The emergence of the Business Process Outsourcing or BPO industry in India in the 1990s and its phenomenal growth ever since had mainly been spurred by economic reforms focused on privatization and liberalization, especially the telecom sector in 1994. India today has become one of the driving forces as far as outsourcing is concerned with the production of robust world class IT services. Over the years with information technology driving the leading business modules across the globe, the meaning of outsourcing has assumed a whole new meaning altogether. Focusing on their core competencies, today Indian companies are also able to outsource various non core functions which was not possible earlier. The major players in today’s BPO industry are third party service providers and the captive units. In India the BPO industry is second only to the IT/ITES industry in terms of size, growth and scope. While Customer Care Services are the biggest contributors to the BPO industry, the KPO or Knowledge Process Outsourcing has tremendous potential for growth as well.
Reasons behind India’s Success in BPO Industry
Initially the emergence of the BPO industry was primarily a result of the liberalization of the telecom industry in the year 1994. Gradually the leading IT giants stepped in to make things better with a keen focus on the development of the BPO sector. But how was it possible for India as a nation to scale such giant strides in outsourcing in such a short period of time? Why is it so that the foreign companies are still so eager to establish and extend their outsourcing units in India? Come let’s find out:
BPO Sector: How is India Growing and Current Scenario of BPO Industry in India
The Indian BPO industry initially dealt into medical billing, data processing, medical transcription etc. Now it has penetrated into Insurance Processing, technical support and web research etc as well. With the global economy already grappling with two key financial setbacks via Recession and Eurozone crisis it would be interesting to find out how the Indian BPO industry is faring at present. According to CNBC the BPO industry is meeting challenges far better than the IT or ITES industry by bringing about effective adjustments in their business models to ensure positive results for themselves. Key BPO units are investing more on onshore units than offshore ones, thus building on their global delivery model which in turn has resulted in clients investing more on high value transformation projects. Here are some other highlights:
India is ready to ink a free trade agreement with the European Union provided it is granted the recognition of a data secure destination (Economic Times)
The financial year 2012 is hailed as a milestone year for the IT-BPO industry by NASSCOM with revenues crossing the 100 billion USD mark
However, at this point going by the growth records of the four major BPO companies in the quarter that ended June 2012, it is difficult to estimate the average growth attainable in near future:
Infosys- Disappointing figures thereby forcing the giant to reduce its guidance to only 5% for the 2012-2013 as opposed to NASSCOM’s growth prediction for FY2013 which stood at 11-14%
HCL Technologies- Raked in revenues of more than $4 billion
Wipro- Reported 1.4% QoQ losses in quarter revenue
Tata Consultancy Services- Registered a growth of 5.3% witnessing overall boom in service lines, industries and markets
Challenges Faced by the Indian BPO Industry
As much as it is difficult to estimate the future of the BPO industry in India, we can still believe that things can be better if we are able to resolve some needling issues faced by the industry:
Lack of Commitment: It is a huge problem faced by the industry at present. The industry though is able to tap a pool of talent in the initial years of their career; there are very few people who are ready to render long term services to this industry. In short there are not many who are willing to consider it a long term career option.
High Competition: Philippines, Pakistan, Eastern Europe, Egypt, China are a real threat to India’s one-upmanship in the industry
Third Party Outsourcing: The third party outsourcing companies are dealing with serious financial constraints owing to which they are unable to invest properly in training.
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.
Limited growth potential, high attrition rates, lack of experienced employees are other issues of concern
Leading BPO Companies in India
Overview: Business Process Outsourcing
Business Process Outsourcing (BPO) services involve outsourcing business units or organization’s repeated business processes to an outside
provider to achieve cost reductions and customer satisfaction. The provider manages the process and may also change the process. This can be done by implementing new technology or applying old technology in a new way. The diagram shows how BPOs evolved with time.
Amex, British Airways and GE started the outsourcing trend in the early 1990s. The aim was to reduce costs and to minimize efforts spent on non-core activities.
Attrition Rates in BPO Sector
We all know that attrition rates are very high in this sector as compared to others – around 35% in non-voice and 45% in voice-based call
centers. And unfortunately around 60% of the workforce, instead of leaving one call center and joining another, leave BPO industry altogether. The cost of attrition is almost one and a half times the annual salary. The reasons may be:
Solution to the problem
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.
Customer Support Services: Answering customer queries through voice, e-mail and chat.
Technical Support Services: Finding and providing solutions for customer problems related to hardware, software, peripherals, and Internet.
Sales and Telemarketing Services: Interacting with customers for selling or promoting products or services.
Administrative Support: It includes indexing, form processing, data entry, document conversion, scanning, etc.
Customer Relationship Management (CRM): It includes services such as taking orders, customer service, product support, technical help desk, and market research.
Finance and Accounting: It includes internal auditing, travel expenses, time and expense management, credit and debt analysis, collections, invoicing,
accounts payable, accounts receivable and billing-dispute resolution.
Human Resources and Training: It includes recruitment, training, attrition/retention, database management, contract-worker management, etc.
Myths and Realities about BPOs
Myth: BPO industry is short-lived.
Reality: BPOs are here to stay. The industry is well established with strong infrastructure, technology, and workforce.
Myth: Jobs in BPOs are at risk.
Reality: BPOs have deep roots in the western world. It is very unlikely that the jobs in BPOs in India would dry up.
Myth: Chinese and Russian BPO industries will soon overtake Indian BPO industry.
Reality: Along with other barriers, one major barrier that China and Russia have to overcome is the English language barrier. And along with other advantages, the biggest advantage for India today is the large pool of talented individuals. So there is a very small possibility of China and Russia overtaking the Indian BPO industry in the coming years.
Myth: Many big players are withdrawing their businesses due to quality and security issues in India.
Reality: A few companies may have withdrawn their businesses from India, but such cases are not appearing very frequently. Initially these companies may have withdrawn their businesses from India, but many of them have sent much more work to India later on.
Myth: Attrition in Indian BPOs is high due to job frustration and odd shifts.
Reality: Most youngsters are hopping from one job to another because they are getting tremendous job opportunities. And they have no problems working in night shifts too. Attrition is more in Indian BPOs because BPO competitors are offering more salaries or better designations.
Myth: The only work that employees have to do in BPOs is taking calls. The roles are limited to customer support officers, technical support officers, and team leaders.
Reality: There are many job roles in BPOs like quality, human resource, finance, IT, project management, training, facilities management, etc. Taking calls is not the only thing that has to be done. The job profile depends upon the skills and qualifications of the employee.
Myth: Working in BPOs results in monotony and health-related problems due to long sitting hours and continuous speaking.
Reality: BPOs provide proper health care facilities, work environment, and recreational activities for the employees. They provide sufficient breaks between the login hours. Many BPOs provide indoor games such as balls, carom boards, chess, etc. to their employees on the floor to remove the monotony of the job.
The BPO market breakup by industry is as follows:
Financial Services: 17%
Communication (Telecom): 16%
Consumer Goods/ Services: 15%
Information Technology: 43%
Global BPO Market by Geography:
The BPO market breakup by geography is as follows:
United States: 59%
Asia-Pacific (including Japan): 9%
Facts about BPOs:
- Large no. of talented graduates
- Affordable and quality education as compared to developed countries
- English language benefit
- Well-developed IT industry
- Strong customer base of well known companies
- Powerful venture capital interest in investing in growth opportunity
- Scarce foreign language skills other than English.
- Lack of customer service culture
- Expensive and poor quality telecom infrastructure
- Poor electricity supply
- Cultural differences
- High attrition rates, therefore less no. of people with extensive call centre experience
- Horizontal and vertical expansion of existing customer base into new markets
- Time zone difference between India and target markets
- Increasing awareness of outsourcing services
- High Billing rates
- Political instability
- India’s competitors in Eastern Europe, Latin America and the Asia Pacific regions offering cheap BPO services
- Increasing technology automation.