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The BPO juggernaut starts rolling

May 21, 2003

How technology compresses change! It is no longer the age of software, which has matured, is facing pricing pressure and has lost its stock market shine. It is now the age of business process outsourcing.

Till some time ago it used to be called IT-enabled services, denoting the manner in which individual services like data entry, responding to calls, medical transcription and simple data processing were delivered. But somewhere along the line, entire business processes began to get outsourced, giving rise to BPO.

The pioneers in India who first began to host outsourced services in the country were American Express and British Airways.

The big break came when GE began to set up large call centres around Delhi, thus demonstrating the scalability of the operations high visibility.

Today BPO is the rage. In two years time, the total number of people employed in BPO has gone up tenfold to 200,000 and on current reckoning a similar tenfold growth will take place in another couple of years.

Clearly, taking after software, India has emerged as the preferred destination for companies in mature economies seeking to beat down costs and improve productivities by outsourcing entire business processes at both the front and back office.

Ireland, the Philippines, Australia and China (to serve Japan) are all competitors but, in this volume business only India has the numbers not just today, but also is likely to in the foreseeable future.

As numbers come with a skill tag attached to them, Indian ability to deliver numbers also means the ability to ensure quality which keeps improving.

By all accounts, in terms of potential, cross-border outsourcing has barely scratched the surface. For example, an important outsourced service, HR functions, has barely begun in India.

The largest outsourcing deals to come to India so far have been under $200 million, whereas large deals within developed economies are upwards of $1 billion. Besides, notions of what can be outsourced are changing by the day.

Indian ability to gain from this outsourcing potential is based on the gradual acceptance of and familiarisation with the India brand.

Says a US-based Indian software professional, "The taxi driver's opening gambit nowadays is, on seeing that you are Indian, to ask you if you are in software."

It is slowly becoming unnecessary for call centre agents to adopt non-Indian names. Indian names are OK so long as they are not very complicated.

The Western customer now knows and accepts that his call is being answered from conceivably anywhere in the world and there is also a realisation and expectation that if the response is from India, then his technical problem will be taken care of.

Within India outsourcing has followed several paths. First it was the MNCs that set up their captive centres to establish the proof of concept. Then the Indian third party BPO operations had to do the proving all over again.

Thereafter has come the stage of dualism whereby outsourcers have both their own operations and access third party services.

The latest trend consists of more and more complex services like technical support 'my PC or our ERP has this glitch' and processing of tax returns under US GAAP being outsourced.

And growth results from rapid upscaling. A company comes in with one process and then, within months, decides to bring in several more proceeds with rapid hiring and acquisition of office space.

In the general satisfaction in India over the success in BPO taking up the slack in software growth, there is as yet inadequate realisation of its implication on a much wider area beyond its immediate vicinity.

The first and most significant impact is on education. Just as software has changed the face of India's technical education, BPO will transform the market for language and professional skills. The stifling of white collar job growth as a result of all round downsizing in the organised sector will end.

Already a new vista is opening up before middle class Indians: that of working in large numbers for, if not MNCs then their surrogates. Education till the undergraduate level is likely to become more skills and capabilities oriented and expand the market for private education.

The rapidly expanding BPO industry is also having an impact on office space. Not only has BPO thrown a lifeline to the gasping property market, it has also forced standards to go up.

There is an increasing demand for construction to conform to international standards and cities which fail to measure up are losing out.

But the impact goes deeper. A rare bandh in Bangalore over Cauvery waters last year had BPO managers struggling to explain to their clients what a bandh was and how it wouldn't affect operations.

A state big in BPO cannot afford to have any kind of disruption, be it over traffic, civic amenities, electricity or even law and order.

If you are manning contact centres for half the Fortune 500 companies, your show must never stop.

The BPO impact does not end there. It has strategic implications. If a large chunk of corporate America and a bit of corporate Europe has a stake in Indian stability and business continuity, irresponsible Indian leaders who glibly talk of teaching Pakistan a lesson will have to be disciplined.

Conversely, export of terrorism from Pakistan which destabilises India will not be tolerated by those companies. By developing a symbiotic link with Western business so that it has to depend on you for its day to day operations, you get them on your side.

As US back and front offices sprout in India, its ability to lobby in Washington will improve, courtesy its MNC clients. These are some of the extensive ramifications of what BPO will be doing for India, which will go way beyond what software has so far done.

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Number of User Comments: 4


Hi, i donot agree with views here.Actually being a backoffice(I define backoffice as service-provider for developed nations)will solve employment problem for some or most percentage ...

Posted by vishal

Sub: BPO wave?

Isnt the BPO wave actually avoiding the real issue. that America ( possibly the western world) is so used to lifestyle that is no longer ...

Posted by ananth

Sub: BPO

BPO functions from India are increasing mainly because of the talent pool of educated and upworldly mobile youngsters. It will keep rising and dependencies are ...

Posted by Bal

Sub: Great Article

The author has well researched the topic and has interviewed the right people. I must say this has been an excellent attempt to let people ...

Posted by Srinivasan


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