India BPO Industry Overview

Table of Contents
Executive Overview Emerging Trends of BPO Indian BPO market: Key highlights and trends Phases of ITES-BPO Evolution in India Key enablers for growth of BPO in India Impact of BPO on Indian economy BPO: Services Spectrum PATNI :-BPO SERVICES Mapping of BPO and KPO processes on complexity grid Patni approaches towards Hiring and Retention Patnis Differentiators

Executive Overview
BPO A structured arrangement between an organization and an outsourcing partner to perform services, otherwise conducted in-house. Until few years ago, BPO was a means to achieve cost efficiencies in transaction intensive back office business processes This resulted in both tangible benefits like reduction in cost, and intangible benefits such as focusing on more strategic issues.

Emerging face of BPO

BPO is emerging as a key management tool, the focus of which is expanding beyond the non-core areas, giving an organization flexibility to achieve a certain set of tactical and strategic goals. Organizations opt to undertake BPO because it offers them advantages of cost, speed to market, competitive capabilities, stimulus for growth and both the time and space to focus on their own core competencies. As the scope of BPO increases, so does the level of complexity involved in managing partnerships, structuring deals, and capturing values. Consequently, older paradigms of BPO no longer hold true.

Indian BPO market: Key highlights and trends

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Indian BPO Exports

11.82 8.63 6.30 4.60 3.10
11%

Break-up of Indian BPO Experts

11%

USD Billion

10 8 6 4 2 FY 2004 FY 2005 FY 2006 (E)

3% 3%
46%

Customer In Customer Interaction Services Services

F&A

F&A HR Others

46%
HR

40%

40%

Others

FY 2007 (E)

FY 2008 (E)

Source: NASSCOM Strategic Review 2007

BPO in India is growing at 32% and is estimated to cross $ 8.63 billion in 2007 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 Indias 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

Phases of ITES-BPO Evolution in India

Operational cultures previously seen only in western shared services centers were developed Large operations & high quality infrastructure was built Development of delivery processes legalising shift work for men & women Low resistance to offsshore outsourcing regulatory standards Rise in anti offshore backlash from global sourcing Maturity of processes& regulatory standards in industry Improving risk profile of the business model-supply-side still perceived to be immature Early movers display advantage of acale Credibility of business model reinforced perceived risks dealt with satisfactorily Initiation of work on process & Widespread global acceptance of the economic imperative of global sourcing Proliferation of players, service lines & sourcing destinations Changing cost economies decline in labour arbitrage offset by leveraging processes & SG&A efficiencies and scale Shift towards higher order, cost plus benefits

Phase 1 1996-2000 Pioneers focus on building scale. Absence of vendors with exhibited capabilities. Preference for the captive model

Phase 2 (200-2003) Early adopters sharpen outsourcing strategy. Rise of 3PSP

Phase 3 (2003-2008E) Cautious followers embrace outsourcing unconditionally. Higher degree of consolidation shake out

Source: IBM Consulting Services

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Key enablers for growth of BPO in India

Large pool of English speaking talent
Large English-speaking Talent Pool

3.1 million graduates pass out of Indian Colleges annually comprising of 151,000 Engineering & 100,000 IT Graduates

Emphasis on Information Security & Quality

Highest number of Quality certified Delivery centers in the world (including ISO27001, BS7799, SEI CMM, SEI PCMM, COPC, eSCM etc) Initiatives & Investments in ensuring highest level of Data/Information Security

Focus on Business Infrastructure

Rapid growth in critical business Infrastructure like Telecom, Internet Connectivity, Real Estate, Roads, Transportation etc Strong emphasis by government on building & enhancing support Infrastructure

Business Policy & Regulatory Environment

Indias attractiveness is enhanced by progressive tax reforms & strong regulatory framework Government support through incentives & non- financial assistance

Progressive macro-economic environment

Stable market with a thrust on growth and globalization India has created a BPO business friendly environment through progressive policies (STPI & SEZ)

Impact of BPO on Indian economy

Job creation (Direct & Indirect)

BPO offers a big employment avenue for Indias vast population base Direct employment of 415,000 people in BPO, with ~ 3 million indirect employment in 2006

GDP growth

8.5% GDP growth in 2006, a major contributor was the growth in services sector including IT & BPO BPO and IT industries are a key contributor to India current Forex reserves of $ 194 billion

Rising income levels and purchasing power of people

BPO offers employment to millions of people with competitive remuneration 415,000 people employed in BPO are a key constituent of the growing affluent class of people Purchasing power of ~ $ 3 billion of the people directly employed in BPO in India

Development & Upgradation of Infrastructure

Many MNCs and Indian companies have invested billions of $ in creating infrastructure Robust telecom, internet connectivity, roads, logistics and ancillary support infrastructure

Positioning in the global marketplace

India has emerged as a global IT and BPO hub & globally positioned as the number # 1 destination for BPO and IT services

BPO: Services Spectrum

Financial Accounting Management Reporting Revenue Accounting Order to Cash Record To Report Procure to Pay Fixed Asset Management Commercial prospect evaluation for new innovations New product development support Data mining, programming, data analysis Patent drafting & filing support Analytics: Business intelligence Target segmentation Pricing analytics Finance and Accounting
Support

Staffing Mgmt Resume filtering JD development Initial CV screening Staffing administration HR Service Administration Employee data mgmt Leave scheduling & tracking Attendance management Employee service Employee helpdesk

R&D and Product Design HR Technology & Helpdesk operation Business operations Outbound Logistics Sales & Marketing Customer Service Inbound Logistics

Core

Strategic Sourcing Spend analysis RFX management eAuction support Category Management Sourcing support Contract compliance management Spend reporting Process Management Invoice management Custom analytics

Customer support Billing query resolution Order management Account maintenance Order booking Email/Chat support Collections

Application Support ERP CRM Portal Support Content Management IT Helpdesk Desktop Support Networking Support Web Support

Moving towards KPO

India KPO services market is expected to:    Grow from $1.2 Bn to $15.5 Bn in 2010 CAGR of 43% Hold 71% of global KPO market in 2010 from 56% in 2004

Latent opportunities

Equity Research Logistics management Consulting services Monitoring services Legal advice Medical advice

Rapidly evolving opportunities

Network management Distribution product development Data search, integration and analysis Marketing services Secretarial services Web site services Remote education Customer Analytics

Established opportunities

Customer interaction services Finance and accounts services Engineering design services HR services Animation Translation, transcription and localisation

Source: NASSCOM McKinsey Study- India IT Strategies, Evalueserve

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PATNI :-BPO SERVICES Mapping of BPO and KPO processes on complexity grid
High High IT Helpdesk Defined Benefits Revenue and ERP/Apps Support AP / AR Credit Cards Claims Processing Payment Processing Customer Support Application Processing Code Support Web Content Management Expense Processing Health & Welfare Defined Contribution Benefits Admin Revenue Assuranc e Fund Administration Claims Adjudication Actuarial Services Benefits Coding

Financial Reporting

Complexity

Health Insurance Application Processing

Low BPO
Knowledge Intensiveness
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Knowledge Services (KPO)

Patni approaches towards Hiring and Retention

Employee Satisfaction & Retention
Retention Program: Bank @ Patni Plan Well Defined Career Path Quarterly Skip Levels Meetings Competitive salaries Quarterly Fun Outings Reward & Recognition Schemes Performance Based Incentives Schemes Retention Programs Compensation linked to performance Employee Satisfaction Survey Parents visit to facility

Hiring
Selection Tools
Aptitude test Language Proficiency Test Technical TestGroup Discussions Technical/Functional Interview Final HR Interview

Patni attracts the best talent in the industry by simply giving

responsibility early on to its employees - Business Today

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Patnis key differentiators

Past track record Integrated IT-BPO Solutions Flexible and Scalable Delivery Model Established transitioning methodology Year-on- year productivity gains Multi-lingual Support Capability

Over 29 years of experience in servicing global clients Large strategic global relationships with Fortune 500 organizations Patnis IT & BPO organizations are tightly integrated Joint Project Governance & Relationship Management Flexibility in engagement and program design Flexibility in scaling-up operations Agility in deployment of best-of-breed resources Robust Transitioning Toolkit & Program Migration Methodology Offshoring Assessment through SCOPE methodology Year on year productivity gains to sustain significant cost benefits Six Sigma based Process re-engineering and automation to enhance cost savings Global Service Delivery Footprint Experience in providing Multi-lingual Support from India & China covering languages like English, Spanish, German, French, Chinese, Japanese and Mandarin Six Sigma based process improvements Robust quality model to achieve defect free delivery Operational best practices implementation Maximization of cost take-outs through competitive pricing model Reward and Penalty based structure to drive competitiveness Business Transformation and Consulting Practice to assist clients to draw a clear roadmap for redesign and improving business services Best in class people management practices to attract and retain talent Low attrition rate compared to industry standard
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Six Sigma capability

Competitive Pricing

Business Transformation capability People practices