FLAVOR OF THE MONTH l BPO: Some present travails

FLAVOR OF THE MONTH l BPO: Some present travails

BPO as an industry has come of age

Pratima Harigunani

Tuesday, June 10, 2008

It has rightfully achieved the wisdom, maturity and power that come with growing from a sapling to a well-rooted tree. But there are many storms and seasons that this blossoming and strong tree will have to weather as it heads further for the skies.

This in turn would mean going further deep down the earth and imbibe and establish new lessons and foundations for now and tomorrow. 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.

Growing competition from other offshore/near shore BPO destinations like Philippines, Eastern Europe, Latin America and China 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.

"As currencies take on a new world order and cost is just incidental, we must continue to ensure that value score above cost. As a conscious business decision, 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," Ramesh Gudalur, president, MphasiS BPO shares.

Talent has been a bogey off and on. 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. But the industry is dealing with these issues with new and stronger ways.

“Our people care initiatives and investments are paying off in a big way. 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. Some of these initiatives are: Metamorphosis – An internal program where lateral movement is encouraged. EDS Learning and Leadership Academy, an academy in Mangalore that focuses on training fresh engineering graduates for a career in the Information Technology industry with an emphasis on real-life case studies and scenarios and College Connect, an initiative focused on developing the human resource capital of the Information Technology sector as well as a measure to cater to the need for efficient human resource requirements within the organization," Gudalur explains.

The biggest challenge facing the industry today is resource turnover, according to 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 and Indore 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. As per the Nasscom-Everest Study, the sector 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.

Mphasis BPO, for instance, has focus this year on building capabilities portfolio beyond the traditional BPO space to new services in the KPO space.

“We will also build domain based expertise and have a client centric approach to our solutioning,” says Gudalur.

Some time back, a McKinsey study for Nasscom had identified a disconnect between ITES-BPO clients and their outsourced service providers. According to 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 BPOs.

© CyberMedia News

©CyberMedia News