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    Bpos in India: Introduction To Bpo

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    mohanvilva
    This document discusses business process outsourcing (BPO) to India. It notes that BPO allows companies to reduce costs, ensure uniform practices globally, and tap new revenue sources. India is a large BPO market due to its large English-speaking workforce, low costs, political stability, and infrastructure. Companies outsource business processes like finance, HR and procurement to cut costs by 30% on average while maintaining or improving quality. BPO contracts typically last 5-10 years due to high switching costs.

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    Bpos in India: Introduction To Bpo

    Uploaded by

    mohanvilva
    51 views8 pages
    This document discusses business process outsourcing (BPO) to India. It notes that BPO allows companies to reduce costs, ensure uniform practices globally, and tap new revenue sources. India is a large BPO market due to its large English-speaking workforce, low costs, political stability, and infrastructure. Companies outsource business processes like finance, HR and procurement to cut costs by 30% on average while maintaining or improving quality. BPO contracts typically last 5-10 years due to high switching costs.

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    Bpo in India

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    This document discusses business process outsourcing (BPO) to India. It notes that BPO allows companies to reduce costs, ensure uniform practices globally, and tap new revenue sources. India is a large BPO market due to its large English-speaking workforce, low costs, political stability, and infrastructure. Companies outsource business processes like finance, HR and procurement to cut costs by 30% on average while maintaining or improving quality. BPO contracts typically last 5-10 years due to high switching costs.

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    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    51 views8 pages

    Bpos in India: Introduction To Bpo

    Uploaded by

    mohanvilva
    This document discusses business process outsourcing (BPO) to India. It notes that BPO allows companies to reduce costs, ensure uniform practices globally, and tap new revenue sources. India is a large BPO market due to its large English-speaking workforce, low costs, political stability, and infrastructure. Companies outsource business processes like finance, HR and procurement to cut costs by 30% on average while maintaining or improving quality. BPO contracts typically last 5-10 years due to high switching costs.

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    of 8

    BPOs in INDIA

    INTRODUCTION TO BPO::

    Globally, competitive pressure is forcing organizations to look for


    ways to manage growth more cost-effectively and efficiently,
    minimizing infrastructure and employees. As a result, organizations
    worldwide are trying to outsource those areas of business that can be
    effectively and efficiently managed outside the organization. By
    doing so, they gain a competitive advantage in terms of cost and
    productivity. Today, BPO addresses the enterprise's fundamental
    challenge: How does its management take a process important to the
    company's operation and make it more effective while simultaneously
    lowering the cost? BPO enables companies to reduce cost and:

     Start up operations with greater speed


     Ensure uniformity of management practices across the globe
     Tap into alternative sources of revenue
     Have more consistent training practices.

    There are three distinct process areas in an organization’s cost


    structure that can be outsourced, as illustrated in Figure 2. They are:

     Business administration
     Supply chain management,
     and Customer service, sales and marketing.
    Each of these can be further broken down in to sub-processes
    and functions. The costs typically account for six-to-seven percent of
    revenue. Service providers are offering to reduce the cost and improve
    the service levels of key processes such as finance, accounting,
    human resources, and purchasing.

    MARKET SIZE

    BPO is big business. According to the Gartner Group, the


    worldwide BPO market is expected to grow from a 2002 figure of
    $110 billion to $122 billion in 2003 – a growth of 10.5 percent. India
    has emerged as a key player in the BPO market. According to
    NASSCOM – the revenue from BPO services and related services
    like call centers grew by 59 percent to $2.3 billion in the financial
    year 2002-2003. NASSCOM estimates that the revenue from BPO
    and related services will grow 54 percent in the year up to March 31,
    2004, to touch $3.6 billion. McKinsey & Co. predicts the global
    market for IT-enabled services to be over $140 billion by 2008.
    NATURE OF OUTSOURCING

    Companies seeking to outsource their business processes to


    external parties need to evaluate them thoroughly before they begin
    operations – as most BPO activities tend to have maximum benefit to
    the outsourcing organization when they have a degree of continuity.
    This continuity is derived from long-term partnerships. The service
    provider goes through a learning curve before efficiencies and
    effectiveness in managing and implementing the set of processes set
    in. Unlike other outsourced activities such as application development
    or system integration that tend to be project based and relatively short
    term, BPO is a long-term undertaking with contracts lasting several
    years. As Figure 3 below shows, 63 percent of BPO contracts are for
    5-10 years and another 25 percent for three-to-five years. This is
    mainly because of the high cost of switching between vendors. In
    addition, renewal rates are high. According to vendor responses to the
    Gartner survey, nearly 90 percent of contracts are renewed, with
    only a 10 percent rate of non-renewals. Non-renewals, more often
    than not, are due to a change in client strategy or management
    changes.

    THE OUTSOURCING DESTINATION

    INDIA - A BACKGROUND

    For almost two decades, the Indian software industry has been
    successfully providing software and support for a number of Fortune
    500 companies. These solutions have helped companies provide better
    and more proactive support to their own customers. Factors that
    contributed towards making software outsourcing to India and Indian
    companies a success, are today contributing to the successful
    outsourcing of business processes by organizations to partners in
    India. One of the key advantages that India has is that for well over
    half a century it has been a stable, secular democracy. As such there
    have not been major political, economic or social upheavals.
    Successive Governments of India have ensured stable economic
    growth. Today, India has the institutions and infrastructure in place
    that makes it comparable to any developed first world economy.
    Over the last decade, the central government as well as state
    governments have geared themselves up to do business. This has
    resulted in the simplification of many rules and regulations, the
    reduction

    INDIA – THE ECONOMIC SCENARIO

    Over the last decade, the average growth rate of India’s GDP
    has been five percent to seven percent, making it one of the better
    performers in the world economy. Inflation has been relatively low
    and the purchasing power parity in India relatively high (the fourth
    largest in the world). It is a member of the elite space club – a nation
    that has built and launched its own satellites – and devotes
    considerable resources to technical and scientific research. India has
    the twelfth largest telecom network in the world.

    INDIA – THE PERSONNEL ADVANTAGE

    Probably the greatest contributing factor to India’s continued


    success first in information technology (IT), and now in information
    technology enabled services (ITES), is the large pool of trained
    English- speaking people. As a culture, Indians value education and
    qualifications. As a result, there are a large number of graduates and
    postgraduates _ instructed their entire lives in English. Each year,
    approximately 2.1 million graduates and 300,000 postgraduates
    emerge from the Indian educational system. Few graduates go abroad
    to pursue further education or better prospects, for those who stay
    behind, a career in a IT or an ITES affords them a much better
    standard of living than local jobs. A postgraduate, for example
    commonly starts at a salary of around Rs. 7,500 per month, which
    approximates to US $150. A comfortable salary in India is considered
    to be around Rs.10,000 which translates to approximately US $222
    per month. And so, it is no surprise that because the US dollar goes
    further in India that companies worldwide can drastically cut costs
    without compromising quality.

    INDIA – THE COST ADVANTAGE

    A leading international airline company, which carries out


    multiple back office functions from India, has scaled up its operations
    to over 1,500 people and is said to be saving close to US$30m per
    year in staff costs over and above the approved productivity levels.
    AMEX’s center in India provides payable and reconciliation services
    to all its businesses globally. A leading financial services company
    has scaled up to 12,000 employees and provides the gamut of services
    from data entry to helpdesk support. It is the quality of personnel,
    combined with the cost effectiveness of operations that is leading to a
    migration of key processes to India.
    INDIA – THE LOCATION ADVANTAGE

    In a recent McKinsey analysis, India came out as the top


    location of choice for companies wishing to outsource their business
    processes. The study revealed that companies looking to outsource
    their business processes usually consider two main parameters:
    People attractiveness – size of talent pool, salaries, quality, and
    knowledge and comfort in English Location attractiveness –
    infrastructure availability, bandwidth availability, electricity
    availability, political stability, government policies, and time zone
    differences.

    INDIA – BENEFITS OF OUTSOURCING

    The growth in business processes outsourced to partners in India


    has been phenomenal. Scores of companies based in the United States
    and in the European Union have benefited by outsourcing a large part
    of their business processes to partners in India. These include both
    third party vendors and captive units. NASSCOM, the premier
    industry association of Indian IT companies, classifies Indian business
    process outsourcing services under IT enabled services (services
    delivered over telecom networks or Internet); and characterizes it as
    the fastest-growing segment of Indian IT exports over the past two
    years. As the following table shows, Indian IT-enabled services _
    after 64 percent growth in FY01 (year to March) _ are expected to
    grow at a similar rate in FY02. This compares with just 22 percent
    growths in software services and a mere five percent in R&D
    outsourcing services during the year.

    CONCLUSION

    BPO is one of today’s key management tools. Companies


    across the globe have realized the importance of outsourcing their
    non-core functions whether to reduce cost or support expansion.
    India continues to be a preferred destination for outsourcing for the
    reasons captured in this paper. These advantages, coupled with Patni’s
    proven approach and integrated service delivery model, enable
    corporations to derive significant value from its outsourcing initiative.
    This, in turn, frees organizations to focus on their core competencies
    and pursue strategic goals in a dynamic business environment.

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