| 1. INTRODUCTION | | | | software/and production Engineer in various states. |
| Business process outsourcing is one of the most | | | | Following are the data: |
| rapidly growing industries in the world today. Though it | | | | State, Sr. Developer, % Analyses |
| is not an industry, it includes various sub activities of | | | | Karnataka, 582099, 100 |
| many main industries such as manufacturing, trading, | | | | Andhra Pradesh, 532354, 91.45 |
| marketing, banking, insurance and financial services. | | | | Delhi, 523556, 83.64 |
| Since itworks for all these industries, it has been | | | | UP, 521753, 76.49 |
| treated as an industry. This is due to the enormous | | | | Maharashtra, 506489, 69.95 |
| growth and development of outsourcing of work in the | | | | Haryana, 505203, 63.98 |
| past few years over the globe in many countries. | | | | Tamilnadu, 466802, 58.51 |
| BPO in simple language can be defined as the act to | | | | MP, 464312, 53.51 |
| give a specific function or work to a third party with | | | | West Bengal, 447266, 48.94 |
| the condition to maintain required standard and quality | | | | Orrisa, 368740, 44.75 |
| in order to focus on your core activities. So BPO | | | | Kerala, 366368, 40.93 |
| simply helps you in focusing on your core area and | | | | Gujrat, 350955, 37.43 |
| other non core activities can be outsourced to an | | | | Source: - |
| outside agency for which it becomes a core activity | | | | In the above chart the highest salary is from |
| and have specializations. | | | | Karnataka, and lowest is from the Gujrat and the |
| In past, there were no such specific outside agencies | | | | difference is 62% which is very significant, Further |
| that were existing but when people knew about this | | | | there are many states like Bihar, Goa where these |
| advantage they started concentrating on the non core | | | | industries can be further developed. |
| activities of large corporate which has a huge volume | | | | Further the above salary are from the main cities in |
| of work and started providing these companies with | | | | these states, if the BPO industry can further go to |
| the specialization of work for their non core function, | | | | other II & III tier cities and towns the structure can be |
| which is very large number and gives cost advantage | | | | reduced further. The companies can even provide |
| to all the parties involved in the transaction and | | | | training to people and can employ them. |
| generates great employment opportunities. | | | | 4.2 INFRASTRUCTURE ADVANTAGE |
| 2. HISTORY | | | | The second biggest factor in the BPO is the Cost |
| BPO as a concept and industry has really emerged | | | | advantage in the infrastructure cost. India has definitely |
| and known to people in the past few years but it is not | | | | the low infrastructure cost as compare to US and UK. |
| a new activity for all of us. People in their day to day | | | | But within India itself there is a wide gap in the lease |
| life and even in the small and big business have been | | | | rentals and other infrastructure cost. No such analyses |
| using the outsourcing model since years. Few e.g. could | | | | comparing the lease rental in the different cities or |
| be the keeping a maid at your home to carry out the | | | | states are available. But lease rentals discrimination |
| regular house cleaning work so that you can focus on | | | | prevails within the cities itself e.g. within Mumbai there |
| activities which are more important to you. For | | | | are many lease rental available within the range of INR |
| business the manufacturing units many times send | | | | 25/- Sq. Ft. to 225/-Sq Ft. As outsourcing location does |
| material outside to job worker for some process. | | | | not have anything to do with the locations. In other |
| I rather something think that an entrepreneur is the | | | | cities and states the lease rentals are very low as |
| oldest example of outsourcing as he is the person | | | | compare to the major cities due to the low property |
| who has an idea or some business model. He starts | | | | rates. |
| his business and at the initial stage he himself is | | | | The other infrastructure cost is also very low in the |
| involved in handling many functions such as production, | | | | other cities of India due to low standard of living among |
| marketing, accounting, finances etc. But as he grows | | | | the people. This can help the Domestic Outsourcing |
| he hires people to handle various functions and he | | | | market grow very well. The location to carry out the |
| focuses on the core activities of business | | | | process is not much important except that the entire |
| development. If the organization grows to a really good | | | | technical and relevant infrastructure should be available |
| level he may further outsource many unproductive and | | | | in the city. |
| non core activities to outside agencies. But in all this he | | | | The above facts can be justified with the recent |
| never compromises on the quality of work and the | | | | development happening in many of the tier II & III Tier |
| deadlines. | | | | cities such as Indore, Ranchi, Baroda, Bhopal, Pune, |
| So the outsourcing has been existing for years for the | | | | Lucknow and many other cities where the telecom |
| people who had the thrust for the competitive | | | | companies have started their call center and are |
| advantage for cost and quality. Now that people have | | | | working efficiently as the requirement of company is |
| really understood it as a strong business model they | | | | to answer local customer care problems in the local |
| are really creating more opportunities for them. | | | | language. |
| 3. INTERNATIONAL BPO | | | | 4.3 Relaxed Quality Standards |
| The very fact that how BPO became known to | | | | As compared to the international quality standards the |
| people of India so fast, was due to the international | | | | domestic BPO are not much quality conscious as |
| outsourcing model i.e. outsourcing between the two | | | | these companies which outsource the work are local |
| nations. As we know that there is a huge gap in the | | | | companies and their major concern is to get the work |
| cost of manpower and infrastructure in the developed | | | | done within their standards. The users of their services |
| and developing nations. Both of these costs are further | | | | are also people from India which does not require very |
| affected by high population in the developing or | | | | high standards. For e.g. the call center in Ranchi can be |
| undeveloped nations which makes the manpower | | | | used only for the people opting to use Hindi as a |
| cheaper in these countries. This has resulted in the | | | | language or a Call center in Aurangabad can be used |
| historical growth in the international BPO market. | | | | to answer the problems in Marathi i.e a local language |
| The above opportunities have been observed by the | | | | of the state. Hence Quality is not a major |
| multinational companies and the international business | | | | consideration as compared to the international BPOs. |
| community and they have really taken the advantage | | | | As the outsourced work is purely process oriented. |
| of this by outsourcing the work to India and other | | | | These companies can also provide the required |
| underdeveloped and developing nations. | | | | infrastructure or checks on the quality work. |
| The 80 % of the business for export BPO is from the | | | | Further availability of manpower for such work is easily |
| two countries i.e. US and UK and this has created a | | | | available as it doesn't require much qualified people as |
| dependency for these nations. This increasing trend of | | | | compared to standards of international BPO. |
| international outsourcing gave a setback to the | | | | 4.4 Currency Fluctuation Risk |
| developed national such as unemployment and other | | | | The international BPO market is surviving even after |
| social security issues and due to this the administrator | | | | significant variation in the rates of international |
| of these countries has started demoralizing the | | | | currencies. As we have seen the rate of international |
| outsourcing model. Further this has been hit by the | | | | currency are very volatile, In the previous 12 months |
| recession in the international market. The main reason I | | | | the USD rate has been in the range of 46 to 51 |
| could understand is that that these nations have | | | | against rupee affecting the margins of International |
| outsourced the work but they really could not focus on | | | | BPO companies. But in the domestic BPO the risk of |
| their core activities and specialization. This has created | | | | currency fluctuating is nil as the transaction are within |
| uncertainty in the highly growing international BPO | | | | the country and this minimizes the risk of the business |
| market. | | | | for both the company's. |
| The above factors have made the International BPO | | | | 4.5 No International Competition |
| more challenging and resulting in Indian BPO Industry to | | | | The domestic outsourcing can have its long term path |
| rethink their strategy and a need to broaden its horizon | | | | within India as there would be no competition within the |
| and look for alternative path of growth which is less | | | | countries as compared to the international BPO where |
| volatile and affected by the global country and industry | | | | in there are other countries such as Phillipines, china, |
| specific dominance. There are many advantages and | | | | Russia, Canada etc. Even though India has shared |
| factors which provides us the facts that the domestic | | | | more than 50 % of the International Business in BPO. |
| outsourcing will be very successful in India. We will | | | | The Domestic outsourcing would in all its variation |
| analyze each factor individually. First have a look at the | | | | would have the benefit to the consumer and the |
| potential of the Indian Domestic BPO market. | | | | people as the competition would be within the states |
| 4. SCOPE IN DOMESTIC BPO | | | | of India and each state government may be keen in |
| The Indian BPO Industry has a huge potential which | | | | providing the better infrastructure to the corporate |
| may be very difficult to assess. People have realized | | | | interested in having their BPO operation in their state. |
| the advantage and benefits of the Domestic BPO and | | | | 4.6 High Reliability & Security |
| many of the big companies like Infosys, satyam, | | | | The reliability & Security factor in case of domestic |
| Infovision, Intelenet have started focusing on the | | | | BPO are very high as they will never be affected by |
| domestic BPO realizing the future of the Industry. | | | | the government policies within India. As currently we |
| Indian domestic BPO industry as per the report given | | | | have observed that between the nations there is high |
| by E & Y is at a market size of $1.62 Bn in the year | | | | instability due to political and social factors for |
| 2008 with a growth rate of 50 % in the past five | | | | outsourcing of work to othercountries like India, China, |
| years which is higher that the export BPO market. It is | | | | Russia etc. |
| expected to reach at the $ 6 Bn by the year 2012with | | | | 4.7 Timing differences |
| a maximum addressable opportunity of $16-19 Bn. | | | | For domestic BPO, the people would not hesitate to |
| Further similar data have been given by IDC | | | | get into the work and even the HR can provide better |
| forecasting the market size to reach $6.82 Bn by the | | | | facilities as the people will not have to work in night |
| year 2013 and will continue to grow at a rate 33.3% to | | | | shift. International BPO have to incur additional cost for |
| reach the above target. The growth rate is very | | | | retaining the employees in the night shift, further the |
| impressive. | | | | availability of people willing to work in the night shift is |
| Further the banking, Finance, telecom and Insurance | | | | very limited. People would not agree to work in night |
| sector are expected to grow at 20-30% growth rate | | | | shift as this impact the body's natural circadian |
| over next 3- 5 years and these sectors contribute 80 | | | | rhythms. |
| % to the BPO industry. Hence the exponential growth | | | | 4.8 Potential Growth |
| in these sectors will require them to intensely focus on | | | | Domestic BPO has a great potential for growth of |
| their core activities. Besides the above industry the | | | | Indian economy as the development, education and a |
| other industry such as travel, healthcare, media and | | | | good standard of living will reach to the poor and |
| retail are also fascinated by the cost advantage of the | | | | middle level of people in all the small and medium cities. |
| domestic BPO industry. The focus is also shifting from | | | | The people who do not posses complete qualification |
| voice based outsourcing to other outsourcing work | | | | can also get the job as they have to do only a specific |
| such as HR and F&A. | | | | process for which they do not require high education. |
| Although the profit margin in the domestic BPO are | | | | They can do the work based on the basic training |
| lower than the international still the net margins are | | | | provided by the companies. This can really provide a |
| expected to increase from 8-9% in 2008 to 11-12 % in | | | | good pace to the growth of Indian economy in all the |
| 2012 and even more if the resources of the interior | | | | sectors. |
| part of India are utilized properly. | | | | 4.9 Dual advantage |
| Thus besides the above facts there are many other | | | | The biggest advantage in the Domestic BPO is that |
| factors which make the Domestic market more | | | | the benefit of cost reduction, which will remain in India |
| attractive and interesting. | | | | as both the companies are in India. The ultimate |
| 4.1 Manpower advantage | | | | advantage of cost reduction would be enjoyed by the |
| India has ample manpower resource and it is good for | | | | Indian consumer as previously it was enjoyed by the |
| the services industries, it has already been proved that | | | | consumers of other countries. |
| manpower is one of the biggest cost advantages in | | | | 4.10 International Policy Advantage |
| the outsourcing model. As we know that within India | | | | The international policies on the outsourcing will not at |
| itself there is discrimination in the salary and wage | | | | all affect the Indian market as the domestic |
| structure which could work as a great advantage for | | | | outsourcing will be within the control of Indian |
| the domestic outsourcing industry. These salary | | | | administration. Further the policies that will be framed |
| structures make it a more attractive business within | | | | by the government would be in favor of industry and |
| domestic outsourcing. | | | | people as it will have direct impact on industry growth |
| The salary structure analyses by shows the following | | | | and employment opportunities of the nation. |
| data for the Average salary structure of the Senior | | | | |