Indian BPO Industry: The Inside Story

chillibreeze writer — Nayanathara

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India on the fast track

At the turn of the millennium, India has numerous reasons to smile about. The economy is no longer passive and redundant; on the contrary it is one that is being steered by the winds of social and economic changes. During the past few years, the country has seen phenomenal developments in its political, social and economic infrastructure, accelerated by the strong forces of globalization and Information Technology. A country with a resurgent, progressive economy; India can be rightly called the foster-child of globalization.

The booming Information Technology (IT) segment comprising ITES (IT-enabled services) / BPO (Business Process Outsourcing) are the core sectors that have driven the country into the epicenter of change. The liberalization of the Indian Telecom sector in 1994 gave an unexpected boost to the ITES/BPO industry. In no time, India has turned into a hot destination for global offshore outsourcing companies. The expansion in this sector can be attributed to the leading IT giants, captive players and third party service providers, who dominate the Indian ITES/BPO market. While the countries around the world are vying for a fair share of the cake, India has grabbed the pie as the preferred destination for offshore outsourcing. Indeed, India is shining!

BPO Industry: India clicks!

India became familiar with ‘Business Process Outsourcing’ only in the early and mid 1990’s, but now the entire country seems to be quivering with the ‘BPO fever'. The foreign direct investment (FDI) in the country owes a lot to this sector, which is progressing at a break-neck speed. The different kinds of services offered by BPO's include Customer Support, Technical Support, Telemarketing, Insurance Processing, Data Processing, Internet / Online / Web Research and so on. The cheap labour costs and the pool of skilled, English-speaking Indians have always been the two foremost factors contributing to the BPO boom in the country. As the National Association of Software Services and Companies (NASSCOM) points out, the other equally motivating factors include strong quality orientation among players, ability to offer round-the-clock services based on the country's unique geographic location, positive policy environment which encourages investments and a friendly tax structure, which places the ITES/BPO industry on almost equal footing with IT services companies.

The studies conducted by NASSCOM and the global consultants McKinsey & Co. brought to light certain amazing facts on the Indian BPO segment. According to a NASSCOM study, the country’s flourishing ITES - BPO sector is estimated to have achieved a 54 per cent growth in revenue in 2003-04. A key employment - generating sector in the country; the BPO segment created job opportunities for around 74,400 additional personnel in India in the same year. By the year 2008, the ITES- BPO sector is expected to employ over 1.1 million Indians, with its sales expected to touch an amazing 21$ to 24 $ dollars.

Where call centres are a part of life

For today’s youngsters, the call centers are a welcome addiction. The industry has woven such magic around the entire nation that these days a city without a call centre would be hard to find. Call centers contribute a fair share to the revenue of the Indian BPO industry. About 70% of the BPO industry’s revenue comes from call-centers, 20% from high-volume, low-value data work and the remaining 10% from higher-value information work.

The average Indian’s attitude towards life has undergone a drastic change in the last few years. The motto of today’s young Indian generation is “Live life king size”. The changing lifestyles, demand for luxury and emergence of high-income spending groups coupled with a thoroughly cosmopolitan outlook of life are changing the modern Indian. Call centers are a major turn on for young graduates. In addition to providing employment, the call centres offer excellent benefits, good working environment and attractive remuneration packages. So who wouldn’t choose to be a call centre employee?

When things go wrong…

It is true that the Indian BPO sector is witnessing an unprecedented boom but the flip side of the industry cannot be ignored. For sometime, the Indian BPO industry has been battling certain complex problems such as labour attrition, poor infrastructure and lack of data protection laws.

The high attrition rate in the industry is primarily due to the restricted career options or growth opportunities for the youngsters. Fear of stagnation is a major factor that forces the employees to quit the industry. While some leave their career mid-way in pursuit of higher education, others are drawn in by the higher pay packages offered elsewhere. The new entrants into the BPO sector, who are consistently on the look out for trained youngsters, offer higher remuneration. With the employees moving to other jobs in less than a year, the industry has to confront the gnawing problem of attrition.
Another key problem is the stressful work schedule, particularly night shifts, which may create both physical and mental disorders in the long run. Other reasons for the attrition problem include misguidance by the company, non-conducive policies and procedures, mental strain brought about by reclusive lifestyle and difficult relationships with peers or managers. According to analysts, labour attrition rates in the outsourcing industry vary between 20 and 40 per cent in certain companies while at top firms it’s around an average of 15 per cent. If the current attrition rate continues, the outsourcing industry is likely to face a shortage of 262,000 professionals by 2012.

Where lays the solution?

The multi-billion dollar BPO industry is racking its brains to solve the crisis, a complicated one that could prove to be disastrous in the long run. Brand building has come up as a good panacea for the attrition problem. The Indian BPO industry is focusing on the process of brand building with a view to create respect and awareness of the job among the people. The problem of talent attrition could be kept at bay by offering perquisites like the right opportunities for education such as degree courses for youngsters. While some BPO companies retain their employees by providing free food and accommodation, there are yet others who offer interest free home and car loans while some others even offer activities such as bungee jumping and salsa classes. Besides creating a challenging, competitive work environment, the stress is now on hiring the right employees. Today, most of the BPOs are on the look out for freshers and agents with more than one-and-a-half to two years of work experience, rather than graduates with no prior experience in the industry.

Lack of top-class infrastructure is also another key problem to be dealt with. As part of country’s infrastructure development, measures need to be taken to improve the quality of roads, power, transport and communication and connectivity. Further, the industry and the Government need to join hands so as to create an efficient legal machinery to enforce stringent laws. This will ensure a smooth, protected environment for the operation of businesses, particularly in connection with laws/policies governing data/cyber security and intellectual property rights.

The road ahead…

Although countries like Australia, China, Philippines and Ireland have emerged as the close competitors in the ITES/BPO sector, India is still the favored market for BPO companies. As for 2005, NASSCOM predicts that there would be a considerable expansion in the captive operations of global organizations and MNCs in the BPO sector. Another key development would be the rapid growth in offshore outsourcing, especially in the sectors of Automatic data management, Human Resources (HR), Finance and Accounting and Healthcare.

The rating agency ICRA reports that by 2006, India is expected to capture 56 per cent share of offshore business process outsourcing business, with the demand for BPO services increasing at an annual growth rate of 50 per cent during 2004-06. The size of the Indian BPO market is likely to be around $9-12 billion by 2006 and it will employ around 400,000 people.

While figures are a source of comfort for the BPO segment, there is much to be done to smooth the edges. We might have a multitude of issues to take care of, but at the end of it all India will be shining even brighter.

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—About our writer:
Nayanathara says,
" I’m passionate about three things – poetry, painting, and music. Besides my mom (she has always been my best friend), I love to spend time with some of my close friends. My motto is while you are in this world, do something everyday which makes you feel creative and alive"