Learning from the Elephants of the
Indian BPO Industry II
By Carol Dominguez and Paul Catiang

“If you do follow your bliss you put yourself on a kind of track that has been there all the while, waiting for you, and the life that you ought to be living is the one you are living. When you can see that, you begin to meet people who are in your field of bliss, and they open doors to you. I say, follow your bliss and don’t be afraid, and the doors will open where you didn’t know they were going to be.”

- Joseph Campbell, The Power of Myth

In today’s frenetic pace, where does one find bliss? The answer, at least for Carol Dominguez, President and CEO of John Clements, lies within that frenzied activity, the electric buzz of commerce. The usual concept of bliss—a serene, relaxed flowing from day to day—isn’t readily apparent here, but a closer look just might yield the calm one finds in the eye of a storm.

Once again, Carol seems to have worked herself to the ground. It’s a Saturday afternoon, and she’s in her lanai again, fresh from a six-hour flight from Jakarta, where she had spent the previous week. But before that, she, along with Grace Sorongon, Vice President and Managing Director of John Clements, had also spent two weeks in India to visit clients and to attend the much-awaited and highly prestigious NASSCOM’s 15th India Leadership Forum 2007 in Mumbai. “Ten days in India feels like ten years, sometimes,” she quips, describing the tightly-packed itinerary of her visit.

In February, Carol visited six Indian cities: New Delhi to meet with Everest, Genpact and to host a lunch for outgoing Philippine Ambassador to India Laura del Rosario; Hyderabad to pay calls on HSBC, GE and Satyam Computer Services Ltd.; Chennai for visits with Perot Systems, Sutherland Global Services, and OfficeTiger; Pune to visit Affinity Express; Bangalore to go to Brickwork India, Dell and Infosys; and lastly Mumbai to visit Citibank and to attend the NASSCOM conference.

NASSCOM’s 15th India Leadership Forum 2007

One of the most prestigious gatherings of international ICT companies, customer organizations, analysts, business intelligence firms, and global investors, NASSCOM’s 15th India Leadership Forum 2007 was held from February 7 to 9, 2007, and was attended by CEOs and company presidents and other leaders of the IT and ITES industry in India and from several countries, including Australia, Canada, China, Egypt, Malaysia, Mauritius, Pakistan, the Philippines, Sri Lanka, Taiwan, Turkey and the United States.

This year, NASSCOM’s India Leadership Forum focused on issues concerning leadership, globalization, innovation and manpower resource development, all of which will play an instrumental role in extending India’s edge in the global markets.

“I attended this fantastic conference track by Deepak Malhotra of Harvard Business School,” recounts Carol, “entitled Negotiating to Win from a Position of Weakness. He told us the story of the 1912 Roosevelt presidential campaign. Roosevelt’s campaign staff made the mistake of printing out three million pamphlets using a photograph they didn’t own the copyright to. At the time, copyright law stated that copyright owners may charge US$ 1 for each photograph printed; this could have potentially drained Roosevelt’s campaign fund. But his campaign manager, George Wilbert Perkins, was a fast thinker and sent a telegram to the company owning the copyright. He told them “We are planning to distribute millions of pamphlets with Roosevelt's picture on the cover. It will be great publicity for the studio we use. How much will you pay us to use yours?” The company wrote back and said they could only afford to pay US$ 250. He converted a potential loss into actual profit. Isn’t that fantastic?”

The rest of the conference track drew from other examples of turning the tide at the negotiation table, from which Professor Malhotra derived time-honored strategies for winning even from an inferior position: changing the rules, playing to one’s own strengths and not to the strengths of the aggressor, flowing with the challenges instead of resisting them, and knowing the limits one’s own capabilities.

India and the Philippines: a Comparison from an Outsourcing Perspective

A majority of the conference tracks, however, dealt less with universal business practices and more with trends in global sourcing and how India—and, by extension, the Philippines—can adapt to these trends.

Global Outsourcing is a phenomenon that will continue for a long time and is transforming into a strategic form of service delivery, as large-scale IT delivery with a very cost-efficient setup. In 2006, it crossed the mark of US$ 1.6 trillion in terms of global revenues. Emphasis on new technologies, integrated global delivery across geographies and service delivery models, industry-centered developments will be the trend.

In the case of the Philippines, there will be competition with other markets like Europe and Asia Pacific, particularly China and Vietnam.

Market Share and Revenues
India is advanced in terms of outsourcing business, having generated US$ 24.2 billion in volume of business--excluding domestic revenues--and a 1.2-million headcount--again excluding domestic IT and ITES workers--with a revenue growth of 33 percent. These processes generally come from the US and the UK; India’s share of European and newer markets is growing steadily. Recently, companies have realized India’s value as an outsourcing destination and have reaffirmed their preference for the country after considering other locations.

In contrast, the BPO industry in the Philippines is only at US$ 3.6 billion, with a 237,000-strong headcount and revenue growing at 50 percent. Philippine operations largely take on US voice processes and are poised, with the initiatives of several associations primarily led by the Business Processing Association of the Philippines (BPA/P) to expand into other markets.

Processes Offered and Talents Available
In India, the BPO industry enjoys a good mix of voice and non-voice processes. Other verticals, like manufacturing, retail, media, utilities and healthcare are also growing, and at least have more than 50 percent share of the industry. This is made possible by the 400,000 engineering graduates added to India’s workforce each year. In 2006 alone, India produced around 3,021,000 graduates, with degrees ranging from Engineering, Arts, Commerce, and Science, at the Diploma, Graduate, and Post-graduate levels.

There are also industry-specific training programs, such as the various Centers of Excellence outsourcers in India are known to establish, where their employees can have their skills honed to address the need for better-skilled people.

In the Philippines, voice operations remain the province of outsourcing at approximately 75 percent of the market share. The rest are non-voice operations, which include back office operations, medical and legal transcription, data transcription, animation, software development, engineering design and digital content. A total of 450,000 college students graduate in the Philippines every year, although this modest number is far from the only source of talent for the BPO industry.

The Philippines also has several BPO-centered training programs, which are offered by private training companies and government institutions. The Philippine government has recently provided subsidized training programs for near-hires, which is designed to address the short- to medium-term demand for talent. In the meantime, English has been restored as the primary medium of instruction, and several advocacy programs have been launched to encourage bilingualism and to emphasize the increased employment opportunities that come with a high level of English proficiency.

Cities, Infrastructure and Prominent BPO Companies
Indian outsourcing is primarily driven by the private sector, and a prime example of this is NASSCOM and its effective marketing, advocacy and standardization initiatives that have helped give India its global footprint. Developments take place in various cities, like New Delhi, Mumbai, Hyderabad, Chennai, Bangalore, Pune, and Kolkata, tapping into the pools of talent in these various cities.

A mix of government and the private sector drives business in the Philippines, and development is largely centered on Manila and Cebu, with viability slowly growing in Clark, Baguio, Iloilo, Dumaguete, and Bacolod. Several sites are opening elsewhere in the country, and a few other companies are seriously considering several other Philippine locations. To date, over 30 contact centers have been established in areas outside of Metro Manila.

The Beginnings of Outsourcing
Historically, captive operations were the first to start up and grow in India, beginning with Gecis, now renamed Genpact. Current top captive operations include HSBC, IBM Daksh, GE and Dell. Third-party outsourcers have also followed suit, which now include Genpact, ICICI OneSource, WNS, Wipro BPO, Sutherland Global Services and HCL BPO Services.

Third-party outsourcers initiated the outsourcing boom in the Philippines. Today, the top third-party providers are Convergys, Teletech, Sykes, PeopleSupport, eTelecare, and Advanced Contact Solutions. Captive operations generally have fewer employees, but only in comparison to their third-party siblings; the top captive operations in the Philippines employ at the most 4,000 people each; these include HSBC, Dell, Citibank, and JP Morgan Chase.

Challenges and Opportunities
Both countries, however, are faced with similar challenges and have resulted in creative solutions. Attrition, for example, has encouraged a more holistic approach towards employee retention; Genpact’s retention strategies—involving employee’s families in their jobs, incentive programs contingent on years spent with the company, and other perks—came about as a result of the high attrition rates in the country.

In the Philippines, a bigger issue than attrition would be the lack of suitable and willing talents for the industry. Advocacy among prospective candidates, combined with government support, is expected to encourage these candidates to consider a career in the BPO industry.

Taking on higher-order processes is another challenge both countries face as business process outsourcing evolves into knowledge process outsourcing. This requires additional training, if not tie-ups with academic institutions to develop curricula that will produce graduates well suited to the complex operations required by knowledge process outsourcing.

In Conclusion

And what are the key takeaways from this year’s visit to India? Carol Dominguez responds, “I have three key takeways from my visit. The first one starts with what Pramod Bhasin (CEO of Genpact) told me at a CEO forum in the Philippines. He said that the Philippines hasn’t attracted the kind of talent India has attracted into the BPO industry—investment bankers, engineers, management consultants, and the like—because the Philippines is too heavily weighted on voice operations, which is mostly night work and lacks the variety that people would look for in a career. In order to attract talent and increase revenues by going up the value chain, we should develop more non-voice processes within the KPO space."

Key takeaway number two focuses on locations. "It is important to develop Tier 2 and Tier 3 cities where talent is available and labor costs less, and there would be less competition,” continues Carol. "These cities need to develop the infrastructure to attract potential BPO locators and also need to make themselves interesting places to potential migrant leaders."

“My third key takeaway is that we shouldn’t compete with India; it’s difficult to compete with a country that has made such a global footprint where outsourcing is concerned. Instead, we should encourage more Indian companies to set up BPO operations in the Philippines and therefore gain indirect access to the outsourced operations of large American and European multinational companies. India and the Philippines have a lot in common,” Carol explains. “Aside from a facility for the English language, both cultures value education and family.”

It is early evening by the time the interview is done. Talking about her trip to India seems to have energized Carol all the more. Her bliss has found doors to India, just as her own front door opens for her. She gets up and, true to form, leaves. “I have a dinner with some clients,” she says by way of explanation, before heading out to her next appointment.

INDIA VS. PHILIPPINES

*Non-voice operations excluding IT

**Customer Interactive Services

*Sources: NASSCOM and BPA/P