the company more flexible.
Outsourcing may provide a firm with increased flexibility in its resource
management and may reduce response times to major environmental
changes.
 Highly skilled, English-speaking workforce.

 Cheaper workforce than their Western counterparts. According to Nasscom,

The wage difference is as high as 70-80 percent when compared to their
Western counterparts.

47
  Lower attrition rates than in the West.

 Dedicated workforce aiming at making a long-term career in the

field.

 Round-the-clock advantage for Western companies due to the

huge time difference
The BPO boom seems to be increasing everyday with more and more companies
deciding to follow the race, making conditions really viable for a positive growth
in the BPO industry. You can make money online through BPO.

Another way in which BPO contributes to a company’s flexibility is that a

company is able to focus on its core competencies, without being burdened by the
demands of bureaucratic restraints. Key employees are herewith released from
performing non-core or administrative processes and can invest more time and
energy in building the firm’s core businesses. The key lies in knowing which of the
main value drivers to focus on – customer intimacy, product leadership, or
operational excellence. Focusing more on one of these drivers may help a company
create a competitive edge.

A third way in which BPO increases organizational flexibility is by increasing the

speed of business processes. Using techniques such as linear programming can
reduce cycle time and inventory levels, which can increase efficiency and cut
costs. Supply chain management with the effective use of supply chain partners
and business process outsourcing increases the speed of several business processes,
such as the throughput in the case of a manufacturing company.

Finally, flexibility is seen as a stage in the organizational life cycle. BPO helped to
transform Nortel from a bureaucratic organization into a very agile competitor. A
company can maintain growth goals while avoiding standard business
bottlenecks.BPO therefore allows firms to retain their entrepreneurial speed and
agility, which they would otherwise sacrifice in order to become efficient as they
expanded. It avoids a premature internal transition from its informal
entrepreneurial phase to a more bureaucratic mode of operation.

A company may be able to grow at a faster pace as it will be less constrained by

large capital expenditures for people or equipment that may take years to amortize,
may become outdated or turn out to be a poor match for the company over time.

48
Although the above-mentioned arguments favor the view that BPO increases the
flexibility of organizations, management needs to be careful with the
implementation of it as there are issues, which work against these advantages.
Among problems, which arise in practice are: A failure to meet service levels,
unclear contractual issues, changing requirements and unforeseen charges, and a
dependence on the BPO which reduces flexibility. Consequently, these challenges
need to be considered before a company decides to engage in business process
outsourcing

A further issue is that in many cases there is little that differentiates the BPO
providers other than size. They often provide similar services, have similar
geographic footprints, leverage similar technology stacks, and have similar Quality
Improvement approaches.

Additional Benefits of BPO:

 Increase productivity
 Cut operational costs
 Provide better service
 Save costs
 Improved accountability

The BPO boom seems to be increasing everyday with more and more companies
deciding to follow the race, making conditions really viable for a positive growth
in the BPO industry.

49
 Threats
Risk is the major drawback with Business Process Outsourcing. Outsourcing of an
Information System,
for example, can cause security risks both from a communication and from a
privacy perspective.

For example, security of North American or European company data is more

difficult to maintain when accessed or controlled in the Sub-Continent. From a
knowledge perspective, a changing attitude in employees, underestimation of
running costs and the major risk of losing independence, outsourcing leads to a
different relationship between an organization and its contractor.Risks and threats
of outsourcing must therefore be managed, to achieve any benefits. In order to
manage outsourcing in a structured way, maximizing positive outcome, and
minimizing risks and avoiding any threats, a Business Continuity Management
(BCM) model is setup. BCM consists of a set of steps, to successfully identify,
manage and control the business processes that are, or can be
outsourced.

A BUSINESS process outsourcing (BPO) consultant charges huge fees upfront,

promises process and then fails to provide the campaign on one pretext or other.
A BPO consultant provides process with impossible to meet quality parameters and
as predicted when you fail to meet the 99.99 per cent accuracy rate, the process is
terminated and the center owner loses the client and the money paid to the
consultant plus incur huge cost on running such a campaign.

50
 Problems In BPO

Business process outsourcing, the most flourishing Indian industry sector has
emerged as India’s most promising sector, and has been growing at a rate of 40-
50 per cent since its inception. BPO is a very fast paced and a high momentum
industry. BPO industry is expected to generate one million jobs by the year
2008. Taking advantage form the abundant skills and low cost benefits, large
number of BPO companies has mushroomed in India in recent years, many of
the well established IT companies have also started their BPO divisions. But,
there is another side of the BPO picture too. The side that has already brought
the BPO industry in limelight many times. This picture is concerned with the
non viability of the BPO and the fact that the young generation of India is
actually loosing out in the BPO.

In the past couple of years, India has witnessed many small time businessmen
entering the bandwagon of the flourishing the business process outsourcing sector
without adequate investment capital or vision that is required to run an
employment organization. (This article is not critical about individual business or
small entrepreneurial efforts) Even many biggies and MNCs were found
exploiting the psyche of people who favour and safeguard employment
generating and economic development efforts against critics. Many are taking an
advantage of the favorable climate created by the recent outsourcing culture of
the west.
Business process outsourcing organizations, commonly known as call centers –
work when rest of the India sleeps! Most of the BPO organizations work
according to the international (US and UK) timings, therefore most of the BPO
employees work in might shifts starting anywhere from 10 p.m. to 2 a.m. and
ending at 6 a.m. to 10 a.m. There is also a graveyard shift starting at 4 a.m.
working in such shifts having odd timings have started showing hazardous results
on the health of the Indian youth.
Prolonged working in shifts of odd hour’s can have major implications on the
physical and mental health of the employees. The physical strains like sleep
disorders, depression, odd working shifts, learning foreign accents, constantly

51
handling abusive calls and high stress levels are making the BPO employees more
prone to hypertension and heart attacks.

Various surveys and research conducted amongst the call centre employees have
shown that depression is the most common problem faced by BPO employees.
Frequent headaches, feeling of fatigue, sleeping disorders and frustration have
become regular problems for them.
The basic profile of the BPO employees is trouble-shooting, sales or revenue
collection. All of these are done through tele-calling. Talking to foreigners in a
fake foreign accent, solving other people’s problems, facing and handling the
anger and abuse of the clients become a routine for these juvenile population.
The youth is facing the brunt of the thoughtless campaign of many employers
who are just trying to encash the flourishing BPO scenario. With no particular
qualification required for call centre jobs (except fluency in English and good
communication and convincing skills) BPO jobs provide a quick gateway to good
pay packages. Many youngsters are quitting their education right after the 12th
standard for these jobs. This step can block and kill their long term (future) career
prospects. Also, at the very young age they get lot of money in hand and they are
unaware of the rational utilization of that money. Also, working in overnight
shifts does not get accepted easily in the traditional Indian culture and the youth
are resistance from the seniors in the society.
Due to the increasing gap between the supply and demand of the talent for Bpo’s,
and the already saturated talent market, the companies are luring and attracting
youngsters with attractive pay packages and other benefits as soon as they get out
of college. But the youngsters have to face the realities of the industry as they fail
to cope up with the stress and responsibilities of their work life. It is clearly a case
of hyper-growth with an immediate fall-down as soon as the reality strikes.
With no time for personal life, the erratic schedules and monotonous work of
business process outsourcing also disturbs the family life of the employees adding
to their frustrations. This will definitely lead to loose family ties and other
unhealthy behaviour.
All these problems have triggered the problems of attrition and retention for the
BPO industry itself. If not taken care of, these problems can lead to hazardous

52
health and other implications for the youth of India.

BPO Backlash
BPO India is one of the popular business practices in the world's competitive
environment. The Indian BPO industry is constantly growing. According to India
Infoline, the ITES-BPO segment recorded a growth of 59% in the year 2002 and
touched US $2.3 billion in the year 2003. However, along with the phenomenal
increase in BPO to India there has been a backlash against outsourcing. The
opposition and backlash is coming mainly from developed countries that are
directly affected by outsourcing to India. Though this anti-outsourcing movement
is gaining momentum but the pace at which the trend of outsourcing is continuing
to India, this is going to double in a couple of years. It is because of numerous
advantages that India enjoys in comparison to other countries.

Fame comes at a price. And being the fastest-growing and most cost-competitive
outsourcing destination could sometimes elicit such negative responses. The reality
that India is fast emerging as the back office of the world and our BPO industry is
estimated to grow at a rate of 65 per cent per year is not taken too well by most of
the developed countries of the world, from where these jobs are coming to India.
Even as investments in the ITES-BPO industry are increasing by the day, banners
and slogans demanding a ban on outsourcing of jobs to India are increasingly
noticeable.

Some states in the US have tried to legislate banning the transfer of state data
processing contracts to developing nations. Despite the bill being passed by the US
senate barring the shifting of BPO work to India, the BPO supporters lobby in the
US is working at changing the mindset and perceptions.

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 Scope of BPO Sector

BPOs have a great scope in India. Around 5 years back, BPOs were just a
means by which companies could save costs. Only a few activities were
outsourced. But now BPOs are emerging as a management tool and focus
is shifting from non-core processes to core processes. This is how BPOs
gave rise to KPOs and LPOs. In the near future, BPOs may give rise to
some other sectors as well. Outsourcing involves many risks, too. These
risks can be:
 Data security
 Vendor's financial instability : The buyer will have to search for a new
vendor if the vendor becomes financially unstable.
 Loss of expertise : The knowledge and expertise of carrying out the
outsourced processes can be lost with time.

 Loss of control of one's own company's processes.

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 Future Opportunities for India

From the last two decades Business Process Outsourcing is catering various
industries like Retail, Insurance, Mortgage, Banking and Finance, Healthcare,
Telecommunications, Technology, Travel and Hospitality and more. Companies
are consolidating and standardizing operating processes by outsourcing the
business process to third parties that offer economies and focused management
expertise. In the present scenario many UK and USA based companies are
resorting to Asian countries like India, China, Russia and Philippines to outsource
their business processes. Offshore BPO is predicted to grow at a significant rate
per year. BPO within Asia- Pacific market is expected to display a growth rate of
about $14 billion by 2010.
Business Process Outsourcing help companies achieve indomitable position in the
service market and generate high profits by improving their business operations.
Business Process Outsourcing is a tool that allows the companies to survive in the
cut throat competition by retaining their customers and providing high rate of
customer satisfaction. The advancements in technology and infrastructure have
made it easier to carry out BPO services. Countries offering cost advantage by way
of cheap labor along with skilled workforce are ideal destinations for BPO
industry.

Future of BPO in India: Today 55% BPO services are carried out by Indians and
the future prospects are even more promising with increasing number of graduates
in the country who are well versed in English language. People in India have now
started looking at BPO jobs as long term career as it offers fast-track career
advancement opportunities. Earlier only professional degree holders used to get
hefty salaries but the advent of BPO has made graduates to earn well in the service
sector. Subsequently India’s economy has got a hike since the establishment of
BPO firms.

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Future of BPO in China: According to some sources, the call centre industry in
China is expected to grow by 22% this year and will reach to 28 billion dollar
revenue by 2010. This industry will give employment to around 158,000 people
including bank services and technical support staff for IT companies. Multinational
companies are attracted to set up more BPO firms in China owing to high
productivity and cost-effective human resources.

Future of BPO in Russia: In the present scenario many companies are banking
upon Russia’s outsourcers wish to have a large number of BPO firms. Russian
outsourcing is known for cost effective quality services which gives the clients all
good reasons to hire Russian BPO firms. Russia is emerging as a skilled back
office administration to the world’s leading corporations.

Future of BPO in Philippines: Business process outsourcing or BPO is an emerging

industry in the Philippines. Since 1980s service sector has seen good growth in
Philippines. Employment of labor force has seen a major shift from agriculture to
service sector. Philippines business process outsourcing (BPO) industry is going
strong and it has been estimated that by the year 2010 the BPO industry revenues
will be approximately US$12 billion. Also the industry will generate one billion
jobs by 2010. Philippines BPOs are doing greatly in legal and medical
transcription, finance, logistics and accounting.

Near-shoring as a business strategy

India can collaborate with other countries to leverage local knowledge of the
business environment and language skills while providing its domain knowledge
and technological expertise for successful outsourcing. For example, TCS has a
Latin American arm based in Mumbai, India which serves an insurance client in
Chile with a center in Uruguay as a near-shore location. Outsource2india has a
collaboration with a company in NE India that leverages the unique talents of the
people of this region.

Opportunity areas

Today more industries are where IT was in the 1990’s - knowledge based.
Research and Analysis Outsourcing may soon be the biggest revenue grosser in
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India as BPO companies move up the value chain in their service offerings. This
includes:

1. Research and Development

  Product Innovation - Companies are going beyond basic research to

invest in innovation and new product development. Companies that
have invested in R&D in India are Cisco Systems, Motorola, Hewlett-
Packard, Google General Motors Corp. and Boeing Co among others.

 Co-development- In pharmaceuticals, India has the opportunity of co-

development and ownership of new patented drugs through drug
research, clinical trials and manufacturing. Indian pharma major
Ranbaxy has an agreement with MNC GlaxoSmithKline to
commercialize compounds they develop together.

2. Legal Outsourcing
India ’s large pool of qualified English-speaking lawyers with experience in
the British legal system can offer paralegal support, legal support and patent
services. A few Indian companies affiliated with American law firms are
now able capture a tiny piece of the American market. They are now doing
legal research at very high rates by Indian standards but yet 50% below
typical American rates.

3. Engineering Outsourcing
India can provide high-quality engineering services in the fields of:

 Mechanical & Electronic engineering - analysis and design ,

embedded software

 Plant Design, Process Engineering

 Plant Automation Services

 Enterprise Asset Management and OEM solutions

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4. Remote Infrastructure Management Services
India can offer management services for IT infrastructure, applications
operations, IT security and maintenance. This sector presents great potential
through large-value multi-year contracts

5. Accounting Services
We are in the initial stage where payroll processing services and some
accounting is being done for large American companies. This trend will
continue and soon a full range of accounting and tax services will be
provided by Indian companies.

6. Outsourcing opportunities for India exist in other fields like Financial

Research, content development, medical writing: animation, film,
publishing, web services; Human Resource outsourcing: recruitment,
training, Education, Nanotechnology and many others.

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 Conclusion
India has fundamental advantages - abundant talent and cost, are sustainable over
the long term. Timely government policies and increased public- private
participation have played a key role in developing and enabling business
environment for the Indian IT-BPO industry.

But one thing is sure. The trend of BPO is likely to continue under all
circumstances, because firms have become habitual of moving the BPO work to
India, it is now like an addiction, which they can't do without. The only thing that
needs to be done now is resolving of cultural differences, which, crop up during
the cross-border shifting of BPO work. Indian BPOs have been in great demand
because of the low-operational costs here and also because most of our workforce
is well educated and has had a university education. Indian BPO industry is driving
at the top gear and is sure to maintain that number one position in the coming years
too………

The industry is expected to achieve an export target of USD 0- 2 billion by FY

2011, employing 2.5-3 million professionals directly and contributing substantially
to the socio-economic development of the country.

BPO is one of today’s key management tools. Companies across the globe have
realized the importance of outsourcing their non-core functions whether to reduce
cost or support expansion. India continues to be a preferred destination for
outsourcing .

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