MNCs prefer Indian BPO cos: E&Y

SIBABRATA DAS / Mumbai

Fortune 500 companies have indicated growing confidence in the capabilities of Indian business process outsourcing (BPO) companies to handle outsourcing of core service processes, according to an Ernst & Young survey.

“While 58 percent of the respondents indicated that only non-core processes had been transitioned, a significant 24 percent had successfully transitioned core processes,” the survey said. Both core and non-core processes accounted for the balance 18 percent.

Cost saving was the top outsourcing objective of US corporates, said Farokh T Balsara, president-WIC, Indo American Chamber of Commerce, and partner at Ernst & Young. “Almost 94 percent of the respondents cited achieving significant cost reduction as one of the top five outsourcing objectives. 75 percent of the respondents cited achieving significant cost reduction as their primary objective,” he added. Were US corporates satisfied? Three-fourths of the respondents indicated a 30-50 percent saving per employee.

The survey also sought to identify the various cost drivers impacting the operations of the respondents. The cost-mix indicated by various respondents show salaries and benefits contribution at 40-60 percent while communications and infrastructure accounted for 10-15 percent and training 5-10 percent.

De-risking the business was also one of the top five objectives for US corporates to outsource, with 12 percent of the respondents citing that as a reason. There are a range of de-risking options available, including location options and local outsourcing. “US-based corporations have invested or are continuing to invest significantly in Indian offshore operations. While only 29 percent of respondents had so far set up operations in multiple city locations within India, 25 percent of respondents in single locations indicated that they had plans to extend to multiple locations. However, only 10 percent of respondents operated out of multiple sites within the same city location,” the survey said.

40 percent of respondents who operated from multiple locations also outsourced residual work to local vendors. However, several of those that operated from single locations did not follow a policy of local outsourcing, usually in line with current global policies.

The Ernst & Young survey covered 30 respondents, including Fortune 500 companies and large US-based BPO service providers who have set up shop in India.

“The biggest stumbling block is still the lack of ‘proof of concept.’ Most US companies are now running trial projects. If those do well, it augurs well for the Indian BPO industry,” said Balsara.