ANNUAL BPO SURVEY: The Age of Outsourcing

It may seem a little strange, perhaps even ironic, to many social scientists
and historians that a country known to be in perpetual slow motion, with one of
the lowest literacy rates, and quite infamous for its lack of service attitude
would be chosen by the world to become a global services hub.

But India has been a country of stark contrasts. It continues to be. When all
this began, just about half a decade back, its telecom infrastructure on which
the whole offshoring model is dependent on, was one of the poorest, by any
standard, most certainly by the standards of the countries that chose to move
their services to India.

And who was the first big mover in this phenomenon? A company known to be
among the best managed business organizations in the world. It was not
disappointed for its faith in India.

In the matters of faith, India has never disappointed. From Buddhism in the
era before Christ, to technology in the twenty-first century, India has
delivered value–spiritual or material–whenever the world has turned to it.
Offshoring has not been an exception. Most companies who have outsourced to
India have realized that India has consistently delivered a higher quality,
leading to the slogan–come here for cost, stay here for quality.

There is no doubt that they came here for cost. But they also came here
because we could speak English. They came here because India had built an
awareness about itself by successfully delivering offshore IT services.

However, two reasons that are extremely important in explaining the
large-scale success of India are often ignored. One–India’s large pool of
manpower–often gets mentioned as just another factor. In fact, India’s large
human pool–so far seen as a liability and believed to be the cause of all that
is negative about the country–is the single-most important asset that has not
just made people shift their services here, but will make them stay here. The
icing on the cake is: unlike many of our potential competitors–this manpower
is not concentrated in Delhi or Mumbai. They are spread everywhere in India. So
India will not get saturated anytime. Delhi or Bangalore may, but not India.

The second reason–and this is never even mentioned in the numerous
presentations that you hear everyday–is the power of global Indian, more
correctly the ‘embedded Indian’. Invariably, most decisions to outsource
and/or offshore are influenced by a few key people in global business
organizations.

Invariably, one or two Indians are part of that decision-making chain. This
helps in two ways. One, these people, because of their comfort level/patriotism,
push India’s case. Two, their peer group is comfortable about the fact that
they do understand India.

It is no coincidence that some industries like BFSI, telecom, and technology,
that have more Indians in decision making/influencing positions have been the
first ones to bet on India. Other high potential sectors–like retail for
example–have been fairly slow in tapping the India advantage.

Of late, however, there have been a lot of discussion on whether India can
sustain this lead over other nations, who could potentially be cheaper. These
discussions overlook some fundamental differences (of India) from other low-cost
destinations. Two major factors that would sustain India’s position as the
global outsourcing hub are its demography and its intellectual prowess. As
discussed above, India is not Delhi and Mumbai. As Delhi and Mumbai dilute their
cost advantage, companies will move to smaller cities. It is already happening.

The other factor is even more compelling. India’s intellectual prowess and
the large number of ‘ex-McKinseys’, and ‘ex-Citibankers’ mean that this
sector in India has been able to attract the best talents. They have jumped at
it only after seeing the sheer magnitude of the opportunity. This has also meant
that India does not remain just another low-cost destination. It is fast turning
out to be a decision making center by itself. This will mean that Indians
will themselves decide to move to other low-cost countries for low-value jobs,
while retaining the higher value ones in India. This also has started happening.
Even today, for companies like GE, the decision on offshoring–no matter to
where–happens in India.

With something of this ‘magnitude and quality happening in India’,
someone had to record it. Our annual survey is an attempt to do that–record
this ‘happening history’ in a hurry.

That
is the issue’s positioning. It is the first attempt at understanding the
industry as it stands today. The prime objective of this exercise is not to
estimate industry size. Many market research firms and industry associations–most
prominently Nasscom–have done that in a highly detailed manner. We may
disagree here and there, but by and large, they have built this industry.

What we have attempted here is to go beyond the big numbers and look at what
exactly is happening. The issue will try to answer the questions which follow.

• Who are the biggest players?
  There are many obvious names, but a few surprises as well

• What they are doing–voice,
  e-mail, back-office

• The industries that they get
  their business from

• Which are the opportunities that
  they are after, and what the challenges are.

• Individually, what are the
  strengths, weaknesses, and risks of each of those companies–beyond the
  revenues and the manpower

• Geographically, within India, how
  is the work getting distributed, and whether and how will change in the near
  future.

In summary, these are questions that are important from the market point of
view. One major question that remains–and we have not attempted to answer it
here–is what are the most important internal challenges and what are the best
practices in meeting those challenges. We believe that requires much more
in-depth study and we promise, we will undertake that

separately.

A few potential FAQs should be answered. Why have we focused only on
India-centric companies? This is because we believe from the market point of
view, the challenges that an India-centric company faces is very different
compared to that of a captive or an MNC BPO like Convergys or Sitel. Signing a
client is a totally different challenge, both in magnitude and quality. When we
undertake the study on internal issues, we will not a distinction among them, as
the issues are similar.

Also, the next issue will give an overview of the captives and MNC BPOs,
along with two separate rankings for them, based on manpower, not revenue, for
obvious reasons.

Of
course, we should define what India-centric means. India-centric for us means
companies whose sixty percent or more of the operations are in India. The reason
we did not take headquartered in India as the filter is that would have excluded
many companies like EXL, 24/7 Customer, vCustomer etc. eFunds is one example
that is owned by a US corporation and started as a captive. We have included
them because in 2002-03, more than 80 percent of their outsourcing operations
were based in India. We have, however, excluded their captive revenues.

That leaves hundreds of small companies. They will also be covered in the
next issue. We wanted to include them in this issue itself. But the response was
a little slower, though that has since picked up. We wanted to do a good job. We
will cover all those who matter in the January issue.

We have ranked the top 15 companies. And followed it up with a list of
emerging seven companies. We have presented here what the Top 15, an exclusive
club, by itself, are doing in terms of processes, verticals. For individual
companies, please refer to the write-ups on them. We have tried to give as much
information as we could. But not all companies have shared everything with us.
That was a limitation.

In the write-ups on segments, we have not included common segments like
customer service and insurance-claims processing. We have included only new
segments, the only exception being telemarketing, which is again top of mind for
the wrong reason–the DNC regulation.

We have also talked about the existing and emerging locations for BPO that is
still an important issue as far as the BPO industry is concerned.

The issue is a first attempt at understanding the industry. It is not
comprehensive by any standard. We have tried to present information that are not
available anywhere else, to the best of our ability. We will do a much, more
comprehensive job next year, based on our learning. That is a promise.

bpOrbit Team: Shyamanuja Das, Balaka Baruah Aggarwal, Rajneesh
De and Ravi Shekhar Pandey