1.Introduction :Few years back, nobody would have imagined that a day would come when no direct contact with customers are needed. All the business processes are done from a remote location with the help of technological advancement. Telecommunication industry has spread their hands an all over the globe through internet services. During 1990’s the development of telecommunication reduced the cost and enhanced the ease of communication across the world. All the informations are now converted into digital format, which is easy to transfer of work offshore utilizing resource arbitrage. In the era of globalization all the multinationals reviewed their strategic positions to overcome severe competition and general slowdown in the global economy. All the companies want to maximize their profits through proper allocation of resources. The activities of the companies can be segregated as core and non-core activities. The main emphasis is given to the core processes of the company by utilizing their resources and managing their limits. So all the non-core processes are handled by the outside experts. The outburst of information technology made an easy route to compete globally. All the companies want to be economically benefited by off-shoring their non-core activities. The real time communication cost is gradually decreasing due to the enormous application of web-based tools. Now all the business operations are going across thousands of miles due to globalization of non-core processes. Standardized web-based tools have used globally to transmit data. Information Technology enabled services (ITES) outsourcing helps the multinationals to diversify their non-core operations. Cost advantages, competitive pressures, specialized service providers act as a catalyst of outsourcing. So the core processes are the main activity of the companies. To enhance these core processes the company utilizes their resource base and time management to hold a good share of global market. 1 2. Concept/Meaning:Outsourcing is not a new activity to outsource the business processes. From the barter age it is originated as a specialized tool to overcome the increasing economic pressures. It is a transfer of delegation of authority and power to an external service provider to accomplish the task of day to day business operations. The outsourcing job may be done by the individual or the organization itself but they prefer to do it from the specialized service provider. At the beginning of 20’Th century, the automobile giant Ford utilized outsourcing providers for making their car-tyres. Word’s best sports-shoe makers e.g. Adidas, Nike, Reebok outsource their research design & manufacturing jobs to a Chinese shoemaker, Yue Yuen. The idea of outsourcing has its root in the ‘competitive advantage’ theory propagated by Adam Smith in his book ‘The Wealth of Nations’ which was published in 1776. The shifting of manufacturing jobs to other countries providing cheap labour during the Industrial Revolution, has taken a new connotation in today’s scenario. In a world where IT has become the backbone of businesses; 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 processes under strict guidelines regarding requirements and specifications from the outsourcing company. BPO has become synonymous with corporate strategy and companies are realizing the strategic role it can play in marinating global competitiveness. Adam Smith wrote about 200 years ago “the maxim of every prudent master is never to attempt to make at home what it will cost him more to make than to buy”. The Harvard Business Review identified outsourcing as one of the most brilliant management idea and practice of the past 75 years. Gartner identifies outsourcing as “the delegation of one or more IT – intensive business processes to an external provider that in turn owns, administers and manages the selected processes based on defined and measuring performance criteria”. BPO is the process of delegating one or more business processes to an external partner. It 2 is generally for back-end administrative functions that are necessary to run a business but are not a part the core business processes. Bargaining businesses, pressures of competition, shrinking time span, easier time communication, the concept of ‘global village’ with seamless synergies, abundant hard working and skilled personnel at low cost and the ability to work round the clock due to time zone differences are some of the reasons for the surge in outsourcing. The IT Enabled Services (ITES) and Business Process Outsourcing (BPO) are used interchangeably now-a-days. ITES is basically a sub-set of BPO. If the process that outsourced involves use of Information Technology it is called ITES else it just Business Process Outsourcing. 3. Why Outsourcing/Rationale:Business Process Outsourcing is beneficial to both the outsourcing company and the service provider, as enables the outsourcers to reduce cost and increase quality in non-core areas of businesses and utilize his expertise and competencies to the maximum. BPO saves precious management time & resources and allow focus while building upon core competencies. Companies are generally looking at low cost destination where third-party service provider is available. Optimizing business performance to attain value chain is the main activity of an outsourcing firm. Following services are provided by the BPO – Receivable & Payables, Inventory Management, Other Processing, Quick Book Accounting, Financial Statement Preparation and Accounting services. BPO saves time, explore new revenue areas, accelerate other projects and focus on their customers. Some motivational factors of BPO enhancement are factor cost advantage, economies of scale and business risk litigation. Benefits derived from BPO can be summarized as follows – I. Productivity improvements As the company doesn’t manufacture their products in-house only, they are using on-shoring or off-shoring business processes to the third party services provider. 3 Many operating costs are being eliminated by outsourcing the jobs. By outsourcing the company can make some control on cost savings. Some specific guidelines and rules are being given to the outsourcers. enhancing customer satisfaction etc. So improvement of productivity can be seen in an increasing trend. II. so easy and improved accountability can be seen. III. Opportunity to focus on core business As the non-core a\activities are outsourced. delivery details. companies can focus on other operational areas. domain expertise can help to minimize total cost.g. Prescribed guidance & rules are followed by the experts. Therefore rather than training own personnel & recruiting domain experts it is economical to outsource the jobs. inventing new products. Increasing scales. use of technologies. VI. re-engineering. Operational cost control By outsourcing non-core processes. Improved HR Flexible and scalable services are provided to accompany the changing customer needs & requirements. Natures of any job. supporting company acquisitions. 4 . Contract amount are also fixed. HR personnel are taken care to the customer needs. Cost savings Through process improvements. developing new products. expanding market span. IV. management can concentrate on their core business operations. This leads to reducing the administrative cost and operating cost. Improved accountability Transparency can be seen by outsourcing any job. New inventions to the goods & up gradations are the main area of outsourcing. Hence the company can concentrate on their main operating areas e.Maximum portion of the manufactured goods are now being taken from outsourcers who are experts in this fields. VII. time span etc are being mentioned in the contract. V. Access to expertise Low cost destination & experts domain knowledge gives the company better exposure in their market share. consolidations etc are the main area of the management. outsourcing is uplifted. When any long term contract is taken into consideration. Confidentiality As outsourcing are done far across the country with the help of telecommunication services. III. so no direct control is being seen from the outsourcing company. Control Control is a very vital factor in choosing BPO. the supervision or control should get preference because in long term the controlling aspect may be get weaker. Implementation Issues In Outsourcing:For selecting a BPO partner. Competency – Every firm wants to outsource their non-core activities. The outsourcing company always looking at low cost destinations. Practically all the core activities are processed in-house but some automobile industries are now-a-days outsourcing their core processes.4. So the outsourcing company looked for reasonable savings in the cost without compromising quality. II. HR activity is the only activity which is not fully outsourced. So assessment of outsourcing agents is very much important for the customer satisfaction. certain issues or factors are to be taken in care. Too little control is also makes an adverse result and too much control means doing the job himself. as HR activity differs from industry to industry. then in the long term when inflation arises. as the outsourcing company desires. Control can be done in two perspectives – long term & short term control. The considerations are as follows – I. But the competency is related with the core activities of the business processes. IV. But in short term contract the control is needed to know how the firm is doing. The 5 . so the least cost vendor takes the contract. If there is any escalation cost. Cost Cost is to be determining after evaluation of the outsourcing job. The vendor firm quoted the least cost. 5. Models of Outsourcing:Business Process Outsourcing is a process which is being adopted many of the western companies to reduce their cost burden & improve their product quality. which are shown below – 6 . V. Since the outsourcing company is using multilocational outsourcing operations and then the vendor is to be very cautious about their contract norms. If the BPO works under the given guidelines then continuity is carried out. BPO’s activity can be classified in the following chart – Business Process Outsourcing (BPO) Geographical On-shore Near-shore Off-shore Service Provider Data Voice Software In-bound Calls Out-bound Calls There so many models of outsourcing but only three models are very much practical. So the BPO is also hand of gaining competitive advantages. Competitiveness Performance is the main measurement of how BPO works. The Service Level Agreement (SLA) is being implemented to stop hacking or data leakage.outsourcers are very much cautious in maintaining the confidentiality of their client. Model 1: US-based Accounting Firm Flow of work Captive Centres in India Model 2: US-based Accounting Firm Flow of work Centres in India Centres in India Model 3: US-based Accounting Firm Flow of work US-based Agencies Flow of work Centres in India Centres in India 6. Market Segmentations:7 . According to the statistics of NASSCOM. And the call centres have grown Rs. Following are the various segments of outsourcing – I. Data entry 8 . Quality services. 7100 crores revenue. Data Search. Customer service interaction including call centres According to the statistics of NASSCOM there was a growth of 112% in revenue and 86% growth in employment from the year 1999-2000 to 2000-2001.4100 crores and 70000 in 2001 respectively. Market Research. 3000 crores in 2002-2003 and it maintained a steady growth of 45% over next five years.Estimate F .1999-2000 Segments Customer interaction services including call centers Back office operations/Revenue Accounting/Data Entry/Data conversion including Finance & Accounting/HR Services Transcription/Translation service Content Development/Animation/En gineering and Design/GIS Other Services including Remote education. Highly English speaking persons etc. this industry is expected to be $17 billion industry in India & will generate approximately 1. And it has grown by 111% in the year 2001-2202.1 million job opportunities by 2008. The growth rate of the industry is as high as 73% resulting in the Rs. Low cost manpower. II.Forecast Table – 1 Information Technology Enabled Service (ITES) industry is very fast growing area in the Business Process Outsourcing (BPO) activities. Network Total Employ -ment 8600 Reven -ues 400 Employ -ment 16000 2000-2001 Reven -ues 850 Growt -h (%) 112 2001-2002(E) Employ -ment 33000 Reven -ues 1650 Growt -h (%) 94 2008(F) Employ -ment 270000 Reven -ues 20000 15000 950 19000 1350 42 35000 2750 111 300000 21000 5000 15000 120 820 6000 27000 160 1600 33 95 5200 30000 150 2100 -6 31 50000 300000 4000 25000 1400 110 2000 140 27 3000 210 50 180000 11000 45000 2400 70000 4100 27 106200 6960 70 1100000 81000 Source: NASSCOM E .2400 crores and 45000 in 2000 to Rs.Back office operations/Data conversion/HR activities42% growth in revenue and 27% growth in employment are seen from the year 19992000 to 2000-2001. Total revenues and employment of the industry substantially increased from Rs. are the inherent reasons. We can define the emergence of outsourcing activities as follows – 9 . Data research. It is predicted that the segment will produce Rs. 7. Management etc. IV. Outsourcing & ITES:The rapid pf the BPO industry is mainly depends upon the mutual contribution of the ITES & outsourcing activities. And 27% growth was seen in the revenue & 43% growth in employment in 2000-2001 over 1999-2000. Specifically animation industry is producing a huge impact I this area. Content development/Animation In the world India is the low-cost destination with high skilled manpower are available. So this is the hottest destination of BPO industry. 11000 crores. And there was a 31% growth in the year of 2001-2002(E). 50% growth in revenue is achieved in the year 2001-2002. Consultancy. There were 95% increase in the revenue & 80% increased in employment in 2000-2001 over 19992000. 4000 crores revenues and 50000 employments in the year of 2008. ITES includes services that can be outsourced using the powers of IT. Market survey. It was seen that 33% grown in the revenue inn the year of 2000-2001 over 1999-2000.operations of the raw data & paper documents received from the remote location has an increasing trend in the field of back-office operations. V. Doctors’ overseas record their finding into Dictaphone and the sound tracks are transferred through datacom links to ITES companies specializing in this area. III. It is expected that in the year of 2008 the employment will reach at 180000 and revenue Rs. Translation services Medical transcriptions involve the transcribing of medical records from audio format or as dictated by doctors into either a hard copy or any electronic format. Today Indian companies are offering a variety of outsourced services ranging from customer care. transaction documents management. retention & training challenges in order to attract investments to there to there region. The Government of various states also provides assistance to companies for overcome the recruitment. tax processing. The spectrum of services offered by Indian companies has evolved substantially from its humble beginning. The ITES or BPO industry is a young and nascent sector in India and has been existence for a little more than five years.• • • • • 1960’s – time sharing 1970’s – parts of IT operations 1980’s – entire IT operations 1990’s – alliances/tie-ups 2000’s – IT-enabled services Since the outset of globalization in India during the early 1990’s. HR hiring and bio-tech research. long distance and international connectivity to competition. tele-marketing. accounting. Despite its recent arrivals on the Indian scene. data base marketing to web sales/marketing. The National Association of Software & Service Company’s (NASSCOM) has created 10 . 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 National Telecom Policy (NTP) introduced in 1999 and the deregulation of the telecom industry opened up national. the industry has grown phenomenally and has now become a very important part of the export oriented IT software and services environment. transcription. Looking at the success of India’s IT/software industry. billing services. successive Indian Governments have pursued programmes of economic reforms committed to liberalization and privatization. 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 Park” and “Export Enterprise Zones”. Benefits like tax-holidays generally enjoyed by the software industry were also made available to the ITES/BPO sector. ITES-BPO Emplyees & Revenues Employee & Revenue 8 6 4 2 0 FY 2004 FY 2005 FY 2006 Financial Year Employees('00. NASSCOM acts as an advisor consultant & coordinating body for the ITES/BPO industry leasion between the central & state Govt. total satisfaction factor. Surveys by NASSCOM also revealed that Indian companies are better focused on maintaining quality and performance standard. The ardent advocacy of the ITES/BPO industry has lead to the inclusion of the call centres in the “business auxiliary services” segments. thereby ensuring exemption from the service tax under the finance bill of 2003. of transactions/hour an average speed of answer.2 11 . Outsourcing to India offers significant improvements in quality & productivity for the overseas companies on critical parameters such as no.platform for the dissemination for the knowledge & research in the industry through its survey & conferences. Apart from that investigation in upgrading their CRM & ERP initiative. many Indian ITES companies are beginning to acknowledge COPC certification for quality & are working towards achieving COPC licenses.00 0s) Revenues(US $ bn) Table . of correct transactions/no. of total transactions. Indian ITES/BPO companies are on an ascending curve as far as the quality standards are concerned. Organization that have achieved ISO 9000 certification are migrating to the ISO 9000-2000 Standard & companies on the CMM framework are realigning themselves to the CMM model. no. committees & the industry. horticulture establishment and maintenance etc. Conventional areas It includes house-keeping of building and work areas.ITES-BPO Sector based Offerings Human Resources 11% 3% 40% 46% Finance & Accounting Customer Interaction Others Table . catering. III. quality lab operations. These outsourcing activities can be classified into three broad perspectives – I. annual maintenance contract for computers. security of plant and township. car pool. accounting activities. Emerging areas It includes procurements of activities. human resource functions and management or total solution contracts etc. 12 . internal material handling with equipment. crane maintenance. environment monitoring on specified parameters. Non-conventional areas It includes maintenance of critical and specialized equipment. packing of HR coils. II. waste handling and health management etc. hospitability and canteen. Outsourcing Activities:There are so many activities which are outsourced.3 8. So all the business process can be classified into three groups. The process that can be outsourced may be classified into IT enabled and others.g.In other words IT can be leveraged varies under the influence of suitability to industry. data analysis for routine information and administration) Table . USA and Canada currently have more than 62% of the BPO pie and will continue to dominate the BPO market.g. costs and managerial perception of the risk involved. supply chain management.g. Focus on core competencies b. Improvement in service quality 13 . A variety of sources have predicted that BPO services have grown worldwide from $119 bn in 2000 to $240-$300 bn by the year 2005.1. which are as follows – Nature of Activity Core Process Critical Non-core Process Non-critical. location. accounting & HR administration) Relatively less critical and can be mostly outsourced (e. time. 95% of the work will goes to local BPO companies while only around 5% is outsourced to off-shoring locations. There are four drivers to the outsourced boom being witnessed: a. This global off-shoring exceeds US $300 bn.4 8. Non-core Process Possibilities for Outsourcing Key to firm success and strategic in nature (e. Global Scenario:BPO is not a new phenomenon in the global market. Efforts to reduce costs c. R&D) Important but not one of the differtiators (e. Now-a-days the global off-shoring market continues to grow rapidly for producing high quality products with low cost. Australia. The trend of relocating non-core business functions off-shore to developing nations such as India and China continues to gain momentum.d. China.g. Mexico. Malaysia. with 1 being the lowest and 3 the highest) * Infrastructure is good only in certain cities Source: NASSCOM India’s main competitive advantage stems from the availability of a huge education. New Zealand and UK. Increased efficiency • Countries competing in the BPO space – Till the mid 1990. But after 1990.5 India made the preferred location for BPO in Asia-pacific. Ireland was considered the most preferred location for outsourcing. Market Local Infrastructure Access Market 2 0 2 2 2 2 2 2 0 1 2 2 2 2 3 2 2* 3 Cosmopolita n 3 2 1 2 3 2 Cost base 2 2 3 2 1 3 Country New Zealand Malaysia Japan Hong Kong India UK Workforce 2 1 1 1 3 1 (Ratings are on a scale of 1 to 3. low labour cost. Table . there were so many countries who want to grab that market e. goods infrastructure and access to European Eunion were factors in favour of Ireland. Commoditized functions that require more generic and easily acquired skills will continue to be strong candidates for off-shore relocation. English speaking population and a Competitive cost base. India. The large available pool of English speaking workers. Philippines. Advancement in IT during the last two decades have allows 14 . government assistance. Two common strategies for reducing costs relating to non-core functions are physically relocating them and farming them out to service provider vendors. According to McKinsey estimation that the BPO industry worldwide have grown roughly $32 bn to $35 bn in revenue in 2002 and projected to grow at a rate of 30 to 40 percent per year for the next five years. a broad category of functions that include a great variety of support roles. The scope of functions that have been deployed or outsourced off-shore has continued to expand to BPO/ITES. Initially IT services were the focus of most firms’ off-shore deployment and outsourcing efforts. Deployment and outsourcing can employ either an off-shore or near-shore strategy. US International Transactions Accounts data). In US services imports have grown from 14% to 17% of total imports between 1980 and 2003 (Bureau of Economic Analysis. 15 . ranging from answering customer queries in a call centre to sophisticated financial analysis. based on the location to which functions are related or the location of outsourcing service providers.organizations to separate core from non-core activities. 6 16 .Global BPO Scenario BPO Market Size($ Bn) 300 200 100 0 BPO Market Size Year 119 234 2000 2005 Source: Gartner Table . Marke SCM Paym ent Indirec t Financ e HR Admin istratio W o w rld w id e R o 2000 2005 Functions Source: Gartner Table .BPO Market Size($ Bn) G loba BPOScenario 250 200 150 100 50 0 234 143 74 119 64 21 32 10 36 BPO M arket Size 2000 BPO M arket Size 2005 Jp C a na an da & A P E C E ur o pe U S C ountry Source: Gartner Table .Function wise breakup Market Share($) 100 50 0 Sales.8 17 .7 Worldwide BPO Market . Industry conduct (action taken by industry players) IT and BPO work are higher margin businesses. BPO growth for the globe off-shore IT & BPO industries are quite large. Supply (the capacity & quality of off-shore location) b. The share of the off-shore components is expected to increase to 23% of total spending by 2007. Europe is expected to be the second largest market for 18 .Wordwide BPO Market by industry verticals Financial Services 15% 16% 43% 17% 9% Communication Consumer goods/services Manufacturing IT Source: Gartner Total Market Size in 2000 – US $ 119 bn Table . The US is expected to be the largest source market for the ITES accounting for nearly 60% of the market. industry evolution will be shaped by the interplay of three major focuses: a. Demand ramp up (realistic adoption of off-shoring by companies) c.9 The off-shoring market for the globe BPO industry could expand by more than 10 times from its current size of approximately US $150-200 bn. It is estimated that profits generated by $10 bn exports by Indian (IT & BPO) is equal to profits generated by $30 bn of manufacturing exports generated by China. 21 464.the ITES sector.24 2.38 2.10 2004 123.68 Germany 45.20 47.64 UK 27.82 Hong Kong 14.33 7.22 225.2 HR Service 5.58 212.57 2.0 Market Research 3.0 Networking Consulting & Management 15. 2002-2004 Country 2002 2003 112.26 Table .64 1.81 48.0 Finance & Accounting Services 15.79 0.93 US 106.36 14.45 Source: FROST & SULLIVAN Global Predicted Figures McKinsey & Co. Integration & Management 44.90 27.0 Data Search.0 Translation. predicts global market for IT – enabled services to be over $140 billion by 2008 These $ 142 Billion can be broken up and shown as under Customer Interaction Service 33. (Offshore Outsourcing & Offshore Subsidiaries). Facts & Figures Total Value of Jobs Exported (USD $ billions).04 As % of 2003 GDP 1.76 Japan 196.12 6.0 Remote Education 18.0 Website Services 5.14 22.29 27.08 5.07 6.66 7.28 22.69 436.0 Total 141. Transcription & Localization 2.15 France 21.0 Engineering & Design 1.40 Total 412.13 1. accounting for 22% of the total spending which is expected to reach Euro 129 bn by 2008.63 16.2 Source: NASSCOM McKinsey Study – India IT Strategies In that the opportunities for India will be $ 17 Billion 19 .64 --CAGR 7. Department of Labour and Forrester Research. Inc.Table – 11 Serial No. Design 818 5576 13846 29639 Sales 4619 29064 97321 26564 Office 53987 295034 791034 1659310 Total 102674 587592 1591101 3320213 Source: U. 1 2 3 4 5 6 7 8 9 Number of US Jobs Moving Offshore Job Category 2000 2005 2010 2015 Management 0 37477 117835 88281 Business 10787 61252 161722 48028 Computer 27171 108991 276954 72632 Architecture 3498 32302 83237 84347 Life sciences 0 3677 14478 36770 Legal 1793 14220 34673 74642 Art. Table – 12 20 .S. made India in the top position among China. About 100000 engineer graduates from India every year. Ireland. India is able to offer 24*7 services and reduction in turnaround times by leveraging time zone differences. Indian Scenario:At present India is the world’s most important off-shoring location for the outsourcing of IT services and IT based business processes.IT Services Export ($ mn) Country 126 130 2800 4750 0 2000 4000 6000 1 Russia China Ireland India Total Export Source: NASSCOM Table – 13 8. capabilities. Many of these engineers are employed with call centres for trouble shooting and providing technical support at salaries that are dramatically lower 21 . and Canada etc. linguistic Excellencies and work ethics etc. geographic location and high skilled manpower are the main reasons for multinationals to back in India. The global market is currently worth some USD 40 bn and the India’s total revenue in the fiscal 2004-2005 was USD 28 bn from software.2. India has 44% share of global market for IT and BPO off-shoring. quality of work. Philippines. In the area of qualifications. Australia. IT services. project management skills and technological know-how make India attractive for Business Process Off-shoring.g.compared to pay-scale in the US. According to the current data. Sun Microsystems. The average monthly salary in India is $400-700 compared to $2700-2800 in the US. which is more popularly known as Healthcare players. Oracle all have announced plans to scale up their operations in India. LG. Data Entry Mid 1990’s late 1990’s 2000 2005 Transcription Services Call Centre Transaction Processing – Non core Transaction Processing – Core Table . The combination of low labour costs. GE. GE pioneered the trend of outsourcing to India when it set up a facility in Gurgaon in mid 1990s. Ford. are increasingly outsourcing business processes due to changing & challenging business environment and technological and legislative changes. Indian labour cost is very cheap e.14 If we see the evolution of the BPO in the India. the BPO industry in India employees around 400 people everyday with the people existing from this sector being around 12% of the total workforce. Managed care companies. Dell. we can define some phases as depicted in the table – 14. And some of the other companies 22 . a chartered accountant gets $15000 a year where as a CPA in US earns $75000 a year. In FY 2005-2006. HSBC. Standard Chartered and other companies like Dell.6 bn. higher value added work such as processing of HR.3 bn to the total software services exports of $23. Banks such as Citi Bank. BPO/ITES hubs in India First Segment Bangalore Chennai Hyderabad Mumbai Gurgaon Noida New Delhi Pune Fariadabad Second Segment Ahmedabad Amritsar Bhubaneshwar Chandigarh Guwahati Indore Jaipure Kanpur Kochi Kolkata Mangalore Nagpur Employees 73000 City Delhi IT Landscape of key Indian cities Focus Prominent firms Call centres.like American Express and British Airways also operating their back offices in India since the mid 1990s. American Express. The success of these early pioneers encouraged a host of other MNC’s to set up their own back-office operations in India. accounts and other non-core functions came to India. HP set up their own captive operations. With increasing confidence of the companies in the capabilities of Indian operations. 23 . GE. Indian BPO cities can be divided into two segments. the Indian ITES/BPO segment grew by 37% contributing to $6. first segment deals with leading BPO cities and second segment deals with developing BPO cities. Initially low-end work such as data entry and call centre activity was outsourced to India. software. back office. Zensar 62050 109500 36500 51100 7300 7300 Table . i-flex. call centres. ITES/BPO Exports ($ bn) 2003-2004 3. C-DAC. back office. Yaho. IT consulting. software Chip design. Wipro Spectramind. SAP. ExL TCS. Persistent System.6 24 2005-2006 6. SAS. Standard Chartered. bio-informatics. E & Y. Oracle. chip design. Satyam. TCS MsourceE.7 Source: NASSCOM Table .(includes Gurgaon and Noida) Mumbai Bangalore transaction processing. Infotech. Intel. TI.1 2004-2005 4.9 2005 5. embedded software Source: NASSCOM STMicroelectronics. tax processing Software. animation Consulting. MphasiS. Motorola. IBM.8 2004 3. HP. Microsoft Cognizant. software Hyderabad Chennai Kolkata Pune Call centres. Wipro. the size and growth of the BPO in India can be depicted as follows: Year Size ( US $ bn ) 2003 2. Citigroup Infosys.3 . Pentamedia PwC.16 Growth Rate 59% 45.15 Facts & Figures Year 2003 to 2005. transaction processing. product design Software. Daksh. IBM. ITC. World Bank. chip design. Polaris. software Financial research.3% 44. Morgan Stanley. EDS. Tisco. Accenture HSBC. AOL. Dell.4% Currently Indian BPO industry employees in excess of 245100 peoples and another 94500 jobs are expected to be added during the current financial year (2006-2007). Convergys. 2003 Employment 65000 24000 11000 25000 44000 2100 171100 Revenue (in $ m) 810 510 210 310 465 45 2350 Customer care Finance Payment service Administration Content development HR Total Source: NASSCOM Table . revenue sector wise in India Growth trend of the outsourcing industry Service Area 2002 . of people in ‘000s) 253 316 415 Table – 17 Statistics regarding number of employees vs.18 Table – 18 25 .Employment (no. NASSCOM.Indian software and IT:Export-drivan boom(USD bn) Market Share 30 20 10 0 19 99 20 01 20 03 20 05 20 07 domestic market export Year Source: DB Research. 2005 Table – 19 IT sector employment continues to rise sharply (Indian IT employees '000) 1000 value 500 0 2000 2001 2002 2003 2004 2005 Year IT Software and services ITES-BPO (CAGR 54% ) Source: DB Research. NASSCOM. 2005 Table .20 26 . 78% 6.A. September.61% 1.A. Source: NASSCOM Statistics of the Number Of Employees in Indian call centres Company Number of Employees ExL 4500 Spectramind 2600 Daksh 2000 vCustomer 1500 Tracmail 1365 HCL e-serve 870 Epicenter 700 ICICI OneSource 650 GTL 650 WNS 1600 Source: NASSCOM-ITES.17% 22.9% 8.85% 5.85% N.785% 1. N.2004) Table – 23 27 .23% 0.Company MphasiS Wipro Infosys Digital Global soft HCL Tech Percentage Of The Revenue Contributed June Sept Dec 2002 2002 2002 16.01% 3.81% 0.22 Employees And Revenues Associated With BPO Units Revenue (in $ m) Headcount GE 250 12000 Wipro Spectramind 95 11500 Convergys 94 9800 IBM-Daksh 65 6300 MphasiS 60 4800 WNS 55 4500 EXL 44 4600 ICICI OneSource 42 4100 HSBC 41 6000 Amex 40 3800 Source: Economic Times (August.9% N.175% 5.24% 7.53% 9% June 2003 28. 2002 Table . 1.A.61% 4.48% 21.027% 0.454% 5% 5% Table – 21 6% By BPO March 2003 25. com 12 Datamatics Technologies 13 Hinduja TMT 14 Transworks 15 tracmail Source: NASSCOM. 2005 Survey Table .24 Top 15 BPOs in India Serial No.com 28 MsourceE 20 Hinduja TMT 24 Tracemail 11 Progeon 4.Company Wipro Spectramind Daksh eServices Office Tiger HCL Technologies BPO ICICI OneSource World Network 35 Services exi Service.4 Source: Business World (4th august.2003) Voice Vs Non-Voice Revenues Employees ($ Million) 41 5000 35 4000 25 1000 2346 2175 2500 2300 3162 1400 1000 685 Voice:Non-Voice 80:20 70:30 0:100 90:10 70:30 65:35 75:25 93:7 66:34 50:50 30:70 Table .25 2005-2006 Genpact WNS Wipro BPO HCL BPO Services ICICI OneSource IBM Daksh Progeon Aegis BPO Services ExI Service Holdings 24/7 Customer.com MphasiS BPO Intelenet Global GTL TCS BPO Transworks 28 . 2004-2005 1 WNS 2 Wipro BPO 3 HCL Technology BPO Services 4 IBM Daksh 5 ExI Services 6 MphasiS BPO (formerly MsourceE) 7 Intelenet Global 8 ICICI OneSource 9 GTL 10 Progeon 11 24/7 Customer. 9. Here India is not a top position. Top US companies often begin their off-shoring decision-making by short listing nations with specific language capabilities before choosing the off-shore destination.6).6 as compared to Canada (2. country infrastructure. culture compatibility. But a now-a-days multi-country strategy to ensure business continuity makes some bad news to Indian BPO.4 out of 10) compared to China. On the cost front. The three factors are to be considered in choosing a country as the off-shoring destinationI. The trend is not just in the area of outsourcing software development work but business-specific backoffice process. Ireland 29 .1 each. India is likely to become the location of choice for high value analytical tasks. geographic proximity and security of intellectual property. nearly half of all companies surveyed stated that they used offshore providers to avoid high labour costs in US and Europe. while more generic commodity processes will eventually more to lower costs environment such as China” – says the AT Kearney report.8 and Canada’s 1. Comparative Analysis:Outsourcing is the best imperative for MNC’s. India scored 1.The Cost factor: This includes cost of labour.8.5. brazil and Czech Republic’s 3.3. Philippines’s 2. India scores the maximum points (3. Hungary. II. Mexico’s 3. According to Forrester Research Study. Australia’s 2. India is the first choice of all multinationals of the world when it comes to off-shore business processing. The multi-country strategy done for minimizing risks in the event of a natural disaster. In the long run. Ireland’s 1. Russia.Environment factor: It includes economic and political risk. management and infrastructure and tax and treasury impact. “Although India is expected to retain its leadership position for the foreseeable future. its strong ratings may be tempered gradually rising labour costs and geographical concerns. At present India is the top position in two factors – costs and people. 00 6.61 5. Mexico (1. employee retention problems.50 Thailand 5. Australia. language skills.27 Japan 2.5). Poor intellectual property and cultural compatibility made India as a medium player. Canada now becoming a favourite destination of US companies due to superior employee retention rate & business process experience.67 4.42 Note: 0 – Best. poor IT and telecom infrastructure.28 4.05 5.08 5.40 4.80 4.08 5.44 4. and employee retention.35 5.3. So the key constraints are language barriers. Ireland have good English speaking people.32 5.71 5.12 3.09 4. better infrastructure.83 4. Ireland (1.The People factor: It includes BPO & IT process experience.96 Hong Kong 3.58 4. 10 – Worst Source: DB Research.12 Indonesia 6.29 2.82 3.50 4.39 South Korea 3. political instability and corruption made India as a second level country in environmental factors.41 4. MC Kinsey.33 Taiwan 3. education level of workforce.3) are far beyond from India. In this factor India placed in the first position scoring 2.45 6.(2.82 6.20 5.14 2.1).88 4.94 Singapore 2. 2005 Table – 26 30 Country Labour Turnover 3.57 Vietnam 6.2).32 6.4).22 4.77 4.18 4. size of labour market. overall support of MNC’s Asia business operations etc.3).20 5. Canada.40 6. Australia (1.76 5.5) & Australia (2. lower economic & political risk but they are poor in terms of labour cost.46 6.41 4.42 4. Brazil (1. while Canada (2.77 Average Grade 2.92 6.41 4.82 .83 5.00 China 6. III.06 5.83 2.30 7. language barriers. China now going very fast in this area because china has large low cost workforce pool. While Brazil & Mexico rank higher than India in respect of the environmental factors.86 Malaysia 4. Comparative Analysis On The Basis Of People Factor Labour Labour Labour Quality Cost Availability India 4. Export of basic materials Manufacturing (machinery & intermediate products) Basic materials.98 4.44 Medium Medium Very Low Medium High Low High Medium Very High Very High Very Low High Medium High Very Low Very Low Very High Very Low * Total score AT Kearney attractiveness index Source: AT Kearney.44 5.58 5.59 5. export of basic materials Manufacturing. export of basic materials.07 Medium Very High Low 13 14 15 16 17 18 South Africa Portugal Vietnam Russia Ireland Turkey 4.12 High Medium 12 Argentina 5.65 4.61 5. Manufacturing. Financial services Basic materials.49 4. Manufacturing. IT High standard IT services Manufacturing. Call centres Manufacturing.Country Attractiveness Analysis Rank 1 2 3 4 5 6 7 8 Country India China Malaysia Czech Rep.20 Low Medium Very High Low 11 Mexico 5. Financial services Textiles.12 5.33 Human Resources Very High High Medium Medium High Medium Medium Medium Cost Advantage Very High Very High High High Medium Very High High High Environment Medium Low High High Very High Low Medium High Core Capability IT services Manual Labour.29 Medium High High 10 Thailand 5.70 4.45 5. Export of basic materials Manufacturing (machinery & intermediate products) Manufacturing (machinery & intermediate products) Electronic equipment.71 4. Singapore Philippines Brazil Poland Score* 7. 2004. Metal working. Electronic equipment Electronic equipment Manufacturing (machinery & intermediate products) Financial & hi-tech centres IT services. Textiles 9 Hungary 5.45 5. Services Manual Labour. Table – 27 31 . Future Outlook to Indian BPO Markets Revenue \ Year Offshore BPO Revenue Indian BPO Revenue Total BPO Market 2002 1322 912 110167 2003 1825 1205 121687 2004 3017 1961 131171 2005 6439 3928 143090 2006 12563 7412 157033 2007 24230 13811 173070 CAGR 78.9. India can capture 25% of global BPO off-shore market and 12% of the market for other services such as animation.8 bn by 2007. content development and design services. Conclusion:India is now the leader in off-shore outsourcing market and the trend have been seen from 2005. research development. • Gartner: $1 bn (2002). market research. medical or other (legal) transcription services. they estimated that by 2008 it will be $17 bn but it has been revised to $21-24 bn by 2008.2 bn (2003). data research. • NASSCOM – McKinsey: in 1999.91 69. 2003) Table – 28 32 .35 9. Gartner doesn’t incorporate animation. $1. Confidence in the service provider companies put forward the BPO industry in a new generation in India. $13. GIS. network consultancy and other non-business processes in its estimates on the ITES market size and potential.45 CAGR in % 2002-2007 Figures in $ Million Source: Gartner Dataquest (May. government support. and Malaysia etc. But other countries like China.Service Line HR Customer Care Payment Services Content Development Administration Finance Figures in $ billion India’s BPO Market in 2008 First Estimate Second (1999) 5. The factors like large pool of English speaking and talented people.0 2. Philippines. are unique to India.0-8. The NASSCOM figures showed clearly that while the industry is currently on the high growth path.0 8. conductive business environment.7 Estimate (2001) 3.4 4. According to Forrester Research. which is a positive side and India has a lot of potential to make full use of this opportunity.0 1.6 1.0-3.5-2. It helps India to resolve the unemployment problem to some extent and also helps to contribute a significant portion to the GDP of the nation.5 3.0 Table – 29 The industry is showing a growing trend globally and also in India. population dynamics etc. 33 .9 2. The Indian companies are the backbone of the India’s predominant leadership in BPO sector. India has potential enough to sustain its leadership.5-3.5 2. are emerging very fast to capture the global market share. it has to take a serous look at managing this growth to sustain and reemphasis its advantages in the global marketplace.3 0. A report by Deloitee Research (2003) estimates that two million jobs (of which 851000 will be from the US) from the largest one hundred global financial institutions will be moved to India by 2008. the core BPO market worldwide will be benefited from this.1 2.5-3.5-4. The Chartered Accountant. pp (605-609). References:1) C. August. (2005): “R & D outsourcing – Indian scenario”. May. The Chartered Accountant. 3) Kably L (2005): “Outsourcing of tax return to India: AICPA guidelines”. 5) Rao N. 8) Satish D & Kumar S (2005): “Mega outsourcing – the beginning of the end “. December. pp (1490-1492).B. June. August.J.G (2004): “Outsourcing is here to stay”. Rajeshwer & Sowdeepti A (2003): “Indian BPO Sector – Finance & Accounting – outsourcing”.J. pp (857-865). May. pp (39-40).J. pp (879-881). The Chartered Financial Analyst. August. 6) Rao N. August. The Chartered Financial Analyst. 7) Rao N. pp (42-46). & Adusumilli R. The Chartered Financial Analyst. The Chartered Financial Analyst. pp (23-27). pp (58-61). April. January. pp (53-58).B (2005): “Accounting outsourcers have your number”. 10)Chhabra S (2006): “BPO – Finance & Accounting – introduction”. The Accounting World. & Prasad I (2006): “BPO – will the boom sustain?”. 9) Gangadhar V & Reddy N (2005): “Strategies for BPO in India”. 4) Samuel P. & Kumar S (2005): “BPO Bash – Is India losing”. The Management Accountant. The Chartered Financial Analyst. The Chartered Accountant. 2) Prasuna D.10. 34 . 11)Other literatures from various websites.