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BPO industry poised for big growth

By Pradeesh Chandran, DH News Service

Slated to grow fast in the coming years, the Indian BPO industry is experiencing rapid changes, in terms of more value-added services and spreading to semi-urban areas to tap fresh talent pools and better cost arbitrage, writes Pradeesh Chandran.

Business Process Outsourcing (BPO) which was earlier considered, just a ‘lifting and shifting’ of processes which was not core to an enterprise has undergone striking changes over the years. Today, businesses have realised that outsourcing is also critical, requiring specialisation in various domains. From mere call centers (voice BPO) or support centers, BPOs have evolved into a viable business model that could reflect in any organisation’s book.

Initial wave of outsourcing was to offshore voice-based support services into a cheaper destination, but today, apart from labour cost arbitrage, Indian firms offer a highly skilled talent pool, domain expertise, ability to innovate etc for their clients and this has made India a preferred destination for outsourcing. Growing at a strong pace over the past three years, BPO is the fastest growing segment of the overall offshore markets, and is currently estimated at $ 26-29 billion. The sector has grown to reach nearly $11 billion in export revenues and also employs more than 700,000 people.

According to findings from a study conducted by Nasscom-Everest, India enjoys a share of more than 35 per cent of the overall worldwide BPO market. The study also said that the total export of BPO services will grow exponentially in the next decade. The fast growing domestic BPO market will alaso add to this opportunity for the industry.

Nasscom also says that the industry is set to see a transformation and the latest is the emergence of the ‘BPO 3.0’. Business transformation is the new mantra of the industry. Organisations are moving away from being mere back office, transaction-based support outfits to being business partners to their clients and even clients want BPOs to share their risk. ‘Outcome-based engagement’ rather than just pricing or using the risk and reward method is the newly emerging trend.

Industry veterans feel that the transformation is happening not only in business but also in the minds of youngsters joining the industry. The sector once considered as a stop-gap arrangement or stepping stone into a corporate sector is no more just a fun place. “The employees who joined the BPO industry were traditionally of the view that a job in a BPO entails more fun than serious work. However, given that the BPO sector is looked upon as the next largest employment generating industry, now employees view it as a steady, long term career path, especially in the knowledge-based process outsourcing sectors such as Medical Transcription,” opines CBay Systems Vice President for Human Resources Sanjay Shanmugaum.

Home market

Another boom is in the domestic BPO space. The buoyant India consumption story and the subsequent need for a robust customer service delivery mechanism have triggered the growth of the domestic BPO market in India. The major growth driver for the sector is the opening up of the domestic market. Outsourcing which was considered primarily for the western MNCs slowly witnessed a shift in the recent past. Despite being a small fraction of the overall outsource business, the domestic BPOs are growing rapidly. The domestic BPO has really opened up new pastures in the Tier 2 and Tier 3 cities in India.

As per a data from a study conducted by Ernst and Young (E&Y), the domestic Business Process Outsourcing (BPO) market, with a growth rate of 50 per cent over five years, grew faster than the exports market to reach nearly $1.6 billion revenues in the financial year 2008. Though it is smaller when compared to the $11-billion BPO exports market, it is expected to reach $6 billion by 2012.

“The domestic market is slowly booming and it helps many Indian companies especially the telecom and banking companies to serve their customers in a better way. Domestic customers always look for support within their close reach and also in their on language,” says Sparsh BPO Services Ltd Chief Operating Officer Gayatri Balaji.

Apart from the quality services to customers another advantage offered by domestic BPOs is that it provides employment for the untapped talent pool in the smaller cities and towns. It gives many individuals an opportunity to work from their hometown than going out for looking job opportunities. Further to this, for the BPO players, entering into Tier 2 cities it is lower labour cost and also operations cost.

The BPO sector is growing not only in terms of revenue but also its reach. The business which saw shift from the Tier 1 to Tier 2 cities are still penetrating into the interiors of the country through rural BPOs. Started as a corporate social responsibility initiative by many companies, rural BPO now appears to be a viable option to find the talent in the smaller towns in India and still keeping costs down. For example, major banking and IT firms like HDFC Bank, Infosys, Axis Bank, Kotak Mahindra have started rural BPOs through partnerships and subsidiaries. Though the data is not available about the number of rural BPOs in India, various state governments including Karnataka and Tamil Nadu have come out with new rural BPO policies and incentives. Through the subsidies and incentives the government intends to promote BPO in various parts of the state which are reeling under poverty and lack of development. Most of these centres provide services like data entry, email responses, document checks, data and bill processing.

“For the Indian domestic market, the shift is towards rural BPOs. The advantage to the industry is the lower cost of operations. For people at these locations, it generates good job opportunities. So, it’s a win-win for everyone. It will also help in improving the life style in the rural areas and also help in the penetration of technology into interiors of India.”says PurpleLeap CEO Amit Bansal.

Problems galore

Even though the BPO sector is witnessing an exponential growth it is not devoid of challenges. A major challenge faced by the companies is availability of quality talent. Attrition is another major worry for the sector. To bridge the huge gap between demand and availability of talent, industry and academia have collaborated for grooming talent. For instance, in 2008, Accenture and Indira Gandhi National Open University (IGNOU) had started a diploma course in Business Process Outsourcing. 

With the industry maturing into high-end, complex offerings and focusing more on industry-specific offerings, the need for highly qualified professionals has increased dramatically. The growth in highly qualified business like Legal Process Outsourcing (LPO), Medical transcription and Knowledge Process Outsourcing (KPO) has created new avenues for professionals like advocates, doctors, paramedical professionals, management executives and so on. According Cognizant Head of Global Delivery (BPO and KPO) Vipul Khanna: “The drivers for professionals like lawyers, doctors among others taking to the industry are the global exposure provided by working for global companies and the opportunity to work with clients who are global leaders in their respective industry segments. Besides, being a part of a high-growth industry also comes with opportunities to grow faster.”

Road ahead

Traditionally BFSI (banking, financial services and insurance) was the major contributor to the sector with almost 41 per cent to the industry’s revenues. Going forward, the outsourcing industry’s focus is shifting towards delivering innovation and business outcomes, over and above greater efficiency and effectiveness. Headhunters feel that as the business gets more value based the demand for skilled talents based on domain knowledge will climb up.

Kelly Services India Managing Director Kamal Karanth says, “Earlier BPOs were looking for accent, but good vocabulary in vernacular languages helps people find job in domestic BPOs and people with specific skills and proficiency will gain excellence in this sector.”
With BPOs moving up the value chain to provide high-end services, new sectors are also emerging. The emergence of health care, engineering services, automobile and government are seen as the major growth drivers for the segment. However, companies also feel that their clients will explore newer business models for optimisation of cost and are preparing themselves to face new challenges and demands.

Source:  The Deccan Herald

Discussion

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