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For
BPO companies, growth will come through market expansion,
expansion to other verticals and efficiencies of scale. The
challenge will be to combine technology and insights with
an innovative delivery model to offer a higher value to clients,
say Gaurav Patra & Shipra Arora
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| During
recession, cost saving is a key driver and outsourcing
becomes imperative, says Vikram Talwar |
Nasscom
predicts that the ITES industry in India will grow by 65 percent
to $2.7 billion (Rs 13,200 crore) by FY 2003. A joint study
by Nasscom and McKinsey estimates that the outsourcing industry
in India will grow from $1.4 billion in 2002 to an estimated
$21-24 billion by 2008 and provide employment to 1.1 million
Indians by 2008. One of every four global giants outsource
their software requirements to India. The consensus of financial
analysts, industry experts and consultants the world over
is that BPO is reshaping the way business is being done and
has the potential to become the next sunrise industry in India.
Taking
stock
BPO in India is growing significantly. This is mainly due
to the continuing global economic downturn in addition to
the success of Fortune 500 firms already outsourcing in India.
However, consolidation amongst Indian providers of outsourced
BPO services will continue while 5-7 strong Tier 1 players
emerge. “High quality, as measured by Customer Operations
Performance Centre (COPC) certification, and success with
Fortune 500 clients in the past is fueling the BPO segment
right now,” feels Sudhakar Kosaraju, co-founder &
VP, business development & marketing, 24/7Customer. Adds
Vikram Talwar, CEO, EXL Services, “Outsourcing as an
activity is independent of the current state of the economy
in the West. In times of recession, cost saving is a key driver,
and outsourcing becomes imperative. During growth, organisations
need to focus their energies to take advantage of the upturn,
and therefore need to outsource their non-core activities.
Growth factors and competition
It is important for the industry to move up the value chain
and offer high quality and unique services to its customers.
It is only the ability of companies to offer such services
that will see this industry gaining real glory, rather than
mere hype.
“For the Indian BPO/ITES industry to move up the value
chain, the need is to develop process and business expertise,”
feels Sri Dasari, president, Brigade India. And the Indian
BPO industry is heading to the higher value add proposition
by implementing solutions for some of the most critical processes
of their clients. “The trend would be to move from the
‘vendor’ concept to the ‘process partner’
concept,” comments Ranjit Pisharoty, country head and
vice president-Technical, Vetri Software.
In addition, there are other factors driving the growth of
this industry. India’s telecom costs—which were
much higher than in rich countries—have started falling,
thanks to liberalisation. Manpower cost in India is also quite
low in comparison with the US. India has a large (250 million)
educated work force, which is creating a growing domestic
sourcing market for call centre services. Finally, India’s
time zone position has made it the popular choice for outsourcing
CRM activities.
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| Domain
expertise is necessary for migration of higher value add
processes to India, says Sanjiv Kapur |
“As
global corporations evaluate destinations of high quality,
low cost and scalable operations around the world, India,
China and Philippines become the front runners of this migration,”
says Pavan Vaish, senior vice president, Daksh eServices.
Agrees Tilak Raj Punjabi, GM (systems & BPO), CSC India,
“At present it is cost and quality that is driving the
Indian BPO industry.” Given that China has a limited
English-speaking population and Philippines generates only
400,000 graduates per year, India’s education system—with
the ability to produce two million graduates every year—positions
the industry well to ride this momentum. This is further supplemented
by the fact that the India brand equity overseas has already
been established through the Indian IT services sector. Says
Rakesh Kumar, president and country head, Global Vantedge,
“The emphasis is on quality, but cost-effectiveness will
also continue to play an important role in determining the
competitiveness of the country vis-à-vis emerging challenges
from countries like South Africa and Canada,” he adds.
However, Pisharoty feels that the factor driving the BPO market
today has shifted from pure labour rate arbitration to cost
competitiveness through technology-enabled re-engineered processes.
Indian companies have terrific process due-diligence skills
and process re-engineering skills backed by in-house technology
groups,” he comments. Adds Sanjiv Kapur, general manager
and head-BPO, Patni Computer Systems, “Domain expertise
has increasingly become the deciding factor for companies
migrating higher value add processes to India.”
Control and security issues will also result in increasing
competition for Indian companies from other English-speaking
countries, especially those like Canada and Ireland that are
in geographic proximity to the US and the UK.
Market and segments
As far as vertical segments are concerned, banking, finance
and insurance, high-technology domains, telecom, e-commerce,
health care and hospitality are considered to be the most
critical sectors for the BPO space. In the days to come, BPO
firms should focus on industries that are manual process intensive
and are facing pressure to reduce costs due to increased competition
or budgetary constraints, and those under regulatory pressures.
At present, most companies are targeting geographies like
the US and UK. However, industry gurus believe that the rest
of the major English-speaking world—like Australia and
countries in the Asia-Pacific—is ripe for large scale
outsourcing initiatives. In addition, there is a need to tap
the French and German markets as well.
Challenges
There is a huge demand for BPO and India has definitely the
right quality and cost equation. So what is keeping this vision
from becoming a reality? Can Indian companies put together
a scalable organisational engine that includes management,
infrastructure, capital, process and customer acquisition?
And can the government and various industry bodies bring about
accelerated reforms in the area of telecom infrastructure
and educational curriculum as also build the right geopolitical
environment so that the customers’ risk of coming to
India gets mitigated? If India or Indian companies tackle
these issues then one can expect the Indian BPO sector to
certainly have a place under the sun.
Key differentiators, which would define a long-term BPO player
would be its investment in redundancies (physical infrastructure,
technology bandwidth, recruitment machinery), its scalability
by virtue of access to funds and experience in migrating and
executing complex back-office tasks across varied industry
verticals. “Indian BPO vendors are being challenged by
insufficient quality of service, lack of service specialisation/expertise,
and ballooning unused capacity. This situation will lead to
the emergence of a set of Tier 1 providers capable of surviving
while leaving unfit players to wind up or sell their assets,”
feels Kosaraju. Adds Sujay Chohan, vice president and research
director, offshore BPO, Gartner, “2003 will be the year
of consolidation for the BPO industry in India. The future
looks promising as the BPO industry is set to grow, but the
business case should be approached with a clear long-term
perspective.”
While infrastructural bottlenecks, especially on the technology
domain, have significantly come down in India, there are several
roadblocks in BPO’s growth path. These range from nascent
licensing policies, labour law restrictions, interconnectivity
and technological restrictions, power supply problems, bureaucratic
delays, inadequate regulatory support, ambiguous laws on e-business,
data protection and privacy, unclear definition of ITES/BPO
and lack of training infrastructure.
| Challenges
for BPO sector |
|
Industry
level
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No single body or forum to represent the views, problems
and issues of the industry at a national level. Nasscom
includes ITES under its purview, but the industry
could be benefited by a body solely devoted to BPO
and call centres.
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No cooperation within the industry to develop and
adopt common quality standards, share best practices
and move the industry away from commoditisation.
National
and international level
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India’s risk perceptions internationally, in
the wake of political standoffs, requires high build-out
of redundancies and BCP.
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Negative perception on infrastructure in India internationally.
Policy
level
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Lack of government support on development of training
infrastructure and appropriate benchmarks/certifications
for students.
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Nascent licensing policies, labour law restrictions,
no common state laws for 24x7 services and working
at night, bureaucracy and red tape in sanctioning
of facilities.
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Lack of availability of long term financing for infrastructure
development.
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Ambiguous laws on e-business, data protection and
privacy.
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Unclear definition of ITES/BPO in state policies.
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Inadequate regulatory support.
Infrastructure level
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Power supply problems.
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Interconnectivity and technological restrictions.
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While technology bottlenecks have significantly come
down since privatisation, there are still several
challenges in getting technology providers to meet
service level agreements (SLA’s) similar to ones
signed by service providers with clients.
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| Different
tiers of BPO players |
1.
Global players like GE, Convergys, CSC.
2. Indian software companies/service providers like Infosys,
HCL and Wipro.
3. Independent players like Daksh.
4. Conventional business houses like Reliance. |
Business
Strategy
A lot of the large IT outsourcing and consultancy firms have
entered the BPO space. However, the business model of BPO
is entirely different, as are the kind of skill sets and depth
of domain knowledge required for delivery. Moreover, the BPO
model throws up a whole new set of HR challenges, and these
companies will need to address these. For these firms, the
current advantages are their relationships with clients, and
the fact that IT is an enabler for BPO. However, to be successful,
they will have to transition from the ‘we also do BPO’
mindset.
The second category of firms are the pure-play BPOs. Since
they start by building the required competencies in the BPO
space, these are better positioned to deliver value to the
client. But, these companies face a challenge in building
requisite trust levels with the outsourcing model. However,
there are a number of pure-play BPO companies that are very
successful, particularly in the UK, and this model can be
replicated in India, with the additional benefit of cost arbitrage.
Then
there are the call centres and medical transcription outsourcing
companies. While lucrative, these are at the bottom of the
value chain and need to either quickly expand in scale and
efficiency to be the best possible vendor in their space or
face consolidation.
Although there are different types of BPO companies, to differentiate
itself as a long-term player, any outsourcing company needs
to have a specific business model. Instead of discrete tasks,
the company should be in a position to provide end-to-end
process outsourcing. The real benefits of outsourcing, both
for outsourcers and service providers, would come from a process
rather than task focus, in the context of outsourcing. “Scope
for process improvements and long term cost savings is enhanced
tremendously when end-to-end processes are implemented rather
than choosing discrete tasks,” comments Talwar.
Another two factors that differentiate the long-term players
from the short-term players are the commitment and investments
in Business Continuity Planning (BCP) to mitigate the risks
of external events. Specific steps like documentation of processes,
build out of redundancies in telecom/communication infrastructure,
power, security, transportation as well as people and training
should be looked into by the companies.
Another important factor for the success of a BPO organisation
is moving up the value chain through process improvements
and re-engineering. Cost savings and labour arbitrage would
cease to be differentiators in the long term as other countries
try to catch up. In the long term, process improvements and
re-engineering, bringing about real savings either through
productivity enhancements or reduction in turn around time
or costs would allow service providers to move up the value
chain and handle more and more complex processes, higher up
in the value chain. “The value chain is more a perception
driven concept rather than reality”, feels Vaish.
Another model that companies are adopting is one of incubating
small entrepreneurs as business associates, who use the innovatively
designed and developed applications built by the technology
groups of those BPO companies to deliver relatively complex
processed material. This allows companies to focus on the
core areas of customer value-add and quality. This also helps
significantly in flexibility and scalability, an important
attribute considering the volatility in this business. Apart
from this, synergy between the mainstream activities and BPO
is also essential. Large companies will continue growing at
a faster rate by virtue of critical mass, momentum and customer
confidence. Smaller players will have a tough time as attrition
and increasing salaries impact them.
Companies considering the long-term advantage of building
a quality-centric service delivery model of higher importance
than immediate short-term gains through high-volume, low-value
task oriented work will survive,” says Talwar.
All these players, through investments in people, processes,
infrastructure and redundancies, would meet client expectations,
and peg them at a high level. “With domain knowledge,
specialisation and domain expertise one should plan to further
expand base,” comments Kapur.
What
is the success mantra?
There are a number of BPO players present in the market. But,
the biggest question is, what steps do you take to be successful?
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| China
and Philippines are frontrunners on the low-cost, high-quality
and scalable operations criteria, says Pavan Vaish |
While
the outsourcing company’s management focuses its time,
energy and resources on building the company’s core business,
service providers should assume full responsibility for managing
day-to-day customer contact and back-office operations. Cost
reduction, an important consideration, could be achieved through
process re-design, use of the latest technology and economies
of scale. The third most important criteria is to improve
service quality. Companies should organise and manage business
processes with a view to providing a higher level and quality
of service to customers, both external and internal. Again
the focus of a BPO company should be on building a more competitive
business, providing the supporting systems and services to
the business and helping companies compete more effectively
in the global marketplace. Apart from these, other factors
like meeting changing customer demands and access to advanced
technologies are also very critical. On the whole, companies
should endeavour to provide a value proposition that maximises
value to the client through cost reduction and long-term savings
through process improvements and productivity enhancements.
For some time to come, India will remain the undisputed leader
as an offshore BPO destination. Industry size will grow and
investments in captive units of large MNCs will continue to
be the key driver in the industry. Competitive pressure and
the hesitancy of first time outsourcers will also see an increase
in Build-Operate-Transfer (BOT) deals in the country while
transaction processing-based contracts will dominate third-party
deals.
One can a see a trend of the call centres moving into areas
that are more process intensive and where scale, domain knowledge
and ability to offer business insights become crucial.
With profile inputs from Srikanth R P and Stanley
Glancy
| EXL
Service India |
|
Noida-based
EXL Service India, set up in 1999, is a wholly-owned
subsidiary of EXL Service Inc, and a leading BPO service
provider in the country. Currently, the company operates
from three centres with a manpower strength of 1,800
employees and a seat capacity of 4,500 on a three-shift
basis. With investments worth $15 million already being
made into its operations the company has estimated revenues
worth $30 million for the calendar year 2002, a growth
of more than 100 percent over its $12 million in revenues
last year. Going forward, the company plans to set up
its fourth centre by mid-2003. As far as full utilisation
of the capacities is concerned, EXL will be achieving
the first and second shift utilisation of its third
centre in the first period of this year.
Presently, almost 80-90 percent of the company’s
revenues are sourced through a single client, namely
US-based financial services company Conseco Inc, which
constitutes a risk factor. Instead of one anchor client
the company will be moving to a three-to-four anchor
client model. With additional anchor clients, EXL intends
to reduce Conseco’s business share to 70 percent
in 2003 and 50 percent in 2004.
Areas of specialisation
The key strength of the company lies in its expertise
in the banking and financial segment. Another strength
of the company lies in the extent of its process capabilities.
It delivers over 70 processes, which includes back office
and transaction processing as well as phone and Web-based
customer contact services. Some of the areas of specialisation
of EXL include tax processing, claims processing, billing
services, accounting transactions, general accounting,
credit/debit card services, benefits and administration,
tax consulting, compliance and other financial activities.
In addition, it also provides payroll and other HR services,
telesales/telemarketing, customer care, Web sales and
marketing.
|
| Spectraminds |
|
Spectramind,
a subsidiary of Wipro, is one of the largest third-party
providers of BPO services with a wide range of processes
in production (voice and non-voice). Boasting of an
employee strength of 2,000, the company has successfully
migrated over 350 processes from different countries
into remote locations. The company offers a full spectrum
of end-to-end solutions, covering voice, non-voice and
Web-based services across a wide range of industries.
It has a centre each in New Delhi, Mumbai, Pune and
Chennai. Its facilities in Delhi and Mumbai have a combined
seat capacity of 5,000. Despite
only two years of business operations, the company’s
customers include Fortune 100 companies. Apart from
targeting the US and the UK that have been the hub of
business for the Indian BPO industry, Spectramind has
gone a step ahead in targeting the Canadian and the
Australian markets as well, gaining an early-mover advantage
over the competition. Spectramind’s
strength lies in its skills to integrate and manage
business processes for multiple countries and technology
platforms as well as its capabilities for migrating,
stabilising and improving processes ranging from simple
e-mail management to complex voice-based technical help
desk processes.
Areas of specialisation
The company’s specialisation areas are claims processing,
document management, animation, network management,
biotech research, credit/debit card services, telesales/telemarketing,
customer care, benefits administration, education and
training, payroll services, records management, billing
services, accounting transactions, general accounting,
risk management, financial reporting, financial analysis
and financial management.
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Daksh
eServices
|
|
Daksh
is a provider of offshore customer interaction services
to Fortune 500 companies. The company offers a range
of integrated customer care services, including voice,
e-mail response, real-time chat, knowledge management,
CRM architecture and other value added services to global
corporations. Established in the year 2000, the company
initiated its operations with seven employees and one
customer. Presently operating from three customer contact
facilities with fully functional 24x7 facilities that
can support more than 5,000 customer care specialists
servicing its clients, the company is now initiating
operations in Mumbai—taking the total head-count
to 3,000. With the expansion underway, Daksh plans to
build up a 5000-strong team by 2005. The IT-Enabled
Services (ITES) revenues for the company totaled $18
million during the FY 2001-2002 with an estimated revenue
of $30 million during FY 2002-2003. The necessary growth
and expansion impetus to the company was made possible
thanks to the $21 million investment from General Atlantic
Partners, LLC in August last year. General Atlantic
Partners is a leading private equity investment firm
focusing exclusively on information technology, process
outsourcing and communications investments on a global
basis. Daksh had previously raised over $8 million in
investment capital. Prior investors include angel investor
Ashish Gupta, CDC Capital and Citigroup Venture Capital.
The company’s client list comprises nine customers
from the top Fortune 500 companies. Some of its key
customers include Amazon, Yahoo and Sprint PCS. In terms
of geographical markets, Daksh is focused on the US
and UK market for its business. In order to strengthen
its presence in the two markets the company has initiated
the setting up of a sales office in the UK and increasing
its sales force in the US.
Areas of specialisation
The strength of the company lies in the following areas
of specialisation: claims processing, document management,
billing services, credit/debit card services, other
transaction processing, database marketing/customer
analysis, telesales/telemarketing, customer care, Web
sales and marketing, other sales and marketing communication.
In order to keep up momentum in the fledgling BPO industry
the company has a robust and strong HR strategy. It
has executed a number of employee relations programmes.
High on the company’s list of priorities are the
employee recognition programmes where individual performances
are recognised.
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| GTL |
|
Global
CMS is the contact centre and Business Process Outsourcing
services group of GTL. The company has a 754-seat capacity
on a single shift and can seat over 2,100 employees
in three shifts. This infrastructure facility is spread
over 1,20,000 sq ft. Established in 1998, the company
is targeting the insurance, financial services, telecom
and retail verticals. It grossed around Rs 708.70 million
(Nasscom estimate) in revenues from ITES. During the
same period, exports formed the bulk of its business,
standing at Rs 575 million. The company is largely focusing
on the US and UK, which form GTL’s export market.
Its key customers in the UK market include a large GSM
operator, a leading insurance company and a leading
healthcare retailer. In the US market, its present customers
are a financial institution, a large cellular operator
and a healthcare company. GTL has been providing services
in the non-life insurance and mobile insurance space
in the UK market for more than two years. In fact, for
a large non-life insurance company in the UK, GTL sells
more than 6,500 policies a month, of which 60 percent
mature into yearly premiums. The contact centre services
provided by Global eCMS are customer acquisition, customer
service, relationship management, technical helpdesk
and Web-based services. Currently, the company is building
up capability in the processing/back office management
areas like transaction processing, accounting, forms
processing/content management, human resources and claims
processing. With a lot more focus going into its BPO
business the company is ramping up its overall strength
in the Indian ITES market and will pose a major threat
to its closest competitors. Aparup Sengupta, global
head, BPO business, GTL, says, “We are not in the
BPO segment for topline growth. We are a long-term player
and intend to market our key USP, which is our scalability.
We are currently in a position where we can offer a
customer a low requirement of 10-15 seats and then scale
up rapidly to more than 1,000 seats on demand.”
Areas of specialisation
GTL’s areas of specialisation include database
marketing/customer analysis, telesales/telemarketing,
customer care, Web sales and marketing, other sales
and marketing communication.
Training & performance management
In order to maintain the quality of services, the company
has designed a comprehensive training and performance
management strategy. The typical training cycle is of
a minimum of 180 hours or 4 weeks. On the performance
management side, a person from the quality team is dedicated
to each programme and his/her main objective is to work
very closely with operations. The quality team is driven
by the quality head and it reports directly to the president
of the contact centre. The objective of this group is
to “identify areas of improvement and assist programmes
in achieving and exceeding performance levels.”
There is one quality person per 25 customer response
executives (CREs)/ agents assigned to the projects.
Systems and connectivity
Keeping the present scenario in mind the company has
built in adequate redundancy into the system. On the
telecommunication front, measures for contingency and
disaster recovery include three redundant last mile
connectivity through 2 Mbps optical fibre from MTNL,
an MTNL RSU located in-house for enhanced reliability
and a 2 Mbps link to US via the Pacific route on which
traffic can be routed in case of breakdown in the IPLC
on the Atlantic route.
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|
Datamatics
|
|
The
services provided by Datamatics encompass a large portion
of the Knowledge Management (KM) chain. The company
presently offers services across the existing KM chain
including areas like data management, document management,
data warehousing, workflow and knowledge capitals. The
ITES revenues of the company for year 2001-2002 accounted
for Rs 215.65 million (according to Nasscom).
Strengths
The business focus on the niche area of Knowledge Management
is one of the USPs of the company, which can stand the
company in good stead in the coming years. What will
provide further impetus to the company is the fact that
KM as a concept is emerging very fast on the scene,
touching upon every aspect of a business with service-oriented
industries relying heavily on information to determine
their competitiveness. Says Manish Modi, managing director
and CEO, “We are an end-to-end KM service provider
in the global market space. We are the leading partners
of Filenet, Hummingbird, Cognos and Documentum—each
player being a category leader in the KM space. In line
with this vision, we are making tremendous investments
in technology and KM services to steer clear of the
clutter in the BPO market place. Based on our internal
market research, we foresee a growth of 75 percent over
the next three years.” This apart, the wide area
of geographical focus across a range of countries has
also built in a lot of de-risking in the business model.
Apart from the USA, the company is also servicing countries
like the UK, Canada, Germany, Switzerland, Singapore,
Japan, Australia and New Zealand. This widespread presence
is one factor that leading competitors of Datamatics
will have to tackle very aggressively.
Areas of specialisation
The company’s areas of specialisation include tax
processing, claims processing, document management,
transcription, translation, digitisation (including
GIS), accounting transactions, tax consulting, compliance,
financial reporting, financial analysis, other transaction
processing, recruiting and staffing, payroll services
and hiring administration.
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