The Indian BPO Landscape:
An Outsider's Perspective
by Joie Llanillo

As a first-time visitor to India and attendee of the NASSCOM 2007 Strategy Summit on August 6 and 7, 2007, I was overwhelmed by the intense experience of visiting the country and seeing first-hand the many professionals and executives working in the ITES-BPO industry there. NASSCOM—the National Association of Software and Service Companies—is the foremost trade organization of the IT software and services in India with over 1,100 members wherein approximately 250 are global companies from various countries such as USA, UK, Europe and Japan. NASSCOM has been the most resilient advocate of global trade in India, dedicated in promoting its members to uphold world-class management practices, high-quality standards and maintain competitive edge in the market.

According to the research conducted by NASSCOM and the International Data Corporation (IDC):

“The BPO exports from India grew by over 33 percent and crossed USD 8.4 billion in FY2007. Direct employment in the sector grew by 31 percent to reach 415,000 in FY 2006 and has exceeded 553,000 in FY2007.

Over the past decade, the Indian BPO segment has witnessed significant transformation. Starting with basic data entry tasks, the industry graduated to a high proportion of voice based services and a range of back-office processing activities. The last three to four years have seen the scope of services expanding to include increasingly complex processes involving rule-based decision making and even research services requiring individual judgment.

The rapid expansion in scope of BPO has been accompanied by and equally rapid adoption across a range of vertical industries. This wide range of services may be summarized into four broad categories comprising Finance & Accounting (F&A), Customer Interaction Services (CIS) and Human Resource Administration (HRA) and a wide range of other vertical–specific and niche services.

F & A services manage or support aspects of the finance and accounting functions of businesses. This includes activities such as general accounting, transaction management (accounts receivables and payables management), corporate finance (Treasury and risk management and tax management), compliance management and statutory reporting. This segment accounts for approximately 40 to 45 percent of Indian BPO.

Customer Interaction Services (CIS) includes all forms of IT-enable customer contact; inbound or outbound, voice or non-voice based support used to provide customer services, sales and marketing, technical support and help desk services. This segment accounts for approximately 45 to 50 percent of Indian BPO. Worldwide demand for CIS is projected to grow at a CAGR of over 11 percent.

The HR administration services include payroll and benefits administration, travel and expense processing, talent acquisition and talent management services, employee and manager self service delivery services, employee communication design and administration. This segment accounts for about two percent of Indian BPO.

In addition to the core categories of CIS, F&A and HR administration, there are several other vertical-specific and niche business services being delivered from India. This segment is estimated to account for approximately eight to 10 percent of the total value of BPO activity undertaken in India.

This includes various “high-end” knowledge–based processes such as financial services research support and analysis for equity/debt/derivatives markets, econometrics, data analytics and modeling, corporate research, legal services, animation and game development services, medical transcriptions and shared back-office and administrative functions.

BPO is witnessing an increasing emphasis on the cost-plus, additional strategic levers that it can deliver includes innovation of the underlying business process being outsourced, improved competitive positioning, managing customer expectations, optimal resource allocation and technology support and access.”

This is further highlighted with the result of A. T. Kearney’s Global Services Location Index 2007, where India ranked first. India still offers an unbeatable mix of low cost, deep technical and language skills, mature vendors and supportive government policies.

Presently, Business Process Outsourcing (BPO) and IT-enabled Business Services (ITES) are the two emergent sectors in India wherein challenges are sprouting on how the industry can retain its growth. Majority of the resource speakers stressed on four points: lack of education, high attrition level of the work force, government taxation and media’s negative feedback on the sector.

Pramod Bhasin, President & Chief Executive Officer, Genpact and Chairperson of the NASSCOM ITES-BPO Forum, reiterated that the government should cascade to the other cities the progress being enjoyed by Tier I & II cities. That the industry should set the standards by ensuring employment reference checks so as to prevent poaching, continuously train the employees so as to lessen the attrition.

Neeraj Bhargava, Co-founder and Group Chief Executive Officer of WNS Global Services, discussed the importance of hiring the right people to ensure high quality of deliverance in work. He also stressed the role of the Indian government in giving support to the sector by improving the educational system, and provide safe transportation and better infrastructure and low taxes.

Vikham Talwar, Vice Chairman and Chief Executive Officer of EXL Services, affirmed the concerns by stating that the industry should manage outside the box. With proper government support, pending problems on taxation, education and infrastructure may be eradicated.  

Ananda Mukherjee, Managing Director and Chief Executive Officer of Firstsource Solutions Ltd., presented about the attrition of the work force and the need to expand and relocate from other metro areas. He also discussed how wage inflation and the desire of the workforce for a yearly raise is becoming a major cause for concern. He shared his observation that people are looking for yearly raise and promotion and want to be the CEO of the company by age 32. Though funny, this anecdote showed how aggressive and ambitious the Indian people can be.

Being part of the 16-man delegation from the Philippines was a remarkable experience. Listening to the resource speakers deliver their passionate speeches gave me inspiration and an eye opener for me. I asked myself: How do we fare compared to India in terms of BPO ITES sector?  In a nutshell, the Philippines is now becoming the choice as a backup location for companies who are already present in India, be it captive or third-party. In fact, during our visit to India wherein we stayed for 11 days, the John Clements team made 20 client calls, and there were numerous multinational companies that kept on telling us that when they expand, they want to set up in the Philippines.

The fact is India is ahead of us by five years. Although I believe we can use this as an advantage by leveraging on what the Indians have already done and just replicate the processes and improve it. All in all, I still I believe that the Philippines has an advantage because of our close affinity to the United States. We are familiar with US culture; we love watching American movies and sitcoms. We were once a colony of the US. Our educational system, laws, and even our affinity for American culture gives us an edge. We as a country just need to start to synergize and develop concrete action plans on how to position ourselves to be the top of the mind answer for companies who are now going to India to make the Philippines as the next best thing for an outsourcing destination.