Bpo Introduction Abhishek

Introduction Business Process Outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in the marketplace. BPO is often divided into two categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services such as marketing or tech support. BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called near shore outsourcing, and BPO that is contracted within the company's own country is sometimes called onshore outsourcing.[1] The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing. Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. BPO is a part of the Outsourcing Industry. It is dependent on Information Technology, hence it is also referred to as Information Technology Enabled Services or ITES. Knowledge Process Outsourcing, or Legal Process Outsourcing is some of the sub sets of Business Process Outsourcing.

BPO In India

More and more domestic companies are setting up business process outsourcing units in district headquarters, tier-III cities and non-IT clusters to save on real estate costs and stem attrition rates. While Satyam Computer Services and the Jindal Group have already started BPOs in small towns of Andhra Pradesh and Karnataka, respectively, new players are in the early stages of talks in this regard. Iron and steel major Jindal Group, which runs a voice- and data-based BPO unit in Torangallu in Bellary district of Karnataka, is expanding to other parts of the state. Informed sources said, with an aim at replicating its success in Bellary, the company had sought the Karnataka government's support in spreading business to other district headquarters such as Shimoga, Hassan, Raichur and Kolar.

According to sources in the Karnataka IT department, JSoft, Jindal Group's software unit, is establishing a second BPO unit in Bellary with an investment of Rs 7-8 crore (Rs 70-80 million). It has also finalized plans to establish a third BPO unit in Hubli IT Park. "The attrition rate in major IT clusters is very high. This is forcing the IT companies to look at tertiary cities to tap the manpower. Basically, they are looking for college students, who can execute work after receiving training. The state has received applications seeking space for BPOs in cities such as Tumkur and Kolar," M N Vidyashankar, Karnataka's IT secretary, said. Byrraju Foundation, the NGO outfit of Satyam Computers, is already running a BPO in Jallikakinada village in West Godavari district of Andhra Pradesh. The company is planning to open seven more such BPOs in rural areas of the state. Similar BPO operations are being carried out in Kuppam in Andhra Pradesh and Kizhanur village in Tamil Nadu by HP and Chida Soft. Bangalore-based SLN Tech Services, which provides e-ticket booking service to a host of private bus operators and resorts in south India, has set up operations near Hebbal, a village on the outskirts of Mysore. The company has shown interest in taking over e-ticket booking services for Karnataka State Road Transport Corporation. "We are also applying for similar services in Andhra Pradesh. We are planning to open a second BPO unit on the outskirts of Hyderabad," said SLN Tech Services Director Dinesh Babu. The North West Karnataka Road Transport Corporation, a Karnataka government undertaking, is planning a BPO unit in Hubli to process the discount passes meant for students and senior citizens. The approval is pending before the Karnataka state Cabinet. IT firms are not only moving to district headquarters, but are also setting up operations in towns and cities, which do not belong to any of the IT clusters. Bhilwara Scribe, a unit of the textile and power conglomerate LNJ Bhilwara Group, operates a BPO in Bhopal, Madhya Pradesh, providing services in medical transcription, data processing and indexing for 15 hospitals and 10 clinics across the US, Canada and Belgium. It also provides services in business transcription in HR-related companies as well as conferences. "Though Delhi and Bangalore are the hot destinations for IT and BPO companies, we opted for Bhopal. We had tested and interviewed 500 people in New Delhi and then tested the same number of people in Bhopal. The results showed the quality of manpower was almost at par. Further, Bhopal had an edge due to low infrastructure cost with potential and untapped manpower. We were the first company to venture into this sector in Madhya Pradesh," said Rajvind Ahluwalia, CEO, Bhilwara Scribe. Nasscom Vice-President Ameet

Nivsarkar said: "It's a healthy move and is expected to create a lot of employment in the rural areas

History of Outsourcing In fact outsourcing is said to have emerged a few thousand years ago with the production and sales of food, tools and other household appliances. As soon as small communities and societies began to form, people with specialized professions began to trade with each other for goods and services. In effect it can be said that each worker was outsourcing some activities to others. The history of outsourcing shows that even in the industrial age, a few thousand years later, very few companies outsourced any of their operations. Companies in the 1800s and 1900s were vertically integrated organizations, taking care of their own production, mining, and manufacturing from raw materials to finished goods as well as then shipping the goods to company owned retail outlets. These companies were often self-insures, handled their own taxes, employed their own lawyers, as well as designed and built their own buildings without outside assistance. This of course is not applicable to all companies during that time period, but it gives a general idea of the time. The history of outsourcing shows that through specialization contracting began to be more popular, especially in the service industry. This in turn led to the first wave of outsourcing during the industrial revolution pushing the large-scale growth of services such as insurance services, architecture and engineering services, among many others. At this time the companies doing the outsourced work were mostly located in the same country, often in the city, just like the customers. The history of outsourcing portrays that as onshore outsourcing continued manufacturing outsourcing of low-tech items such as toys, shoes and apparel goods began to take place. After this manufacturing higher value items like high-tech components and consumer electronics began to appear. In fact outsourcing history demonstrates that manufacturing was the first activity that began to move to offshore destinations in a quest for lower costs. Through the development of infrastructure as transportation and logistics improved, the costs decreased and offshore manufacturing increased. As the education and skills on lower wage countries developed, outsourcing manufacturers gained more value. More recently, in the US during 1970s, it was common for computer companies to export their payrolls to outside service providers for processing. This continued into the 1980s, when accounting services, payroll, billing, and word processing all became outsourced work. Towards the end of modern day history of outsourcing, the trend has moved into the world of information technology, data transcription and call center operations. Studies on the history of outsourcing conclude that outsourcing is clearly not just about payrolls and call centers. This can be seen by simply looking into your medicine cabinet. It is very likely that the R&D of your daily medicine was outsourced to companies in India. Your insurance company which covers the costs of your medications may have their claim processing to offshore transcription providers. And your medical clinic may easily be

outsourcing the administration of your confidential medical records to India, Russia or the Philippines.

History of outsourcing in India The outsourcing history of India is one of phenomenal growth in a very short span of time. The idea of outsourcing has its roots in the 'competitive advantage' theory propagated by Adam Smith in his book 'The Wealth of Nations' which was published in 1776. Over the years, the meaning of the term 'outsourcing' has undergone a sea-change. What started off as the shifting of manufacturing to countries providing cheap labour during the Industrial Revolution, has taken on a new connotation in today's scenario. In a world where IT has become the backbone of businesses worldwide, 'outsourcing' is the process through which one company hands over part of its work to another company, making it responsible for the design and implementation of the business process under strict guidelines regarding requirements and specifications from the outsourcing company. This process is beneficial to both the outsourcing company and the service provider, as enables the outsourcer to reduce costs and increase quality in non core areas of business and utilize his expertise and competencies to the maximum. And now we can see the benefit to the service companies in India as they mature, prosper and build core capabilities beyond what would generally be possible by the outsourcing company. Since the onset of globalization in India during the early 1990s, successive Indian governments have pursued programs of economic reform committed to liberalization and privatization. Till 1994, the Indian telecom sector was under direct governmental control and the state owned units enjoyed a monopoly in the market. In 1994, the government announced a policy under which the sector was liberalized and private participation was encouraged. The New Telecom Policy of 1999 brought in further changes with the introduction of IP telephony and ended the state monopoly on international calling facilities. This brought about a drastic reduction and this heralded the golden era for the ITES/BPO industry and ushered in a slew of inbound/outbound call centres and data processing centres. Although the IT industry in India has existed since the early 1980s, it was the early and mid 1990s that saw the emergence of outsourcing. One of the first outsourced services was medical transcription, but outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries which catered to the process off-shoring requirements of their parent companies. Some of the earliest players in the Indian market were American Express, GE Capital and British Airways. The ITES or BPO industry is a young and nascent sector in India and has been in existence for a little more than five years. Despite its recent arrival on the Indian scene, the industry has grown phenomenally and has now become a very important part of the export-oriented IT software and services environment. It initially began as an activity confined to multinational companies, but today it has developed into a broad based business platform backed by leading Indian IT software and services organizations and other third party service providers. The ITES/BPO market expanded its base with the

entry of Indian IT companies and the ITES market of the present day is characterized by the existence of these IT giants who are able to leverage their broad skill-sets and global clientele to offer a wide spectrum of services. The spectrum of services offered by Indian companies has evolved substantially from its humble beginnings. Today, Indian companies are offering a variety of outsourced services ranging from customer care, transcription, billing services and database marketing, to Web sales/marketing, accounting, tax processing, transaction document management, telesales/telemarketing, HR hiring and biotech research. Looking at the success of India's IT/software industry, the central government identified ITES/BPO as a key contributor to economic growth prioritized the attraction of FDI in this segment by establishing 'Software Technology Parks' and 'Export Enterprise Zones'. Benefits like tax-holidays generally enjoyed by the software industry were also made available to the ITES/BPO sector. The National Telecom Policy (NTP) introduced in 1999 and the deregulation of the telecom industry opened up national, long distance, and international connectivity to competition. The governments of various states also provide assistance to companies to overcome the recruitment, retention, and training challenges in order to attract investments to their region. The National Association of Software and Service Companies (NASSCOM) has created platforms for the dissemination of knowledge and research in the industry through its survey and conferences. NASSCOM acts as an 'advisor, consultant and coordinating body' for the ITES/BPO industry and liaisons between the central and state government committees and the industry. The ardent advocacy of the ITES/BPO industry has led to the inclusion of call centers in the 'Business Auxiliary Services' segment, thereby ensuring exemption from service tax under the Finance Bill of 2003. These measures have led to a steady inflow of investments by large foreign companies such as Reuters, for establishing large captive ITES/BPO facilities across India. Moreover, the existing ITES/BPO operations of major multi-nationals are also being ramped up to cater to the ever increasing demand for better and speedier service. Almost all of India's top ITES/BPO giants have announced some form of expansion and are in the process of hiring manpower to fill the additional seats. India's competitive advantage lies in its ability to provide huge cost savings thereby enabling productivity gains and this has given India an edge in the global ITES/BPO marketplace. NASSCOM studies pinpoint the following factors as the major reasons behind India's success in this industry (Source: www.nasscom.org): •

Abundant, skilled, English-speaking manpower, which is being harnessed even by ITES hubs such as Singapore and Ireland.

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Improving telecom and other infrastructure which is at par with global standards.

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Strong quality orientation among players and their focus on measuring and monitoring quality targets.

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Fast turnaround times and the ability to offer 24x7 services based on the country's unique geographic location that allows for leveraging time zone differences.

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Proactive and positive policy environment which encourages ITES/BPO investments and simplifies rules and procedures.

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A friendly tax structure, which places the ITES/BPO industry on par with IT services companies.

Outsourcing to India offers significant improvements in quality and productivity for overseas companies on crucial parameters such as number of correct transactions/number of total transactions; total satisfaction factor; number of transactions/hour and average speed of answer. Surveys by NASSCOM also revealed that Indian companies are better focussed on maintaining quality and performance standards. Indian ITES/BPO companies are on an ascending curve as far as the quality standards are concerned. Organizations that have achieved ISO 9000 certification are migrating to the ISO 9000:2000 standards and companies on the CMM framework are realigning themselves to the CMMI model. Apart from investing in upgrading their CRM and ERP initiatives, many Indian ITES companies are beginning to acknowledge the COPC certifications for quality and are working towards achieving COPC licences. Despite being a fledgling in the global ITES/BPO industry, the Indian ITES industry recorded a growth rate in excess of 50% in 2002-03. Industry experts consider this a positive indication of the times to come and a look at the ranking and the revenue and headcount statistics show the potential of the industry.The global ITES/BPO industry was valued at around US$ 773 billion during 2002 and according to estimates by the International Data Corporation worldwide, it is expected to grow at a Compounded Annual Growth Rate (CAGR) of 9% during the period 2002-2006. NASSCOM lists the major indicators of the high growth potential of the ITES/BPO industry in India as the following (Source www.nasscom.org •

During 2003-04, the ITES-BPO segment is estimated to have achieved a 54 percent growth in revenues as compared to the previous year.

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ITES exports accounted for US$ 3.6 billion in revenues, up from US$ 2.5 billion in 2002-03.

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The ITES-BPO segment also proved to be a major opportunity for job seekers, creating employment for around 74,400 additional personnel in India during 2003-04.

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The number of Indians working for this sector jumped to 245,500 by March, 2004.

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By the year 2008, the segment is expected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and leading business Intelligence Company, McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing at over 50 percent.

Surveys of the Indian ITES/BPO industry in 2004 expected it to follow the trends given below: •

Customer care: Customer care and support services will continue to lead in terms of revenue generation, with a turnover of around US$ 1200 million in 2003-04., up from last year's turnover of US$810 million.

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Finance: With the financial services segment moving into value added domains like insurance claims processing, financial management services and equity research, this segment is expected to clock the highest growth, with estimates of US$820 million in revenue in 2003-04, up from US$510 million in 2002-03.

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HR services: HR services are also expected to grow and revenues are expected to touch US$70 million during 2003-04, thereby providing latent opportunities to the industry's dominant players.

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Payment services: This segment has also been identified as a high growth area within the industry, and is expected to generate revenues of around US$430 million for 2003-04, up from US$210 million in 2002-03.

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Administration: Revenues from the administration services segment are expected to increase from US$ 310 million in 2002-03, to US$540 million during 2003-04.

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Content development: The content development services segment which includes engineering and design services, digitization (GIS), animation, network management and biotech research, is expected clock a turnover of around US$520 million in 2003-04.

The availability of technically trained and skilled manpower in India is making companies across the world look at the country as a profitable base to shift their high-end support services. Companies like COLT Technology Services are considering outsourcing their technical back-office support work to India. Other areas are high-end network engineering/management support. Another field which is showing immense potential is that of digital content creation and animation. Animation studios like Walt Disney, MGM and Warner Brothers are already outsourcing low-end work like clean-ups, tweening and modelling to India. The availability of skilled and trained manpower and India's ability to keep in step with the latest technological advances in the industry is prompting foreign studios to consider India as a base to shift other high-end animation work like storyboarding and developing original content for animated films ad TV series. Teleradiology is the next segment that holds great promise, mainly due to the time zone differences and the availability of highly skilled radiologists and companies like Teleradiology Solutions have been offering their services to US and South-East Asian hospitals for the past two years. Engineering services like CAD/CAM 2D, 3D and CAE modelling and design automation are the latest additions to the ever increasing list of processes being outsourced to India.

Why India India has one of the largest pools of low-cost English speaking scientific and technical talent. This makes India one of the obvious choices to outsource to. Dell, Sun Microsystems, LG, Ford, GE, Oracle all have announced plans to scale up their operations in India. Others like American Express, IBM and British Airways are leveraging the cost advantage India has to offer while setting up call centers. Several foreign airline and banks have too set up business process operations in India. Indian revenues from BPO are estimated to have grown 107 per cent to $ 583 million and this particular area employs 35,000 people in the year ending March 31, 2002.

Importance of Outsourcing Many organizations today are making the decision to outsource. In today’s global marketplace outsourcing has made itself accessible to many organizations on a national and international level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs in developing countries with few workers rights laws and to exploit the value of artificially manipulated foreign currencies, where the exchange rate is intentionally undervalued. Through outsourcing, companies today have the ability to develop competitive strategies that will leverage their financial positions in the ever competitive global marketplace. Outsourcing is also successful in increasing product quality and/or substantially lowering firm and consumer costs (e.g., increases the quality to cost ratio). Because outsourcing allows for lower costs, even if quality reduces slightly, which is sometimes the case, productivity increases, which benefits the economy in the aggregate? Outsourcing can also present advantages to less developed, typically non-Western states. "Developing" countries, such as China, Philippines, and India, but also countries of Eastern Europe, benefit from the patronage of companies that outsource to them - in terms of increased wages, job prestige, education, and quality of life. Some of the major advantages that today’s organizations can expect to obtain through outsourcing include the ability to purchase intellectual capital, to focus on core competencies, to better anticipate future costs, to lower costs. Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services.

Criticisms of outsourcing Quality of service Criticisms of outsourcing from both management and consumers often focus on a central question: is the performance or quality of the outsourced service, or new organization of labor, on par with the expected standards of management and consumers - i.e. how does

outsourcing a service affect its quality as opposed to "in-house" work . Such judgments are reserved to prevailing cultural values that define what is and is not good service.

Work, labor, and economy Productivity Offshore outsourcing for the purpose of saving cost can often have a negative influence on the real productivity of a company. Rather, than investing in technology to improving productivity, company gain non-real productivity by hiring less people locally and outsourcing work to less productive facilities offshore that appear to be more productive simply because the workers are paid less. Sometimes, this can lead to strange contradictions where workers in a third world country using hand tools can appear to be more productive than a US worker using advanced computer controlled machine tools, simply because their salary appears to be less in terms of US dollars. In contrast, increases in real productive are the result of more productive tools or methods of operating that make it possible for a worker to do more work. Non-real productivity gains are the result of shifting work to lower paid workers, often without regards to real productivity. The net result of choosing non-real over real productivity gain is that the company falls behind and obsoletes itself overtime rather than making real investments in productivity.

Standpoint of Labor From the standpoint of labor, "outsourcing" represents a new threat, contributing to rampant worker insecurity, and reflective of the general process of globalization culminating in Western societies as a whole (see Krugman, Paul (2006). "Feeling No Pain." New York Times, March 6, 2006). While the "outsourcing" process may provide benefits to less developed countries or global society as a whole, in some form and to some degree - include rising wages or increasing standards of living - these benefits are not secure. Further, the term outsourcing is also used to describe a process by which an internal department, equipment as well as personnel, is sold to a service provider, who may retain the workforce on worse conditions or discharge them in the short term. The affected workers thus often feel they are being "sold down the river".