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Prof H.C. Chaudhary, Head & Dean, Faculty of Management Studies,
Banaras Hindu University, respected faculty members of the faculty of
management studies and the Banaras Hindu University; business
executives assembled here, officials from Banks, Insurance Companies,
dear students, ladies and gentlemen.
It gives me great pleasure to be here today amidst you and share some
thoughts on the subject chosen by Prof Chaudhary; “Corporate
Excellence in Indian Service Industry” as the topic for today’s workshop.
I consider it as a great privilege to be here with you at this place, which is considered as
one of the landmark academic institutions in India and a center for premier
management studies. I learnt with great happiness about the important role played by
this center in promoting and conducting Quality Improvement Programmes and
National Doctoral Fellowships for the recognition it gained as a premier center for such
activities of academic excellence.When the mention of service industry comes, it is India
that comes up first and this impression is just not in India but in the entire world. For
instance, it is India, which could be one of the very few countries in the world, which
jumped from the agriculture predominance to the service industry predominance in a
very quick time and even skipping the manufacturing stage.
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Service Sector in India now accounts for more than 50 percent of the gross
domestic product. More significant is the growth of the service sector
which has been consistently high in India in the last two decades. Average
annual growth in services sector in India which was 6.9 percent in the
decade of the 1980s (1980-90) rose to 7.9 percent in the next decade
(1990-2003). The decadal growth of the Indian service sector in the 1990s
is quite high as compared to the world average of 3.2 percent, East Asia
and Pacific average of 6.8 percent, and South Asia average of 7 percent.
The share of service sector in total GDP in China during the period 1990-
2003 moved from 31 percent to 33 percent and in East Asia and Pacific
region from 35 percent to 36 percent and in South Asia region from 43
percent to 51 percent.
However, from the perspective of growth in the economy and also exports,
a few of emerging segments in the Indian service industry which I would
like to mention today are ; Information technology related services, financial
services and the retail sector. All these are witnessing rapid growth in India
and will continue to play an important role in the growth of service sector in
India.
IT Related Services
Out of the total exports of the commercial services from India, Computer,
information, communications, and other commercial services form 75
percent, IT related exports as a percent of commercial services jumped
from about 43 percent in 1990 to 75 percent in 2003. India’s share in the
world software and services market has increased to nearly 3.5 per cent in
2004-05 from 2.4 per cent in 2003-04 and 2.09 per cent in 2002-03.
India continues to make sizeable gains in the services sector and in the
recent period, it has also added ITES/BPO business into its kitty. According
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to Gartner, a market research firm, the size of the global BPO market by
2007 would be $173bn, of which $24.23bn would be outsourced to offshore
contractors. Of this, India has the potential to generate $13.8bn in revenue.
The projection include revenues of pure play Indian BPO service providers,
captive operations of MNCs operating in India, third party service providers
and BPO subsidiaries of the BPO firms.
An estimated 70,000 new Jobs are expected in 2005 in the field pf ITES.
Plus there will be additional hiring to replace industry attrition that is around
25%. On the other hand BPO and outsourcing services would generate
around 1, 25,000 new Jobs in 2005. McKinsey & Co. predicts global
market for IT-enabled services to be over $140 billion by 2008. In that the
opportunity for India will be around $ 17 Billion.
Financial Services
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Financial services are another major segment that witnessed significant
growth and diversification. Financial services include banking, securities
markets and insurance. India has largest number of listed companies in the
world. Its stock market capitalization currently stands at about 70 percent
which is much higher than the 12 to 15 percent a decade ago. Credit
provided by the banking sector as a percent of gross domestic product rose
from about 51 percent in 1990 to 57 percent in 2004. Mutual Fund industry
has witnessed tremendous growth during the last two years. Total assets
under management swelled to more than Rs 160,000 crore in 2004-05
recording significant growth rates. Insurance industry too witnessed
manifold growth with emergence of a number of players from India and
abroad offering a wide range of products and several types of insurance
policies.
Indian retail market is a $200 billion market that is growing rapidly and
evincing keen interest in the global majors. Retailing accounts for 35
percent of the Gross Domestic Product and employs about 21 million
people, which amounts to 7 percent of the total employment, making the
largest in the world. Retail is considered as the world’s largest private
industry with total sales of about $7 trillion. India has about 12 million
outlets, making it the largest retail outlet density in India. Retailing is the
second largest employer in India. India is currently witnessing a major wave
in the development of retail markets that ranges from convenience stores
to one-stop shops, department stores, super markets, hyper markets etc.,
Major industrial groups have shown interest in this group which include;
Tatas (West Side), Goenka’s (FoodWorld), Rahejas (Shoppers’ Stop),
Hindustan Lever (Sangam). The retail revolution in India also brought in
some unique brands which became quite successful like Pantaloons,
Provogue, The organised and corporate-owned retail business is growing
at a rate of 35 per cent The retail industry is being seen as one of the
sunrise sectors. According to a report of the McKinsey and the CII, India’s
retail boom, has a potential to become a $300 billion by 2010 and attract
large investments from global retail giants such as Walmart, Metro,
Carrefour and Ahold once the sector is open for foreign investment. In this
regard, a recent announcement of the government to open the retail sector
to foreign investment is a major a indication of the better things to come in
the Indian retail market. A recent Survey of the FICCI shows that
entertainment industry is projected to grow by 17 per cent to Rs 22,610
crore in 2005 and Rs 42,300 crore in 2008. The Survey projects that Indian
film and entertainment industry which enjoys export earnings of Rs 1,000
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crore annually has a tremendous export potential. This is expected to grow
by 70 to 80 per cent over the next 5 to 10 years.
The excellence is pursued not only in terms of products but processes too.
Concepts such as Six Sigma, ISO certification, Quality Certification, have
been increasingly sought by the service sector firms in India which are
finding greater opportunities and advantages in pursuing excellence in
performance and service standards.
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straightforward but tailored to customers’ specific needs (retail sales,
travel and tourism etc,) should consider shifting portions of all of their
businesses towards automation, self service or providing end to-end
services; they may also want to consider outsourcing those of portions of
their businesses that are not very profitable. They might want to think about
opening their own plants or offices overseas (captive offshoring), since
keeping close taps on the customer is important in this segment. Firms
delivering standardarised services using simple processes (retail
banking, data management, tele marketing etc.) will want to look at
oursourcing or offshoring all or some of these services to cut costs. But a
key strategic direction for them will be to provide complete end-to-end
service in a one-stop shop. These areas may see global competition and
companies must globalize themselves. Businesses whose processes
are complex and require customization (such as personal financial
planning, expert medical diagnosis, relationship marketing etc.) will want to
keep their work in-house, and localized, but focus on decoupling and
disintegrating their processes and selectively automating or
outsourcing where feasible. Finally companies whose work is
standardized yet whose processes are complex (credit analysis,
technical research, content management, software development, etc.,)
should consider captive offshoring, capitalizing on their expertise through
in-house automation, and outsourcing selectively where they need to fill
capability gaps; they may also want to think about globalizing their
businesses, especially if they have unique expertise with complex
processes or have automated such processes”
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Empowering and Enabling employees to develop skill is needed to
effectively relate to customers, fulfil their needs and develop a positive
customer service attitude.
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Dena Bank and Excellence in Service
Dena Bank is one of the pioneering financial institutions in India and has
been continuing its initiatives in promoting better customer service and also
providing them with efficient financial products that cater to the urban and
rural customers with equal intensity. It has used technology extensively to
rapidly redesign the product design and distribution. Some of the innovative
products that Dena Bank has pioneered in Indian financial sector include;
issuance of debit cards, exclusive cards for farmers known as Kisan Cards,
‘FinMarts’ that provide one-stop comprehensive customer solutions,
customized loans for personal consumption and education. It has
introduced in all its branches service standards and benchmarks in regard
to fulfilling various customer services and keeps on improving the efficiency
on a continuous basis by frequent monitoring and evaluation.
Looking Ahead
It is important for us to look at the costs and keep them well under control.
As the industry grows in stature and size, costs tend to go up, but we
should keep watching the way costs move.
Focus on Quality:
Market Integrity
Some concerns came into light recently when data is leaked by some
unscrupulous elements that brought in bad name to the country. It is
important that service oriented institutions prescribe and maintain high
standards of integrity and safety of their information that is confidential in
nature.
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Strengthen Distribution
Invest in Technology
Strengthen Governance
Governance determines how the institutions are run and operated. Several
firms,including some financial firms came into disrepute in the recent times,
because of certain compromises made in the quality of governance and
administration. It is important that the governance structures in all types of
institutions is strengthened that will be vital for developing a strong service
sector.
More important than all these is making of the managers who will support
the growth of the service sector and also make substantial efforts to
increase its scope and size. Many of you students should not only think of
becoming managers, but also strive to become entrepreneurs since service
sector predominance provides unique opportunity for the growth of small
businesses and entrepreneurs. Nations that have become big in economics
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are mostly on the back of the small businesses and you all should not
overlook the great potential you could harness as an entrepreneur.
Thank you once again, for inviting me and it is a great pleasure talking to
you.
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