Business Process Outsourcing

Business Process Outsourcing

Business Process Outsourcing (BPO) is the leveraging of technology or specialist process vendors to provide and manage an organisation’s critical and/or non-critical enterprise processes and applications. The most common examples of BPO are call centres, human resources, accounting and payroll outsourcing. Business process outsourcing may involve the use of off-shore resources.

Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or ’served up’ through the use of software, usually via web browser to the customer

Business process outsourcing in India

The business process outsourcing industry in India has grown by leaps and bounds and as its size increases so does its competitive advantage. Compared with 1996 when this Industry had started inroads into the United States with Outbound Telemarketing campaigns, today the vehicle for these calls-the internet has become cheaper and more reliable for the average Indian business.

The business has boomed to the extent that many people are now running BPO’s out of their cyber cafes and houses in New Delhi.

The sector witnessed considerable activity during 2004-05, including a ramping up of operations by major Indian and MNC players and stepped up hiring. The domestic BPO market, catalyzed by demand from the telecom and BFSI segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, including captive units (of both MNCs and Indian companies) and third-party services providers.

The Indian BPO industry remains on a growth path, emerging as one of the key investment markets in the country.

An Indian call centerGlobal BPO Market by Industry

o Information Technology 43%
o Financial Services 17%
o Communication (Telecom) 16%
o Consumer Goods/ Services 15%
o Manufacturing 9%

Global BPO Market by Geography

o United States 59%
o Europe 27%
o Asia-Pacific (incl. Japan) 9%
o Rest of the World 5%

Size of Global Outsourcing Market

o 2000 USD$ 119 Billion
o 2005 USD$ 234 Billion
o 2008 (est.) USD$ 310 Billion

Size and Growth of BPO in India
Year Size (US$ Bn) Growth Rate

o 2003 2.8 59%
o 2004 3.9 45.3%
o 2005 5.7 44.4%

Currently the Indian BPO Industry employs in excess of 245,100 people and another 94,500 jobs are expected to be added during the current financial year (2005-2006)

Call Center Employee cost

o USA US$ 19,000 annually
o Australia US$ 17,000 annually
o Philippines US$ 9,050 annually
o India US$ 7,500 annually

Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12-24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.

Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

Cities that are leading BPO-ITeS hubs in India today:

o Bangalore
o Chennai
o Hyderabad
o Mumbai
o NCR (Gurgaon, Noida, Faridabad, Greater Noida)
o New Delhi
o Pune

These are Tier I cities that are leading IT cities in India

With rising infrastructure costs in these cities, many BPO’s are shifting operationsto Tier II cities like: Ahmedabad, Amritsar, Bhubaneshwar, Chandigarh, Guwahati, Indore, Jaipur, Kanpur, Kochi, Kolkata, Mangalore, Mohali, Mysore, Nagpur and Srinagar.

Tier II cities offer lower business process overheads compared to Tier I cities, but may have a less reliable infrastructure system which may hamper dedicated operations. The Government of India in partnership with private infrastructure giants is committed to bringing all around development and providing robust infrastructure all over the nation.