Outsourcing Trend: The Changing Face of Indian BPOs

The Business Process Outsourcing Business in India is changing. It is no longer about answering phones, but has turned into more of automotive designing, insurance claim processes, mortgage loans, and so on and so forth.

A few years ago, 20-year old Sandhya S. with her chronic tonsillitis, could not even think of trying for a job in a BPO. She would have been unable to cope with the task of attending calls for 8-hours at a stretch.

Today, lack of employment opportunities is not an issue, as Sandhya is inundated with job offers, despite her throat ailment. No, she hasn’t found a magic cure; it is just Indian BPOs have begun to do business in very different ways, these days. The BPO scenario is changing in India, and how. When the BPO boom took off, in 1999 voice-related services contributed to 85% of the Indian BPO industry’s share of business. Seven years down the line, voice accounts for just 35%. Sunil Mehta, Vice President, NASSCOM, the industry body for Indian IT and BPO companies, agrees: “The services have moved from voice to non-voice like automotive design, insurance claim processes, mortgage loans and so on.”

In the 1990s, the starting point of BPOs, Indian BPOs offered many young graduates their first job. Fresh-out-of-college employees (called agents) were expected to cold call customers in US or Europe and chase down credit card defaulters for payments. Or, they were required to troubleshoot calls on issues ranging from PCs to Internet, travel services, and more.

“The primary promise of BPOs was to offer acceptable services at lower costs,” says Gopal Kuchibhotla, Principal Consultant, Business Solutions, PriceWaterhouseCoopers. But, this low-cost advantage did not hang around for long. As, more and more, Indian BPOs emerged, they started pitching in the same geographies (US, UK, Australia) on the same ‘lower price’ promise, with the result, the low-cost proposition began to degenerate into a zero-sum game.

So much so, according to industry experts say, between 2002 and 2005, average revenue per hour (for a single terminal) dropped from $14 to $12, a straight fall in revenue of around 15%. “BPOs have begun to realise that the traditional sources of cost advantages - manpower and infrastructure costs - may not remain sustainable after a point in time,” accepts Susir Kumar, CEO, Intelenet Global Services. So what has changed?

A Strategical Change From Cost to Consulting

“Labour arbitrage used to be the main driver for outsourcing. Now the drivers are more business-related,” says Ananda Mukerji, Managing Director and CEO, ICICI OneSource. Simply put, nowadays BPOs are stepping in as advisors. And, it’s not just the BPOs who claim this change in function; even consultants agree. “Now, BPOs are also becoming strategic partners of the client,” says Kuchibhotla.

For instance, previously, overseas clients required BPOs to replicate their in-house processes off-shore. A set of SLAs (service level agreements) were defined and BPOs were expected to deliver them. A typical SLA would include parameters like call handling time, percentage resolution of complaints, and so on.

Now, SLAs are hygiene factors. ICICI OneSource executives claim they now embark on an extensive discovery process of the client’s operations, study the current processes and business goals of the client, after which they suggest suitable off-shoring strategies, advising clients on which processes are best left on-shore and why.

For instance, a client called ICICI OneSource to perform a process assessment to uncover opportunities that would increase sales or reduce operating costs. The scope of this assessment was confined to the major business functions of customer acquisition, order management, customer care, and service assurance.

The approach used by the BPO team was to analyse existing data, then observing operations and interviewing relevant employees at the client end, before making recommendations.

“Clients expect best practices in process management and optimization, not just for the off-shored processes, but also for their own internal operations,” says Mukerji adding, “the progression curve of the BPO business is not about being a consultant. It’s about business critical solutions.”

No Longer Face To Face Or Voice To Voice

It used to be that call centre agents were restricted to be being just the client’s face (okay, voice) to the customer. But, as BPOs realised, they were getting just a fraction of the outsourcing business from any single client, they began to increase the range of services offered. “Offering a platter of services enables BPOs to draw in bigger and better deals,” explains a Delhi-based expert.

Progeon, the Rs. 379-crore (Rs. 3.79-billion) BPO division of IT major Infosys, recently tied-up with a mortgage company, where Progeon offers end-to-end solutions, from the initial voice calls to managing monthly instalments and even chasing loan defaulters.

And, if they don’t manage end-to-end contracts? Some BPOs are even giving up businesses that involve only voice. Wipro BPO (previously Spectramind), is one instance. About a year ago, the company opted out of services like tele-marketing. “Outbound voice doesn’t fetch high margins,” says Manish Dugar, Vice President, Finance, Wipro BPO.

As well, delivering only voice services incurs higher training costs for BPOs. Industry sources point out, a beginner’s salary in a voice service would be Rs. 10,000-12,000 a month, while salaries for agents handling low-end non-voice tasks like processing transactions is in the Rs. 8,000-10,000 range.

“Voice processes represent a perpetual activity and are capital-intensive in nature. Though non-voice work can be automated, one can’t automate voice,” says Intelenet's Kumar.

Of course, BPOs have been automating where possible. For instance, Progeon developed auto match rules for a financial services client that had outsourced its stock and cash reconciliation processes. The new technology automatically reconciles financial statements. End result? Progeon no longer needs staff for this job, which would have added another 50% to the process costs.

Against The Flow

Apart from the backlash from the West, job attrition in India has been a big issue of concern with most BPOs. How are BPOs tackling this? By investing 8-12 weeks on training and 4-5 weeks on refresher courses for each employee. And, BPOs have started moving out to the Tier II towns, such as, Pune, Jaipur, Trichy and Visakhapatnam. Small towns mean lower overheads. For instance, manpower rates in Mumbai are the highest at Rs. 51.6 per hour for the starting level agent, followed closely by the NCR (national capital region) at Rs. 50.9, whereas in Kochi, the cost would be just Rs. 17/-.

But, for the Indian BPOs, it’s not just about India, anymore. To access a multi-lingual talent pool (like French-English), BPOs have begun to start operations overseas, in Mexico and Eastern Europe, primarily for the voice business.

That then, tackles even the anti-India backlash, since callers don’t bother to know who the owner of the BPO is. Wipro and Infosys. both have a presence in Europe, so does ICICI OneSource. A better geographical spread also helps BPOs plan their business continuity in crisis situations. “Clients feel safer if BPOs run simultaneous operations in various countries,” says Sunil Chandiramani, Partner, Ernst & Young.

So, is the change in BPO strategies working? At present, the global business makes up only 5% of the turnover for Indian BPOs. Tier II towns make up 20% of business as the $6.3 billion ITES-BPO segment grows at 37% a year (source: NASSCOM).

While it’s still early to talk about the sustainability of the strategic shift, someone is smiling. Entering the office of a prospective BPO employer, Sandhya does not have to clear her throat to get rid of the frog in it, nor does she have to pop lozenges to get rid of the rasp in her voice.

Who said that India would lose its BPO edge with other developing countries wanting a bigger share of the off-shoring / outsourcing pie? Indian outsourcing service providers have proved that they can innovate and go one step further to remain the leader of the pack. In one fell swoop, they are cutting costs by moving to Tier II towns, tackling the backlash about perceived Western jobs moving to India by setting up voice operations and offering employment to locals in USA, Europe, Australia, Asia, etc.

No, India is not about to lose ifs off-shoring / outsourcing edge, it has just gone one better!

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