FLAVOR OF THE MONTH l BPO A journey of challenges

FLAVOR OF THE MONTH l BPO: A journey of challenges

Indian BPO industry’s coming of age was not without its share of lessons, challenges and issues. But the road to better value and impactful innovations has just flagged off

Pratima Harigunani

Thursday, June 05, 2008

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From a fledgling sector, just about a decade back, the Indian BPO industry could now grow nearly five-fold to reach $50 billion in size by 2012, says a Nasscom-Everest India BPO Study (2008).

No doubt, the industry has left its baby-step era and sauntered into its youth, full of promise and potential. But coming of age was not without its share of lessons, challenges and issues.

In case of the Indian BPO industry this only meant one thing: there are no problems, only learning curves. Efficiency, productivity, attrition and absenteeism, better service and operational excellence, are just some of the areas where the industry has been flexing all its power and attention in order to grow and evolve.

Growing competition from other emerging offshore/near shore BPO destinations like Philippines, Eastern Europe, Latin America and China as viable options for BPO delivery centers too have started haunting Indian BPO vanguards.

Add to that are problems on adverse currency movements and wage inflation leading to pressure on the operating margins of providers.

And while it has successfully and progressively got up wherever and whenever it stumbled, the road ahead too is dappled with more stones to tread on.

Lessons from the journey so far

In Zensar's perspective what started as an industry boom many years back on the principle of cost arbitrage, has seen steep rise on the value curve year on year for past few years. Today the industry doesn't talk anymore about non-core business processes but also has core process offerings for customers across the globe.

Finance and accounting, strategic and tactical procurement services, banking services etc. have emerged as solid offerings to showcase industry's capability on the global footprint. Mphasis recounts talent issues, operational lessons and process evolvement as the main cusps of the BPO graph till now.

The future already marks a shortage of 0.8-1.2 million entry-level graduates by 2012. This comes with specific concern areas like middle-management personnel with domain experience, or sector-specific skill shortages etc.

The industry also has to tackle the commoditisation and low-cost perception in the midst of severe price competition.

Ramesh Gudalur, president, MphasiS BPO explains, "As industry grew, so did challenges with talent. Although India produces many graduates, many of them are not "industry ready".

The BPO industry needs specialized skills in both voice and non-voice processes and getting the right talent is often challenging."

"However, we have turned adversity into our greatest strength and training and then job deployment forms an integral part of our HR mandate. We have specialized training programs for our staff both technical and soft skills and this goes a long way in bridging the gap between academic learning and on the job readiness."

Attrition, which is an industry wide challenge, has been quite a force to reckon with in the past few years.

"Our workforces are young, often restless and one that must be given an opportunity to evolve all the time," feels Gudalur.

But the industry is constantly innovating and evolving in its own way to take the bull by its horns. "Over the last few years, MphasiS has worked tirelessly to build structures around retaining its best and brightest talent. Training and development will form the core of our people management strategy. We will push our associates to re-skill, learn new things and understand how they can add value to our clients," informs Gudalur.

"Over the last two quarters our offer-to-join ratios have dramatically improved. We have a number of HR-related initiatives in place and employee retention is top of our priority list."

In addition to managing the issues around talent and scale, there were process and operational areas too where the BPO industry has learnt, faltered, learnt, improved and created new benchmarks.

Prevailing business models since many years like risk and reward, time and material etc are now getting replaced by innovative and attractive models like Platform based offerings pay as you use and FTE based models.

As seen by Zensar, global customers now have better understanding of what they can expect from Indian BPO players in terms of value addition to their business.

"This is helping to change the vendor-customer model to more strategic business partner-customer model."

Another important issue, which has touched the industry deep and wide, is information security, which in Zensar's BPO assessment was the biggest industry issue in last decade. Winning comfort of the global customers and reinforcing the same has seen industry taking steps like ISO27001 certifications, regular surveillance audits, strict process adherence etc.

The essence of learning to work globally is to go the Process Way.

The early BPO days were often characterized with silo processes and therefore impending security breaches.

"Further to our part merger with EDS, we have strengthened our process orientation," Gudalur points out.

Maintaining and bettering operational efficiencies was another issue to be dealt with. "As currencies take on a new world order and cost is just incidental, we must continue to ensure that value score above cost. MphasiS has kept a close watch on maintaining its operational efficiencies. Over the last quarters our utilization has grown and we have deployed several productivity tools to help drive efficiencies on projects. Automation is the way of the future and we have already begun on this path," Gudaldur says.

The mid-life crisis of Indian BPO industry will have a slew of issues to deal with. From managing multiple internal and external considerations, supply-side constraints such as talent and infrastructure, tackling competition from other offshore destinations etc the sector also needs to sustain its basic cost advantage and economic value proposition while at the same time scaling it in lieu with evolving buyer expectations.

A long way to go

As per the Nasscom-Everest Study the sector, to start with the industry needs to tap the addressable market opportunity from exports and from serving the domestic market.

In terms of numbers, this would mean a total export BPO market opportunity of $220-280 billion by 2012 and the domestic Business Process Outsourcing market 's additional $15-20 billion opportunity for the sector by 2012.

The banking and capital markets, insurance and manufacturing verticals together constitute almost 70 per cent ($160-190 billion) of the total $220-280 billion export market opportunity over the next five years.

In addition, the emerging verticals such as technology, telecom and travel and transportation also provide opportunities in excess $10 billion by 2012 along with other segments such as media and publishing, pharmaceuticals and life sciences, and energy and utilities.

The biggest challenge facing the industry today is resource turnover, adds Zensar BPO.

While that remains a concern, industry has now started to move out of the stereotype recruitment modes to innovative modes like exploring cities like Nagpur, Nasik, Indore etc. to look for talent, tying up with community clubs, cross training existing resources across processes etc.

The industry is and will have to keep redefining and realigning its geographical radar.

Currency fluctuations and recession fears have done a lot of groundwork already. While North America is expected to contribute roughly 70 per cent of the total market opportunity for the Indian BPO sector, both providers and buyers should increasingly look at exploiting opportunities in the UK, Continental Europe and Asia Pacific, says the Nasscom study estimates, buttressed by the fact that English-language based business processes from these geographies represent a huge market opportunity of $45-75 billion by 2012.

For this the industry would need to work upon a stronger near-shore presence, bolstering language and cultural capabilities, and fostering distinctive value propositions.

Sometime back, a McKinsey study for Nasscom had identified a disconnect between ITES-BPO clients and their outsourced service providers. As per this disconnect, two to three years into a relationship, vendors are still thinking of quality whereas the clients are asking what innovations you can now offer to further save costs.

There have been many challenges that have been turned into medals, but clearly the road to better value and impactful innovations has just been flagged off. A road that though challenging, is surely enticing the brave and smart army called the Indian BPO.

©CyberMedia News

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