BPO : Verticalization

The BPO industry in India, like the IT services segment, has predominantly

been an export-oriented sector, deriving the bulk of its revenues from the US,

Europe and other regions such as Asia Pacific.

Currently worth around $11 bn, it is expected to experience a five-fold

growth over the next five years. According to the Chamber of Commerce, Nasscom,

the BPO industry is estimated to touch revenue figures of $50 bn by 2012 and

provide jobs to over two million people. The domestic BPO market too has made

great gains as a result of a steady rise in technology adoption by players and

an increased participation of vendors within this domain, Nasscom says. In its

annual study on the Indian IT-BPO industry, Nasscom states that BPO spend in the

domestic market is expected to jump by over 43%.

Rise of the Domestic



Yet another survey by Avendus, a leading investment banking services firm

indicates the rise of the domestic market and its emergence on the radars of

vendors. Avendus' report on the domestic BPO market shows that Indian domestic

outsourcing is emerging as an attractive target market for the Indian BPOs.

The Avendus study, titled the “Indian Domestic BPO Market-An Emerging

Opportunity,” highlights the fact that the domestic BPO market is expected to

grow at a rapid 35% to touch US $6 bn by 2011, (up from the current US $1.8 bn).

The recent reverberations in the global markets-led by the sub-prime crisis

in the US and the overall recessive trends in the American economy-are also

likely to have an impact on the growth of the domestic BPO market. Indian BPO

service providers, grappling with challenges such as a strengthening rupee and

squeezed margins, are now expanding their focus to cover India's vast and

burgeoning domestic market. The domestic segment, which has witnessed intensive

computerization by key industry verticals, is gradually becoming a playground

for the country's leading BPO service providers.

The gravitation towards the domestic market by BPOs began a few years ago,

when leading Indian BPO vendors began to take a look at the opportunities

emerging on the home turf. Changes in government regulations-where new

legislation allowed BPOs in the country to share their domestic and

international call center infrastructure-marked a turning point for the sector,

enabling companies to harness under-utilized capacity.

It was in 2004-05, when interestingly, BPO exports slowed down but domestic

BPO grew by a phenomenal 85% to touch Rs 2,640 crore. The demand was driven by

the domestic telecom, BFSI and retail sectors, by players such as Reliance, the

Tatas, ICICI, Pantaloons, Pizza Hut and new airline and courier companies, who

began to talk the language of customer fulfilment and CRM and were upbeat about

services such as telemarketing and tele-support.

Over the last few years, following a rise in awareness about the importance

of Customer Responsiveness, the domestic market has seen the mushrooming of call

centers, set up by captive and third party BPOs. Recognition of the fact that

technology, particularly Intelligent Communications, can greatly improve the

efficiency and productivity of call centers and their agents, has led to a

greater deployment of the state-of-the-art by these service providers.

The New Name of the Game



Going forward, and in order to build greater traction in the domestic BPO

market, India's service providers will need to evolve a strong Verticalization

approach to address the outsourcing needs of companies representing different

industry segments.

There is a need for Indian BPOs to create a portfolio of Intelligent

Communications solutions that meet the specific needs of high opportunity

verticals such as BFSI, retail, telecom, manufacturing, hospitality, airlines

and transportation, media and healthcare.

Take the instance of the Banking, Financial Services and Insurance sector,

which has taken the lead in technology deployment over the past decade and

represents a huge opportunity for Indian BPOs in the area of outsourcing. Indian

banks, in particular faced with stiff competition from the MNC entrants, have

changed their look and feel, enhanced Customer Responsiveness and are rapidly

embracing Intelligent.

Communications solutions from the leaders in the fray, to provide anytime,

anywhere, on-demand retail banking to users and improve their own

competitiveness, reduce operational costs and cross sell. A number of banks,

alongside financial services companies and Insurance majors are also outsourcing

some of their back-office and even core functions, involving more complex,

higher-end processes to service providers.

Developing a Vertical Mindset



While Indian BPOs are beginning to make a strategic shift in their offerings

to address the requirements of verticals, we are yet to see a more intensive

focus and skill-building. In the current environment, one is seeing few “gurus”

and domain specialists. BPOs are primarily focused on “per seat realizations”-a

trend that cannot be sustained on a long term basis. BPO players need to add

value through focus, from a verticals standpoint.

The strong verticals focus by vendors has to be bolstered with relevantly

skilled manpower with domain knowledge that can understand and redress the pain

points of customers. As CRM becomes important for organizations across verticals

keen on attracting and retaining clients, they are outsourcing this activity to

BPOs that possess the necessary vertical knowledge. Keeping this in view, BPOs

need to hire and sustain their pool of domain specialists, well versed in

specific businesses.

As more and more Indian companies join the outsourcing bandwagon and demand

for good quality service increases, BPO companies also need to explore new

opportunities in smaller cities. For telemarketing English is not required.

Local language is enough and these services can be provided from smaller cities

where there is no cost pressure.

At the same time, BPOs must innovate to provide solutions to domestic

customers that are particularly suited to their particular verticals.

Clearly, domestic BPO has a great chance to survive and thrive. Some smart

repositioning by India's leading players, a strong vertical focus, leading to

higher value add for customers and a rightly skilled workforce can enable

companies to harness the power of the domestic market and build on this new

revenue stream. At the same time, companies must leverage the knowledge and

domain strengths offered by Intelligent Communication solutions providers who

have experience in vertical markets, and cutting-edge offerings help them in

order to help their customers.

Anil Nair



The author is president, Avaya GlobalConnect



vadmail@cybermedia.co.in