“It may slow down, but it’s still going to be double-digit growth,” Ayala told a group of reporters at an outsourcing conference in Manila.

According to Ayala, the Philippine outsourcing business is expected to grow by at least 15 percent each year to $20 billion by 2016. Ayala expects the English-speaking nation to have about 900,000 outsourcing workers in five years.

Currently, the Philippines accounts for just under 7 percent of the global outsourcing market, a distant second to India’s 51 percent share. The Philippine outsourcing market covers most BPO functions, including call centers, information technology, health care and legal work.

Call Center jobs could be in danger to decline, with computer software taking on a larger role and replacing humans at such tasks. That’s the nation’s biggest fear at the moment, as call center outsourcing accounts for roughly 65 percent of Philippine outsourcing.

The country’s other growing outsourcing sectors are expected to offset that decline, however.

“Back office, health care, creative services, and IT are becoming quite attractive here,” Gillian Joyce Virata, senior executive director for the business processing association, said.

The Philippines are certainly counting on their growing outsourcing market. Trade Secretary Gregory Domingo said that the outsourcing sector was one of the Philippines’ economic pillars, and that the 2011 revenue target of $11 billion would be about 5 percent of the nation’s gross domestic product.

“The contribution of this industry cannot be overstated. It’s really a very big help,” Domingo said. “It has provided a very big support to the economic environment of the Philippines in the past decade.”

Source: Supply Chain Digital

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Arvato has been operating in Ireland for 15 years and already employs over 1,200 people.

“I am delighted that Arvato is adding 150 jobs to its very substantial presence in Ireland,” said Taoiseach Enda Kenny as he made the announcement.

“Arvato makes a very valuable contribution to the business services sector in Ireland and I would like to congratulate the company as it celebrates its 15 year anniversary in Dublin and offer my Government’s support as it builds its presence further.”

Dublin became a strategic centre of knowledge and innovation for Arvato finance after AOL outsourced its European back office business to the company.

“Our success over the past 15 years comes down to the partnerships we have established; not only with our international clients but also key organisations such as the IDA and Chambers Ireland,” said Andrea Kaminski, international finance president at the firm.

“I am looking forward to celebrating our joint success to date and preparing for an exciting future.”

By Philip Pilkington, Independent IE

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Outsourcing has transformed global business. Over the past few decades companies have contracted out everything from mopping the floors to spotting the flaws in their internet security. TPI, a company that specialises in the sector, estimates that $100 billion-worth of new contracts are signed every year. Oxford Economics reckons that in Britain, one of the world’s most mature economies, 10% of workers toil away in “outsourced” jobs and companies spend $200 billion a year on outsourcing. Even war is being outsourced: America employs more contract workers in Afghanistan than regular troops.

Can the outsourcing boom go on indefinitely? And is the practice as useful as its advocates claim, or is the popular suspicion that it leads to cut corners and dismal service correct? There are signs that outsourcing often goes wrong, and that companies are rethinking their approach to it.

The latest TPI quarterly index of outsourcing (which measures commercial contracts of $25m or more) suggests that the total value of such contracts for the second quarter of 2011 fell by 18% compared with the second quarter of 2010. Dismal figures in the Americas (ie, mostly the United States) dragged down the average: the value of contracts there was 50% lower in the second quarter of 2011 than in the first half of 2010. This is partly explained by America’s gloomy economy, but even more by the maturity of the market: TPI suspects that much of what can sensibly be outsourced already has been.

Miles Robinson of Mayer Brown, a law firm, notes that there has also been an uptick in legal disputes over outsourcing. In one case EDS, an IT company, had to pay BSkyB, a media company, £318m ($469m) in damages. The two firms spent an estimated £70m on legal fees and were tied up in court for five months. Such nightmares are worse in India, where the courts move with Dickensian speed, or in China, where the legal system is patchy. And since many disputes stay out of court, the well of discontent with outsourcing is surely deeper than the legal record shows.

Some of the worst business disasters of recent years have been caused or aggravated by outsourcing. Eight years ago Boeing, America’s biggest aeroplane-maker, decided to follow the example of car firms and hire contractors to do most of the grunt work on its new 787 Dreamliner. The result was a nightmare. Some of the parts did not fit together. Some of the dozens of sub-contractors failed to deliver their components on time, despite having sub-contracted their work to sub-sub-contractors. Boeing had to take over some of the sub-contractors to prevent them from collapsing. If the Dreamliner starts rolling off the production line towards the end of this year, as Boeing promises, it will be billions over budget and three years behind schedule.

Outsourcing can go wrong in a colourful variety of ways. Sometimes companies squeeze their contractors so hard that they are forced to cut corners. (This is a big problem in the car industry, where a handful of global firms can bully the 80,000 parts-makers.) Sometimes vendors overpromise in order to win a contract and then fail to deliver. Sometimes both parties write sloppy contracts. And some companies undermine their overall strategies with injudicious outsourcing. Service companies, for example, contract out customer complaints to foreign call centres and then wonder why their customers hate them.

When outsourcing goes wrong, it is the devil to put right. When companies outsource a job, they typically eliminate the department that used to do it. They become entwined with their contractors, handing over sensitive material and inviting contractors to work alongside their own staff. Extricating themselves from this tangle can be tough. It is much easier to close a department than to rebuild it. Sacking a contractor can mean that factories grind to a halt, bills languish unpaid and chaos mounts.

So far and no further

None of this means that companies are going to re-embrace the River Rouge model any time soon. Some companies, such as Boeing, are bringing more work back in-house, in the jargon. But the business logic behind outsourcing remains compelling, so long as it is done right. Many tasks are peripheral to a firm’s core business and can be done better and more cheaply by specialists. Cleaning is an obvious example; many back-office jobs also fit the bill. Outsourcing firms offer labour arbitrage, using cheap Indians to enter data rather than expensive Swedes. They can offer economies of scale, too. TPI points out that, for all the problems in America, outsourcing is continuing to grow in emerging markets and, more surprisingly, in Europe, where Germany and France are late converts to the idea.

Companies are rethinking outsourcing, rather than jettisoning it. They are dumping huge long-term deals in favour of smaller, less rigid ones. The annualised value of “mega-relationships” worth $100m or more a year fell by 62% this year compared with last. Companies are forming relationships with several outsourcers, rather than putting all their eggs in few baskets. They are signing shorter contracts, too. But still, they need to think harder about what is their core business, and what is peripheral. And above all, newspaper editors need to say no to the temptation to outsource business columns to cheaper, hungrier writers.

Source: The Economist

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“Is the country attracting demand like India or Egypt? It is not,” said Nidal Abu Ltaif, vice-president for Emerging Markets at Avaya, a global business communications systems provider.

It is three times more expensive to outsource call centres to Dubai than to main players like India or Egypt, Dominick Keenaghan, president of show organiser Insights, said.

The biggest cost for Dubai is labour, he noted. A call centre agent at the Dubai Outsourcing Zone (DOZ) costs $4,000 (Dh14,692) a month compared to $300-$400 in Egypt.

“It’s not cost effective for Dubai to compete with international outsourcers,” he added.

In addition to labour, the costs of real estate and telecoms in Dubai and the Gulf are major setbacks to competition, he said.

“The GCC cannot compete with India, South Africa and Kenya on these.”

Dubai will not be on the outsourcing map anytime soon, said Brownell O’Connor, a customer interaction expert.

“VoIP is over-controlled and where does Dubai get it’s labour anyway? The subcontinent.”

A call centre project in Dubai that O’Connor worked on a few years ago valued at $4 million to $6 million (Dh14 million to Dh22 million) was scrapped because of the telecom costs, he added.

Jordan is increasing its investments in ICT, including the outsourcing of call centres, said Nidal Qanadilo, director of ICT investments at the Jordanian Ministry of Information and Communications Technology.

Companies can cut one-third of their operating costs by outsourcing to Jordan — where it costs $300 to hire a call centre agent — compared to $1,200 in Dubai, he said. CTS, a Dubai-based contact centre whose clients include HSBC and HP, said that call centre outsourcing services in Dubai were pricier by 20 per cent to 30 per cent.

“Are we [Dubai] the number one choice? No, but we’re getting there,” said CTS sales and marketing director Sajjad Hamed.

Price adjustment

The company was forced to slash its prices by 30 per cent to compete with major outsourcers like Egypt, he added.

However, for local and international companies based in Dubai, it makes sense to set up their call centre facility here or hire local outsourcers as many multinationals base their Middle East headquarters in the emirate, industry representatives agreed.

There are over 25 call centres at the DOZ, according to Ammar Malek, Director of Operations at the zone. Emirates airline, the Jumeirah Group, ADCB, Mashreq Bank, Dunia Finance, AXA insurance, Aetna Health Services, Now Health International Services and du all have call centres there, he added.

“As market dynamics change, companies are also looking at new destinations for outsourcing their key business activities. The top priorities remain costs, greater efficiency, better quality and access to talent,” he said.

Source: Gulf News

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“A consolidation wave in Business Process Outsourcing (BPO) sector is likely (in the coming months). Since it is challenging to cope with changing dynamics, some existing entities may move to different lines of business,” Arup Roy, senior research analyst at Gartner, said.

The $12 billion Indian BPO industry is facing stiff competition from countries like the Philippines and the top 10 players account for about 75 per cent of the total market.

Besides, in recent years, as part of their competitive strategies, many domestic BPO players have been looking at broadening their service portfolios.

“BPO providers are aiming to differentiate services via broadening their service portfolios to provide end-to-end services, such as, source-to-pay, and through investments in technology for point solutions automation and business process utility services,” a recent Gartner report said.

Roy noted that process management segment, which is expected to be worth over a billion-dollar in coming years, offers good business opportunities for domestic BPO entities.

“Process management (sector) is expected to see high growth. This segment will provide new revenue streams as well as cross-selling opportunities for many players,” he said.

According to him, process management segment is expected to be worth about $1.7 billion by 2014 whereas this market was pegged at around $600 million in 2009.

On the other hand, Roy pointed out that BPO sector is facing challenges like rising wages and increasing IT costs.

Source: The Economic Times

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The end of the year is a time for assessment, and that goes for outsourcing, too. While it’s easy to point fingers at IT service providers for problems that have arisen over the past twelve months, customers play a significant role in the success or failure of any outsourcing deal.

As the dawn of 2011 approaches, we offer eleven resolutions for the striving outsourcing customer, sure to set things on a better course in the new year, whether your deal is in the ditch or just a little disappointing.

Lest you assume we’re letting service providers off the hook, check back in during the first week in January for a list of long-overdue supplier-side resolutions on CIO.com.

Resolution #1: I will be realistic. “I hear clients constantly complaining about the amount of time they spend dealing with IT problems related to their vendor,” says Adam Strichman, founder of outsourcing consultancy Sanda Partners. “The fact is, managing technology and data centers is hard. You must recognize that if you were doing it yourself, all these same everyday problems would be happening and probably to a greater degree.”

IT leaders will ink a host of new IT services deals in the final days of this year and the first weeks of 2011, hoping that outsourcing will fix all of IT’s issues, the transition will be problem-free, and the provider will deliver better service at a lower cost. They may be disappointed on all three fronts. “Lower those expectations and understand what you are really getting into,” advises Strichman. “You’ll likely still want to [outsource], but be realistic and honest with yourself, your team, and your partner.”

Resolution #2: I will follow the Golden Rule. Treat thy supplier as thou wouldst treat thyself, advises Atul Vashistha, CEO of offshore outsourcing consultancy Neo Advisory. That means not just being respectful, but engaging your suppliers in your planning processes.

“Everybody likes to talk about outsourcing relationships being partnerships,” says Bob Mathers, principal consultant for Compass Management Consulting. “However, when push comes to shove, clients often put the onus on service providers to deliver savings or quality improvement.” To get off on a better foot in 2011, take a look in the mirror, Mathers says. Ask what your internal organization can do to improve internal processes, clarify roles or responsibilities, or otherwise make it easier for your provider to succeed.

“Often performance issues are just as much the fault of buyers as it is of the supplier,” says Lee Ayling, managing director of U.K. information technology for outsourcing consultancy EquaTerra. “Focusing only on one of the two parties often leads to tactical fixes that aren’t sustainable.”

You don’t, however, always have to go along to get along. Just because you say no to a service provider doesn’t mean you’re not collaborating, says Dave Brown, managing director of Equaterra’s information technology advisory.

Resolution #3: I will dream big. While it’s important to keep expectations in check, take time to think about the big picture. “After year one, most deals’ lofty aspirations devolve into the everyday reality of putting out fires and dealing with short term decisions,” says Strichman of Sanda Partners. “Strategic issues, such as innovation and strategic planning, get short shrift.” Schedule an executive meeting early in the year to draw attention to larger goals. Exclude everyday account personnel for now, advises Strichman: “This ensures that the hot problem du jour does not dominate the conversation.” Ask vendor executives to share strategic changes that have made a big impact with other customers.

Another option is to create an innovation roadmap, says Phil Fersht, founder of outsourcing analyst firm HfS Research, and ask your provider for input and resources to support it.

Don’t just go with the flow. “Push the contractual envelope with your vendors,” says Scott Staples, president and CEO of knowledge services for outsourcer MindTree. “Whether it is SaaS, outcome-based pricing, or some other model, new models should be explored everywhere in your organization.”

Resolution #4: I will keep it simple. “In our view, the top-of-the-list 2011 resolution for client organizations is standardization,” says Mathers of Compass. Consider your typical global enterprise: each business unit, geographic region, each function often does things its own way. And service providers accommodate such specialized requirements. After all, the customer is always right.

“This results in operational constraints that drive high costs and inefficiency,” says Mathers. Resolve to implement standard definitions for IT service delivery across the enterprise and reward their use. They should address 90 percent or more of your requirements, Mathers promises.

Resolution #5: I will say what I mean. If you’re not partnering to implement, paradigm shift, you’re thinking outside the box to implement mission critical processes. Put down the buzzword bingo card. There’s nothing like exactitude and candor in getting what you want from a vendor. In keeping with keeping it simple, start by eliminating just a couple of imprecise and overused terms for now.

“Stop using the word ‘innovation’ and use the word that is really meant,” suggests Joseph King, CMO for outsourcer Mindtree, “whether it’s cost savings, productivity improvement, outcome-based pricing, et cetera.”

And consider eliminating the word “cloud” for your vocabulary, says Lee Ann Moore, EquaTerra’s CMO, unless you’re talking about the weather. Instead of resorting to the c-word, says Bob Cecil, executive director of EquaTerra’s business and financial advisory. “Describe the offering for what it really is-SaaS, platform SaaS, business process as a Service, or private network.”

Resolution #6: I won’t believe the hype. Approach new cloud-based services the way you would any other IT service option. Resist the urge to jump if you don’t know what you’re getting into, advises Edward J. Hansen, New-York based partner for Baker & McKenzie. “It is an interesting new service not a silver bullet,” says independent sourcing consultant Mark Ruckman. Repeat this for every hot new emerging technology, process, or service you’re vendor is hawking next year.

Resolution #7: I will create rules and live by them. Make it a point not only to conduct regular governance reviews of your outsourcing deals, but actually attend the meetings, advises Vashistha of Neo Advisory. If you’re paying a third party to do this work for you, consider letting them go. You’ll save money and be more involved. “Stop blowing large chunks of your budget on expensive consultants to do work your own team can do,” says Fersht of HfS Research.

Resolution #8: I will pay attention to my bills. When’s the last time you read-and completely understood-your outsourcing invoice? “By year three, invoices degenerate into a fifteen-page laundry list of indecipherable statements of work, metrics and charges which only one person on your team really understands,” says Sanda Partners’ Strichman. It shouldn’t be that way. “Force your vendor to consolidate it, rework it, and provide something that makes sense [given] your current situation,” Strichman says. You’ll be surprised how many charges were misunderstood, out of date, or inaccurate and the exercise could beget a long overdue conversation about brewing problems.

Resolution #9: I will measure what matters. Make 2011 the year that you define metrics that are meaningful to the business, says Ruckman, and start tracking and reporting on them regularly. If your WAN is only up 98 percent of the time, and you’re still clinging to that 99.99 percent service uptime metric, it’s time to rethink your benchmarks. “Stop including imaginary service levels your consultant dreamt up,” says Fersht.

Resolution #10: I will seek out the best partner for me. Simply going with a three-letter brand name outsourcer or advisor isn’t always the best move. In fact, it can be a costly mistake. “There is lots of competition in the outsourcing market today,” says EquaTerra’s Ayling. “You will always find a supplier who has the right capabilities for you, and, where what you spend with them will make you important to them.” Take an unsparing look at your vendors and advisors, says Baker & McKenzie’s Hansen. If they don’t share your core values, show them the door.

Resolution #11: I will have fun. The economy remains grim. IT and outsourcing are hard. And you haven’t seen your budget inch up in three years. “But technology has never been more exciting with mobile apps, social media, and so forth,” says Staples of Mindtree. “Use the new technology to bring fun back into your organization and energize your business for growth.”

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The company was founded in 2005 as a Marlin Group subsidiary, initially focused on accounting services and from the beginning became an outsourcer of financial and accounting functions for small and medium-sized businesses. Sustainable development towards of the higher level of key competences, quality and reliability of service, as well as the step-by-step increasing of specialization has also led to need of altering in the middle of 2009 of original company name Marlin Consulting. As a result, the name of outsourcer was changed to Acotax, rights to use of that were purchased from Belgian company Acotax BVBA in 2008. Today the name Acotax is a registered trademark (service mark) of service provider.

“Five years on the Russian market of financial and accounting outsourcing for highly specialized service provider in the field of business process outsourcing is really important event, especially given that the majority of accounting firms cease its work during the first three years since its inception,” said Sergey Bulavsky, Acotax business development director. -During these five years, primarily thanks to our customers, we not only developed an excellent practice of outsourced accounting processes and daily operating activities, reached a high level of competence in the field of business process outsourcing and overall maturity, but also we made a great basis for further development of the our company.

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MANILA, Philippines—Labor Secretary Rosalinda Baldoz on Wednesday said that “outsourcing is already with us,” defending her decision to allow Philippine Airlines (PAL) to spin off three noncore services that will result in the layoff of 2,600 workers.

Citing a global trend, Baldoz pointed out at a public hearing called by the House committee on labor and employment that outsourcing already an accepted business practice even in the United States.

Baldoz, however, said that her Oct. 29 decision giving PAL the go-signal to proceed with its plan to spin off in-flight catering, airport services and call center reservations had no prior clearance from President Benigno Aquino III.

PAL’s plan to outsource these services is being protested by the PAL Employees Association (PALEA), which has filed a notice of strike.

Baldoz appeared at the House hearing upon the invitation of Northern Samar Rep. Emil Ong, chair of the committee tasked with checking whether PAL is lawfully allowed to engage in contractualization and outsourcing because of losses it incurred in 2008 and 2009.

Ong also invited representatives of both labor and management groups—Partido ng Manggagawa, Bukluran ng Manggagawang Pilipino, Philippine Trade Alliance and Federation of Philippine Industries, among others.

At the hearing, Baldoz was grilled by Ong and Representatives Emmeline Aglipay of the Democratic Independent Workers Association party-list group, Philip Pichay of Surigao del Sur, Ben Evardone of Eastern Samar, JV Ejercito of San Juan City and Vincent Crisologo of Quezon City.

BPO industry

“We’re talking here about outsourcing. May I ask the labor secretary if it is the policy of the administration now to promote outsourcing?” Evardone asked.

Baldoz said that business process outsourcing (BPO) was an example of an outsourced activity from the United States.

She noted that trade unions in the United States were also opposed to outsourcing. “Nonetheless, employers who look at outsourcing as one way of reducing cost to make them competitive, outsource (jobs) to countries like us,” she said.

As a result, jobs in the United States have been transferred to countries like the Philippines, Baldoz said. The BPO industry, including call centers, in the Philippines has generated tens of thousands of jobs.

Baldoz said that under the Labor Code, contracting out jobs was allowed as long as it was done by an independent contractor.

She noted that there was a labor department order providing guidelines on how to do it.

Asked if, given a chance, she would recommend her policy of promoting outsourcing in the country to Mr. Aquino, Baldoz said: “For as long as it is done in accordance with the law and unless the law is changed—it is still the (same) Constitution and the Labor Code—then that outsourcing should be recognized in the country.”

Asked pointblank if she would recommend this new policy to the President, Baldoz retorted: “Well, if he will ask me, that will be the same answer that I will give him.”

Told that she was appointed by Mr. Aquino to “protect the interest of labor,” Baldoz said: “In this case, we talk of outsourcing always in relation to the different nature of employment—regular, contractual.”

Justifiable causes

Baldoz said even regular employees could be retrenched for justifiable causes. “(T)here could be closure, and for as long as the due process requirement of the Labor Code is satisfied and benefits, the workers, again, based on law, are provided, then that is also allowed,” she said.

During the three-hour hearing, Baldoz and the PAL management defended the ruling. PALEA said 70 percent of its members would lose their jobs because of the Baldoz ruling.

Bataan Rep. Herminia Roman reminded Baldoz that the justification for the contractualization and outsourcing at PAL should be “shown by clear and convincing evidence” and that “these losses must also be substantial in nature.”

PAL said it was spinning off the three noncore services to survive the competition and stay afloat. It said it lost P13 billion in the past two years.

Interpretations

Explaining her Oct. 29 decision, Baldoz said she was merely affirming the previous order of then acting Labor Secretary Romeo Lagman denying the motion for reconsideration of the ground crew union at the national flag carrier.

She based her decision on the provisions of the existing collective bargaining agreement (CBA) between PALEA and PAL “on the exercise of management prerogative and on certain limitations that have been placed by agreement of the parties.”

She was referring to Article 24 of the CBA. “The entire decision has been focused on that,” she said.

PALEA president Gerry Rivera, who was present at the hearing, disagreed, pointing out that the CBA only contemplated “temporary” contracting out jobs in case of company restructuring or spin-off and joint venture.

Rivera pointed to Section 3 of Article 24 which, he said, was explicit in saying that contracting out regular positions should be temporary.

Still, Baldoz insisted that the whole Article 24 “to my interpretation is more of a permanent measure being done by the company.”

She said the only condition required of PAL was to ensure that the mass layoff of PAL employees “has to be done with lawful, just, reasonable and humane manner.”

Source: Philippine Daily Inquirer

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Slated to grow fast in the coming years, the Indian BPO industry is experiencing rapid changes, in terms of more value-added services and spreading to semi-urban areas to tap fresh talent pools and better cost arbitrage, writes Pradeesh Chandran.

Business Process Outsourcing (BPO) which was earlier considered, just a ‘lifting and shifting’ of processes which was not core to an enterprise has undergone striking changes over the years. Today, businesses have realised that outsourcing is also critical, requiring specialisation in various domains. From mere call centers (voice BPO) or support centers, BPOs have evolved into a viable business model that could reflect in any organisation’s book.

Initial wave of outsourcing was to offshore voice-based support services into a cheaper destination, but today, apart from labour cost arbitrage, Indian firms offer a highly skilled talent pool, domain expertise, ability to innovate etc for their clients and this has made India a preferred destination for outsourcing. Growing at a strong pace over the past three years, BPO is the fastest growing segment of the overall offshore markets, and is currently estimated at $ 26-29 billion. The sector has grown to reach nearly $11 billion in export revenues and also employs more than 700,000 people.

According to findings from a study conducted by Nasscom-Everest, India enjoys a share of more than 35 per cent of the overall worldwide BPO market. The study also said that the total export of BPO services will grow exponentially in the next decade. The fast growing domestic BPO market will alaso add to this opportunity for the industry.

Nasscom also says that the industry is set to see a transformation and the latest is the emergence of the ‘BPO 3.0’. Business transformation is the new mantra of the industry. Organisations are moving away from being mere back office, transaction-based support outfits to being business partners to their clients and even clients want BPOs to share their risk. ‘Outcome-based engagement’ rather than just pricing or using the risk and reward method is the newly emerging trend.

Industry veterans feel that the transformation is happening not only in business but also in the minds of youngsters joining the industry. The sector once considered as a stop-gap arrangement or stepping stone into a corporate sector is no more just a fun place. “The employees who joined the BPO industry were traditionally of the view that a job in a BPO entails more fun than serious work. However, given that the BPO sector is looked upon as the next largest employment generating industry, now employees view it as a steady, long term career path, especially in the knowledge-based process outsourcing sectors such as Medical Transcription,” opines CBay Systems Vice President for Human Resources Sanjay Shanmugaum.

Home market

Another boom is in the domestic BPO space. The buoyant India consumption story and the subsequent need for a robust customer service delivery mechanism have triggered the growth of the domestic BPO market in India. The major growth driver for the sector is the opening up of the domestic market. Outsourcing which was considered primarily for the western MNCs slowly witnessed a shift in the recent past. Despite being a small fraction of the overall outsource business, the domestic BPOs are growing rapidly. The domestic BPO has really opened up new pastures in the Tier 2 and Tier 3 cities in India.

As per a data from a study conducted by Ernst and Young (E&Y), the domestic Business Process Outsourcing (BPO) market, with a growth rate of 50 per cent over five years, grew faster than the exports market to reach nearly $1.6 billion revenues in the financial year 2008. Though it is smaller when compared to the $11-billion BPO exports market, it is expected to reach $6 billion by 2012.

“The domestic market is slowly booming and it helps many Indian companies especially the telecom and banking companies to serve their customers in a better way. Domestic customers always look for support within their close reach and also in their on language,” says Sparsh BPO Services Ltd Chief Operating Officer Gayatri Balaji.

Apart from the quality services to customers another advantage offered by domestic BPOs is that it provides employment for the untapped talent pool in the smaller cities and towns. It gives many individuals an opportunity to work from their hometown than going out for looking job opportunities. Further to this, for the BPO players, entering into Tier 2 cities it is lower labour cost and also operations cost.

The BPO sector is growing not only in terms of revenue but also its reach. The business which saw shift from the Tier 1 to Tier 2 cities are still penetrating into the interiors of the country through rural BPOs. Started as a corporate social responsibility initiative by many companies, rural BPO now appears to be a viable option to find the talent in the smaller towns in India and still keeping costs down. For example, major banking and IT firms like HDFC Bank, Infosys, Axis Bank, Kotak Mahindra have started rural BPOs through partnerships and subsidiaries. Though the data is not available about the number of rural BPOs in India, various state governments including Karnataka and Tamil Nadu have come out with new rural BPO policies and incentives. Through the subsidies and incentives the government intends to promote BPO in various parts of the state which are reeling under poverty and lack of development. Most of these centres provide services like data entry, email responses, document checks, data and bill processing.

“For the Indian domestic market, the shift is towards rural BPOs. The advantage to the industry is the lower cost of operations. For people at these locations, it generates good job opportunities. So, it’s a win-win for everyone. It will also help in improving the life style in the rural areas and also help in the penetration of technology into interiors of India.”says PurpleLeap CEO Amit Bansal.

Problems galore

Even though the BPO sector is witnessing an exponential growth it is not devoid of challenges. A major challenge faced by the companies is availability of quality talent. Attrition is another major worry for the sector. To bridge the huge gap between demand and availability of talent, industry and academia have collaborated for grooming talent. For instance, in 2008, Accenture and Indira Gandhi National Open University (IGNOU) had started a diploma course in Business Process Outsourcing. 

With the industry maturing into high-end, complex offerings and focusing more on industry-specific offerings, the need for highly qualified professionals has increased dramatically. The growth in highly qualified business like Legal Process Outsourcing (LPO), Medical transcription and Knowledge Process Outsourcing (KPO) has created new avenues for professionals like advocates, doctors, paramedical professionals, management executives and so on. According Cognizant Head of Global Delivery (BPO and KPO) Vipul Khanna: “The drivers for professionals like lawyers, doctors among others taking to the industry are the global exposure provided by working for global companies and the opportunity to work with clients who are global leaders in their respective industry segments. Besides, being a part of a high-growth industry also comes with opportunities to grow faster.”

Road ahead

Traditionally BFSI (banking, financial services and insurance) was the major contributor to the sector with almost 41 per cent to the industry’s revenues. Going forward, the outsourcing industry’s focus is shifting towards delivering innovation and business outcomes, over and above greater efficiency and effectiveness. Headhunters feel that as the business gets more value based the demand for skilled talents based on domain knowledge will climb up.

Kelly Services India Managing Director Kamal Karanth says, “Earlier BPOs were looking for accent, but good vocabulary in vernacular languages helps people find job in domestic BPOs and people with specific skills and proficiency will gain excellence in this sector.”
With BPOs moving up the value chain to provide high-end services, new sectors are also emerging. The emergence of health care, engineering services, automobile and government are seen as the major growth drivers for the segment. However, companies also feel that their clients will explore newer business models for optimisation of cost and are preparing themselves to face new challenges and demands.

Source:  The Deccan Herald

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