INSTITUTE OF MANAGEMENT STUDIES 

GHAZIABAD 

INTERNATIONAL BUSINESS ENVIRONMENT 

 PROJECT  REPORT 

ON 

BPO AND ITS FUTURE GROWTH IN INDIA 

SUMITTED TO :­        SUBMITTED BY­ 

PROF S.K DUBE VIJENDRA SINGH BM 09236

SHASHANK JAIN BM 09194

SAURABH CHATURVEDI BM 09188

ADITYA AGARWAL BM 09241

 ABSTRACT

BPO is one of the popular business practices in today's competitive environment. The Indian

BPO industry is constantly growing. However, along with the phenomenal increase in BPO

to India there has been a backlash against outsourcing. These enraged cries come from parties

that have been affected by the migration of jobs to off shore locations like India. Though this

anti-outsourcing movement is gaining momentum, it is important to understand the long term

benefits of outsourcing to India. This report gives an overview of BPO industry in India, the

various problems it is facing and the future Prospects.

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 CONTENT

CHAPTER PAGE NO.

BPO : AN INTRODUCTION 4

EVOLUTION OF BPO 5

PROBLEMS AND CHALLENGES

FACED BY BPO 5

SECURITY ISSUE 6

ATTRITION 7

DIFFERENT TYPES OF SERVICES BEING

OFFERED BY BPO 8

BPO AND EMPOYMENT IN INDIA 14

FUTURE OF BPO 18

CONCLUSION 20

REFERENCES 21

  3 
 BUSINESS PROCESS OUTSORCING (BPO) : AN INTRODUCTION

Business process outsourcing (BPO) is a broad term referring to outsourcing in all fields. A

BPO differentiates itself by either putting in new technology or applying existing technology

in a new way to improve a process.

Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business

processes to an external provider that in turn owns, administers and manages the selected

process based on defined and measurable performance criteria. Business Process Outsourcing

(BPO) is one of the fastest growing segments of the Information Technology Enabled

Services (ITES) industry.

Few of the motivation factors as to why BPO is gaining ground are:

• Factor Cost Advantage

• Economy of Scale

• Business Risk Mitigation

• Superior Competency

• Utilization Improvement

Generally outsourcing can be defined as - An organization entering into a contract with

another organization to operate and manage one or more of its business processes.

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 EVOLUTION OF BPO

Outsourcing is not new - it has been a popular management tool for decade. One can safely

say outsourcing has evolved:

• 1960's - time-sharing

• 1970's - parts of IT operations

• 1980's - entire IT operations

• 1990's - alliances/tie-ups

• 2000's - IT-enabled services

PROBLEMS AND CHALLENGES FACED BY BPO

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. An anti-outsourcing movement has drawn wide

support as layoffs continue to mount at such U.S. companies as IBM, which is cutting 13,000

jobs in Europe and the United States and adding 14,000 in India, according to the

Washington Alliance of Technology Workers.

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,

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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. In the UK, three of the country's biggest trade unions have come

together to fight the loss of jobs to India, especially British Telecom's move to open a huge

call center in Bangalore. These unions fear that the competitors of BT will emulate this act.

German protesters have been running an unrelenting political campaign against the German

green-card scheme for a while now.

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.

Security issues

NASSCOM has estimated that India may have lost out IT and ITES business opportunities

worth about $7 billion to $8billion because of security concerns among potential foreign

clients. While global clients are convinced about the delivery capabilities of Indian IT and

BPO companies, data security issues are a major concern in any discussion on off shoring

services to India.

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Attrition

BPO outfits are a relatively new breed of employers that have sprung up over the past few

years. On the surface, these companies seem to offer plumb jobs. The criteria for securing a

job here include little more than a good command over the English language and a basic

knowledge of computers. The pay goes into five figures in little or no time after joining.

However, these professions call for long as well as odd hours of work and incredibly high

work targets to be achieved. Such working hours result in irregular sleep, unhealthy food

habits, nausea, chronic fatigue, body ache, back pain, headaches, computer syndrome, dry

eyes, etc. when these work hours get coupled with the stress brought on by stiff work targets,

the result is a host of psychological problems like nervousness, insomnia, anxiety,

hypertension, restlessness, irritability and even depression. Also the Indian call-center

workers are increasingly facing particular abuse from Americans, whose tantrums are

sometimes racist and often inspired by anger over outsourcing.

Not surprisingly, the attrition rate in BPOs in India is high. The staff attrition rates within

BPO centres in India average 22 per cent per annum, with attrition rates in voice-based

services hitting 30 percent.

To combat these high attrition rates and ensure consistent service delivery quality to their

clients, BPO companies are actively striving to raise the understanding and value of their

company brand within the community, and introducing incentive-based pay structures and

"quality of life" initiatives for workers. Pay cheques alone are not enough to retain

employees. Management also needs to consider other aspects like secure career, benefits,

perks and communication. The attrition battle could be won by focusing on retention, making

work a fun place, having education and ongoing learning for the workforce and treating

applicants and employees in the same way as one treats

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 DIFFERENT TYPES OF SERVICES BEING OFFERED BY BPO

1. Customer Support Services

The customer service offerings create a virtual customer service center to manage customer

concerns and queries through multiple channels including voice, e-mail and chat on a 24/7

and 365 days basis.

Service Example: Customers calling to check on their order status, customers calling to check

for information on products and services, customers calling to verify their account status,

customers calling to check their reservation status etc.

2. Technical Support Services

The technical support offerings include round-the-clock technical support and problem

resolution for OEM customers and computer hardware, software, peripherals and Internet

infrastructure manufacturing companies. These include installation and product support, up &

running support, troubleshooting and Usage support.

Service Example: Customers calling to resolve a problem with their home PC, customers

calling to understand how to dial up to their ISP, customers calling with a problem with their

software or hardware.

3. Telemarketing Services

The telesales and telemarketing outsourcing services target interaction with potential

customers for 'prospecting' like either for generating interest in products and services, or to

up-sell / promte and cross sell to an existing customer base or to complete the sales process

online.

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Service Example: Outbound calling to sell wireless services for a telecom provider, outbound

calling to retail households to sell leisure holidays, outbound calling to existing customers to

sell a new rate card for a mobile service provider or outbound calling to sell credit or debit

cards etc.

4. Employee IT Help-desk Services

The employee IT help-desk services provide technical problem resolution and support for

corporate employees.

Service Example: of this service include level 1 and 2 multi-channel support across a wide

range of shrink wrapped and LOB applications, system problem resolutions related to

desktop, notebooks, OS, connectivity etc., office productivity tools support including

browsers and mail, new service requests, IT operational issues, product usage queries, routing

specific requests to designated contacts and remote diagnostics etc.

5. Insurance Processing

The insurance processing services provide specialized solutions to the insurance sector and

support critical business processes applicable to the industry right from new business

acquisition to policy maintenance to claims processing.

Service Example:

New Business / Promotion:

Inbound/outbound sales, Initial Setup, Case Management, Underwriting, Risk assessment,

Policy issuance etc.

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Policy Maintenance / Management:

Record Changes like Name, Beneficiary, Nominee, Address; Collateral verification,

Surrender Audits Accounts Receivable, Accounting, Claim Overpayment, Customer care

service via voice/email etc.

6. Data Entry Services / Data Processing Services

Service Example:

o Data entry from Paper/Books with highest accuracy and fast turn around time

o Data entry from Image file in any format

o Business Transaction Data entry like sales / purchase / payroll.

o Data entry of E-Books / Electronic Books

o Data Entry : Yellow Pages / White Pages Keying

o Data Entry and compilation from Web site

o Data Capture / Collection

o Business Card Data Entry into any Format

o Data Entry from hardcopy/Printed Material into text or required format

o Data Entry into Software Program and application

o Receipt and Bill Data Entry

o Catalog Data Entry.

o Data Entry for Mailing List/Mailing Label.

o Manuscripting typing in to word

o Taped Transcription in to word.

o Copy, Paste, Editing, Sorting, Indexing Data into required format etc.

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 7. Data Conversion Services

Service Example:

o Conversion of data across various databases on different platforms

o Data Conversion via Input / Output for various media.

o Data Conversion for databases, word processors, spreadsheets, and many other

standard and custom-made software packages as per requirement.

o Conversion from Page maker to PDF format.

o Conversion from Ms-Word to HTML format

o Conversion from Text to Word Perfect.

o Conversion from Text to Word to HTML and Acrobat

o Convert Raw Data into required MS Office formats.

o Text to PDF and PDF to Word / Text / Doc

o Data Compilation in PDF from Several Sources.

o E-Book Conversion etc.

8. Scanning, OCR with Editing & Indexing Services

Service Example:

o High speed Image-Scanning and Data capture services

o High speed large volume scanning

o OCR Data From Scanned page / image

o Scan & OCR paper Book in to CD.

o ADOBE PDF Conversion Services.

o Conversion from paper or e-file to various formats

  11 
 9. Book Keeping and Accounting Services

Service Example:

o General Ledger

o Accounts Receivables and Accounts Payable

o Financial Statements

o Bank Reconciliation

o Assets / Equipment Ledgers etc.

10. Form Processing Services:

Service Example:

o Insurance claim form

o Medical Form / Medical billing

o Online Form Processing

o Payrol Processing etc.

11. Internet / Online / Web Research

Service Example:

o Internet Search, Product Research, Market Research, Survey, Analysis.

o Web and Mailing list research etc.

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 RANKING OF THE TOP 20 COUNTRIES INCLUDED ON THE BASIS OF GSLI

(Global
RANKING OF service
THE TOP location Index)
20 COUNTRIES IN THE YEAR
INCLUDED 2007BASIS
ON THE AND 2009
OF GSLI

BOTH THE 2005 AND 2007 INDEX

India is Yes , India

ranked is ranked
number Number
1. In fact 1. position
India’s In fact India’s position
has been hassince
the same been2005
the same
whensince
GSLI
2004 when GSLI was first worked out.
was firstChina
worked follows
out. closely on the second position with Malaysia and Phillipines just
after China.
It is an undisputed fact that the Asian sub continent is found to be the best option
to outsource work to from the rest of the world and within Asia, India stands
  tall.As we have seen in earlier Unit 13  1 and 2 of Block 1, the greatest advantage

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 BPO AND EMPLOYMENT IN INDIA

While the employment in BPO sector was initially in thousands , there has been significant

increase in the number of jobs created by this sector. The CAGR between 2003 and 2008 is at

31 %. No other sector other than the IT/BPO-ITeS sector has shown such a growth in jobs

within such a short span of time in India.

According to the Nasscom Strategic Review 2008, between the IT and BPO sectors, the total

direct employment in India stands at 2 million and the indirect employment at 7-8 million .

You may wonder what indirect employment is caused by these Sectors. The fast growth of

ITO and BPO have sudden led to growth in demand for a number of employees who support

the skilled employees . With the improvement in salaries, there is greater need for more

maids, drivers, janitors, security staff, cafeteria services etc. Apart from these jobs,you can

observe that the pattern of consumption of people in these Sectors has undergone a change .

There is a tendency to spend more on consumer goods such as mobiles, laptops, clothes,

accessories, vehicles, frequent visits to restaurants, movies and the like. This increase in

spending has given a boost to the Retail Sector too . Similarly, more frequent travel by

employees within the country and more clients visiting India have benefited the Hospitality

and Aviation Sector immensely . It is based on this that , it is estimated that there is

substantial rise in the indirect employment too.

  14 
 the like. This increase in spending has given a boost to the Retail Sector too . Similarly,
more frequent travel by employees within the country and more clients visiting India
have benefited the Hospitality and Aviation Sector immensely . It is based on this that , it
is estimated that there is substantial rise in the indirect employment too.

EMPLOYEES IN INDIA BPO ('000s)

800 704
700
600 553
500 415
400 316 Employees
300 216
180
200
100
0
FY03 FY04 FY05 FY06 FY07 FY08

DISTRIBUTION OF EMPLOYEES BY INDIAN CITIES (2007)

30

24.4
25
21.3
20
15.4
15
11.9
9.8
10 7.5

5 3.3
1.7 1.1 1.5
0.7 0.5 0.4 0.3 0.3
0
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A very typical trend seen with reference to employee distribution is that , most of the
BPO Companies
A very typical havewith
trend seen concentrated
reference predominantly in the metros
to employee distribution in India
is that , most. As
of seen above
the BPO
in the figure, seven cities i.e. Bangalore, National Capital Region ( Noida ,Delhi,
Gurgaon),
Companies haveMumbai, Pune,predominantly
concentrated Chennai, Hyderabad and Kolkata
in the metros alone
in India . Asconstitute
seen above more than
in the
90% of the employees . This only means that the BPO companies have been
concentrating
figure, seven citiesmainly on the bigger
i.e. Bangalore, cities, called
National TierRegion
Capital 1 and Tier 2 cities.
( Noida This is
,Delhi, the result
Gurgaon),
of :
i) Availability
Mumbai, of better
Pune, Chennai, infrastructure
Hyderabad and Kolkata alone constitute more than 90% of the
ii) Availability of English speaking work force.
employees . This only means that the BPO companies have been concentrating mainly on the

bigger cities, called Tier 1 and Tier 2 cities. This is the result of : 78

i) Availability of better infrastructure

ii) Availability of English speaking work force.

  15 
However, in recent times several efforts from the Central and State Governments to attract

investments by Captives and Third Parties have been realizing some benefit . We see that a

number of Service providers have grown out of Tier 2 /3 cities like Chandigarh, Jaipur,

Ahmedabad, Trivandrum, Mysore etc . These cities offer immense savings on infrastructure

costs, particularly due to lower real estate values. However, we must note that though they

have the potential for far more penetration into the market, the availability of readily

employable talent pool does pose a bottleneck. Several efforts are on from all quarters -

Government, industry and educational institutions to work towards solving this problem.

Despite that, it is estimated by the Nasscom-Everest India BPO Study that there is likely to be

shortfall of more than 2 lakh employees for the BPO sector alone by 2012. This gap is

estimated for the entry level jobs which are usually taken up by graduates. India produces

more than 2.5 million graduates per year but only 10-15% are employable in the BPO sector.

There are other estimates which mention a shortfall of almost 5 lakhs across all levels by

2012. The parallel growth of domestic sectors like insurance, hospitality, retail etc. will lead

to further competition for the same talent pool.

A recent combined study by Nasscom and AT Kearney ‘Location Roadmap for IT-BPO

Growth’ has categorized 50 cities in India about their position with respect to the future of

IT-BPO growth . These findings are based on the following parameters :

• Knowledge pool availability and skill sets assessment

• Infrastructure and social environment

• Government support and enabling business environment

• Cost structure

  16 
Based on their suitability, these cities have been called

• Leader locations

• Challenger locations

• Follower locations

• Aspirant locations

Nevertheless , the entire service sector faces certain challenges . These are mainly :

• Talent shortage

• Attrition

• Infrastructure related issues

• Data security

Unless dealt with at the appropriate platform, these issues could pose as bottlenecks for

the future of these services .

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 FUTURE OF BPO INDUSTRY

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 $18 billion by 2012.

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.

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 CONCLUSION

India has a leading edge to attract many foreign companies for BPO and for their non core

activates. The large number of IT graduates, the mastering of foreign languages, and the IT

infrastructure it holds will still be the factor for judging BPO decisions to India. India has to

focus more on reducing cost to be of great benefit to the BPO companies. Competition will

grow by time from other countries such as China where cost will be an influential factor.

Therefore, reduction of inflation of labor cost should be new area of research for Indian BPO

Industry. In terms of manufacturing, the government should keep working in liberalizing its

heavy industry by allowing more number of foreign investor’s to pour their FDI in the

country. Such a step from the government will create more jobs and opportunities to India.

Further studies on the advancement made by countries such as China, South Africa,

Philippines, and Malaysia should be conducted by Indian researchers in order to maintain

India’s dominant position in the field of BPO.

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 REFERENCES
• AT Kearney, 2004 , `Offshore location Attractiveness Index, making offshore
decisions’.www.atkearney.com
• AT Kearney ,2007 , ~Offshoring for long term advantage’ 2007.
• www.atkearney.com
• Nasscom Strategic Review 2008
• Nasscom-Everest India BPO Study, 2008

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