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Home > Business > Business Headline > Report

Value proposition key to BPO growth

BS Bureau in Bangalore | June 13, 2003 15:08 IST

The challenge for Indian companies is to improve their front-end sophistication and also become crisp in articulating their value proposition.

Otherwise they will be condemned to playing only a labour arbitrage game. This is the advice that Noshir F Kaka and Ramesh Venkatraman of McKinsey & Co had for Indian BPO companies.

The speed at which the industry is growing can be gleaned from the fact that right now the top 20 Indian companies in an industry that did not exist nine years ago are negotiating $1.5 billion in BPO deals.

What is more, right now only 5 per cent of the $3 trillion processes that can be outsourced are being tapped. So the BPO industry is still nascent.

The outsourcing is currently being done in only a few horizontals and there are a large number of providers.

A clear likelihood is that there will be a transition from only horizontal to horizontal and vertical (entire processes) outsourcing.

Virtually everybody is talking about offshoring and increasingly it is becoming a strategic decision which is being discussed at the board level.

So providers have to become sophisticated in matching talent across the table. India has great initial country advantages but these can get commoditised.

The first area where this can happen is factor saving, with factor inputs (skills) accounting for 40 per cent of what can be outsourced.

So Indian companies needs skills such as being able to undertake process and task reengineering and effect economies of scale.

There was a need to avoid the commoditisation that had taken place in medical transcription. The area which was next in line was call centres.

There are now ten top players which are offering the same labour rates. Unless you can put different capabilities on the table they will be playing the same labour arbitrage game.

The BPO story differs from the IT story in that the pace of change is incredible and outsourcing and offshoring are taking place at the same time in BPO whereas in IT outsourcing came long before offshoring.

There is a fork in the road for Indian companies. They have to decide to try for just offshoring work or also try for outsourcing work which is more ambitious.

But whatever the choice, most Indian companies have to change from the way they are doing business. They are now mostly in activity/task based work, while a few are handling one or two end-to-end processes.

The final stage in this is being able to handle multiple processes. They are handling current tasks by replicating the processes at the client's end. But they have to become platform-based processes and, finally, insight-based customer solutions have to be offered.

In the call centre business, a Daksh has to become a Convergys; in IT services a Progeon has to become an Accenture; and an transaction processing an EXL has to become a First Data.

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