BPO Industry in India

The BPO industry has emerged as a major employment generator in India. The liberalization of the telecom sector in 1994 had helped the country become a global

BPO Industry: Reasons behind India’s success

India was introduced to the concept of business process outsourcing only during the early 90s. However, the competitive advantages available in India soon made it the favorite destination for foreign companies to start their BPO operations.

• Competitive advantage

• Cost advantage

• Risk mitigation

• Superior competency

• Improved services

The large pool of skilled and talented workers has allowed India to tap into the global outsourcing industry. India as a popular outsourcing destination is helping companies in reducing their operating cost, improving quality of services, and enhancing production. Outsource2India (O2I) thus has become the buzzword of the modern corporate world.

The globalization of world economy and the liberalization policies adopted by the Indian government worked as positive catalysts for promoting the outsourcing industry in India.

The ‘New Telecom Policy’ introduced in 1999 further strengthened India’s position as a leading BPO destination. Introduction of IP telephony and abolition of government monopoly over the telecom industry paved the way for more BPO companies to come up in India. Reduced tariff rates and international calling facilities encouraged foreign companies to choose India as their favorite BPO operating center. Initially, some of the BPO industries that emerged in India were medical transcription, data processing, medical billing and coding, and customer support when large MNCs established their subsidiaries to cater to their parent companies.

BPO Industry: How India is performing

The BPO industry is a comparatively new industry but is already making a significant contribution to the country’s GDP (Gross Domestic Product). The growth propensity of BPO has forced the government to recognize its potential and implement policies facilitating FDI (Foreign Direct Investment) to it. As a result, the number of third-party service providers has reduced and that of the captive BPOs has gone up significantly over the years.

According to a study conducted by McKinsey & Co, a global consultancy firm, the total size of the global BPO industry can be estimated between $122 and $154 billion. Industries that benefit from outsourcing their services to cost-effective locations are retail banking, insurance, travel/hospitality, automobile, telecom, medical transcription, finance, HR, data processing, and pharmacy. India is estimated to enjoy 5-6% share of the global outsourcing market and its dominance is only expected to grow in the coming days.

Indian BPO industry, however, isn’t free from challenges. Although the industry has enjoyed unprecedented growth in the past years, the flip side can’t also be ignored. Following challenges are recognized to affect the growth rate of Indian BPO industry:

• Restricted growth opportunity:

The nature of the industry is restricting the growth opportunity of youngsters.

• High attrition rate: The attrition rate of the industry varies between 20% and 40%. Currently, the Indian BPO sector is facing 55% attrition rate which is higher than any other industry of the country.

• New BPO destinations: The monopoly of India as an offshore service provider is being challenged by new entrants like Eastern Europe, Philippines, Morocco, Egypt, South Africa, and China. Pakistan is also emerging as a potential player in the market.

• Affecting lifestyle: The demand of flexible timing of the industry, especially night shifts is causing both mental and physical issues among workers. It is also contributing towards reclusive lifestyle and stressed relationships. These factors are also leading to higher attrition rate of the industry.

• Infrastructure: India lags behind in offering the type of infrastructural facilities required to grab the increasing volume of outsourcing projects.

• Global economy: The BPO industry is highly dependent on the performance of the global economy, especially that of USA. The current economic crisis of America has affected the revenue generation of Indian BPOs as well.

Nevertheless, for the time being, we can safely assume that the billion dollar Indian BPO industry will continue to grow in the future as well. Despite increased competition from other countries, the industry experts have forecasted robust trend for the Indian outsourcing companies. Following is a list of the top BPO companies in India:

• Genpact
• TCS BPO
• WNS Global Services
• WIPRO BPO
• Aegis BPO
• FirstSource Solutions
• IBM Daksh
• Aditya Birla Minacs
• Infosys BPO
• HCL BPO
• Accenture
• EXL Services
• Xchanging
• Cognizant BPO
• Convergys India