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IT ENABLED SERVICES
INTRODUCTION
Business Process Outsourcing (BPO) is outsourcing of business functions generally performed
by white collar and clerical employees to achieve various benefits such as cost savings, better
quality and ability to focus on core competence. BPO involves outsourcing processes that are not
core to a company, however, are essential for smooth operation of the company. The customer
transfers the complete responsibility of these functions to the vendor who guarantees certain
service quality standards. uch processes include customer service, payroll processing, inventory
management, etc.
The global mar!et si"e for BPO is estimated to be around #$ %&'.( billion in '))* according
to mar!et intelligence firm +$,. The research firm e-pects robust growth in the BPO industry
with more and more companies reaping the benefits of BPO all over the world. The BPO mar!et
si"e is e-pected to reach #$ .*/.' billion by '))0 with a ,umulative 1nnual 2rowth 3ate
(,123) of /).0 percent from '))( to '))0.
BPO has evolved over the years, beginning with time4sharing data processing in the /0.)s5
according to technology research and consulting firm ebs. Over these years, li!e outsourcing,
BPO has moved from being transactional (tas! oriented) to being strategic (process oriented).
Table / provides the !ey milestones in the evolution of BPO.
BPO Trends
The BPO industry is a developing sector and is being studied by analysts and researchers all over
the world. 1nalysts trac!ing BPO have observed the following trends in the industry6
The BPO mar!et worldwide is e-panding with new services getting added to the list of
business processes that are outsourced and new locations coming up as potential offshore
destinations, +ndia being the most preferred destination for offshore BPO.
,ost savings is one of the most important drivers now. +nformation security, e-ecution
capability and financial stability are important considerations while selecting a vendor.
1ccording to +$,, customer care and logistics are mature segments, while procurement
and training are emerging mar!ets and are e-pected to have a growth of more than /) percent
in the ne-t five years.
2artner has also observed the latest trend of offshore in sourcing , in which firms
establish their own offshore captive centers. These captive centers are generally shared
service centers and allow the firms to retain control over the processes.
Evolution of BPO
Table 1 Evolution of BPO
2
!ears Pro"ess
/0.)s Time sharing
/07)s $ata processing
/0&)s 8ntire +T operations
/00)s hared business services
')))s B'B partnerships via +nternet
')))s Process outsourcing via +nternet
')))s +T4enabled offshore services
#orld$s Best BPO Vendors
Owing to the huge opportunity that lies in BPO, large corporations have ventured into the
business and have set up BPO operations all over the world. There is a strong competition among
these multinationals and many organi"ations such as the Outsourcing 9anagement +nstitute, the
,hief 3esource Officer +nstitute, $ata:uest and BPOrbit release BPO ran!ings each year. The
Blac! Boo! of Outsourcing by $oug Brown and cott ;ilson provides a list of world<s best
BPO vendors for the year '))*4'))(. The parameters used for ran!ing these vendors include
customer satisfaction, employee satisfaction, reviews of global consulting firms, performance
with respect to other vendors and client performance ratings. The top /) BPO vendors have been
listed Table '.
Table % #orld$s Best BPO Vendors
Nu& Vendor
/ +B9 2lobal = $a!sh
' 1ccenture
% >ewlett Pac!ard
* 9phasi
( 8rnst ? @oung = ,apgemini
3
. ;ipro pectramind
7 +,+,+ One ource
& eAunds 2lobal Outsourcing
0 ,onvergys
/) 1ffiliated ,omputer ystems
BPO Trends
The BPO industry is a developing sector and is being studied by analysts and researchers all over
the world. 1nalysts trac!ing BPO have observed the following trends in the industry6
The BPO mar!et worldwide is e-panding with new services getting added to the list of
business processes that are outsourced and new locations coming up as potential offshore
destinations, +ndia being the most preferred destination for offshore BPO.
,ost savings is one of the most important drivers now. +nformation security, e-ecution
capability and financial stability are important considerations while selecting a vendor.
1ccording to +$,, customer care and logistics are mature segments, while procurement
and training are emerging mar!ets and are e-pected to have a growth of more than /) percent
in the ne-t five years.
2artner has also observed the latest trend of offshore in sourcing , in which firms
establish their own offshore captive centers. These captive centers are generally shared
service centers and allow the firms to retain control over the processes.
#'at "onstitutes BPO(
BPO deals mainly with non4core processes of an organi"ation. ome of these processes have
been briefly e-plained below.
Ad&inistrative su))ort Outsourcing of administrative support functions includes data
entry, document conversion, forms processing, document scanning, inde-ing, secretarial
tas!s support, etc.
Custo&er relations'i) &ana*e&ent ,ustomer service outsourcing includes
outsourcing of functions such as customer support, order ta!ing, customer service, product
support, technical help des!, collections and mar!et research. 3efer to the re)ort on
Custo&er Servi"e Outsour"in*for more details.
Do"u&ent )ro"esses Do"u&ent )ro"ess outsour"in* includes outsourcing of customer
facing, technical, mar!eting and communications, financial accounting, and regulatory
compliance documents.
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+inan"e and a""ountin* Ainance and accounting outsourcing includes services such as
internal auditing, time and e-pense management, travel e-penses, credit and debt analysis,
collections, invoicing, accounts payable, accounts receivable and billing4dispute resolution.
,u&an resour"es and trainin* >uman resources (>3) is one of the most critical assets
of a company and companies need to carry out various tas!s such as recruitment, training,
attrition=retention, database management, contract4wor!er management, etc., for their
employees. ,arrying out these tas!s through an internal >3 department is costly and diverts
the attention of the management from its core business issues. >ence, companies are now
resorting to >3 outsourcing big time.
Intelle"tual )ro)ert- resear"' and do"u&entation Outsourcing in intellectual
property research and documentation includes filing and drafting of patent applications, prior
art research, licensing support, and patent portfolio analysis.
Le*al servi"es Le*al )ro"ess outsour"in* (BPO) involves consulting, research,
transcription, documents management, billing, translation and other administrative and
secretarial support services required for various legal functions such as commercial litigation,
arbitration and mediation, appeals, government contracts, legal ris! evaluation, etc.
.edi"al trans"ri)tion 9edical transcription is writing down medical records dictated
by physicians and other healthcare professionals. These records include patient history and
physical reports, clinic notes, therapeutic procedures, clinical course, diagnosis, prognosis,
discharge summaries, etc.
Pa-roll &aintenan"e and ot'er transa"tion )ro"essin* This segment includes payroll,
payment, chec!, credit card and stoc! trade processing. Aorester research predicts transaction
processing to be a large segment within the BPO industry soon, with a mar!et si"e of #$
(& billion in '))&. ome vertical processes such as mortgage, loans and insurance claims
processing are also being outsourced.
Produ"t develo)&ent ,ompanies need to constantly innovate to remain competitive in
the mar!et. ;ith the increasing speciali"ation of e-pertise required to carry out product
development, companies choose to outsource their 3?$ functions to vendors who have
e-pertise in a given field. Over the past few years, numerous 9C,s have initiated offshoring
3?$ to other countries including India /'i"' is e&er*in* as a 'ub for R0D outsour"in*.
Publis'in* Publishing outsourcing involves outsourcing of publishing functions such as
boo! design, boo! digiti"ation, e4publishing, drawings and graphics, inde-ing, Dournal
administration, etc.
Resear"' and anal-sis ,ompanies require data and its analysis for ma!ing informed
strategic decisions. These companies have started outsourcing their research and analysis
requirements to vendors who speciali"e in typical research and analysis wor! such data
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analytics, financial analytics, mar!et research, secondary research, primary research, industry
overview, competitive intelligence, etc.
Sales and &ar1etin* 2in"ludin* tele&ar1etin*3 ale and mar!eting outsourcing
involves delegating parts of sales and mar!eting functions such as cold calling, email pitches,
telephone surveys, lead generation, lead qualifying, appointment setting, sales team
management, etc.
Se"urit- ,ompanies have to search for new technologies and employ qualified security
professionals to !eep their data secure from theft. 9aintaining these resources and
implementing a fool4proof security policy is a difficult tas! which can be better handled by
e-perienced third party security agencies. ecurity outsourcing involves management of
investigative services, physical security, electronic security systems, computer and networ!
security, etc.
Su))l- "'ain &ana*e&ent Outsourcing in supply chain management involves
logistics, procurement, warehouse management, contract management, supply chain
relationship management, etc.
BPO Business .odels
Over the years, different models have been used for conducting business in BPO. The regular
outsourcing models of on4shoring, near4shoring and offshoring are seen in BPO as well. TP+, a
sourcing advisory, has observed that in addition to on4shoring, near4shoring and offshoring,
BPO operations are also conducted through the following three business &odels 6
E Transa"tional BPO Transactional BPO handles one aspect of a process only. The
customer has to carry out a significant part of the process in4house and hence the customer
owns the ris! of the process. 1lso, outsourcing many aspects of the process in a transactional
mode leads to comple- fragmentation which can pose as a threat to productive delivery.
E Ni"'e BPO 1 niche BPO carries out %4* aspects of a process. 1 niche BPO, which also
ma!es certain investments in the customer<s process, aims at improving the efficiency of the
process. The vendor in a niche BPO wor!s in close coordination with the buyer, sometimes
see!ing the services of the customer<s employees. Both the vendor and the buyer share the ris!
of the process.
E Co&)re'ensive BPO 1 comprehensive BPO handles both transactional and administrative
tas!s in a process and ta!es 7) percent responsibility of the output. The vendor purchases the
buyer<s assets and also hires most of its employees. ,omprehensive BPO has bul! deals lasting
for 74/) years.
T-)es of BPO Servi"es
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BPO services are generally categori"ed into hori"ontal and vertical services. These have been
e-plained below6
/. ,ori4ontal BPO >ori"ontal BPO involves function centric outsourcing. The vendor
speciali"es in carrying out particular functions across different industry domains. 8-amples
of hori"ontal BPO are outsourcing in procurement, payroll processing, >3, facilities
management and similar functions. 1utomatic $ata Processing (1$P) is an e-ample of a
hori"ontal BPO vendor. 1$P focuses on providing services in hori"ontal functions such as
payroll, >3, benefit administration, ta- solutions, etc. >owever, according to 2artner,
companies should focus on providing vertical services as the mar!et matures.
'. Verti"al BPO 1 vertical BPO focuses on proving various functional services in a
limited number of industry domains. >ealthcare, financial services, manufacturing and retail
are e-amples of vertical BPO domains. 8FB ervice >oldings is a vertical BPO having
focus on industry domains such as healthcare, business services, utilities and energy and
manufacturing.
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Table /6 >ori"ontal and Gertical

ource6 BPO6 The precursor of digital farms
BPO Best Pra"ti"es
;ith time, every industry starts following certain best practices as it develops and
matures. The best )ra"ti"es follo/ed in t'e BPO industr- include6
,ompanies outsource critical but non4core business processes that are not strategic to the
firm<s vision.
1n inefficient process is not outsourced to a third party vendor without any re4
engineering.
,ompanies gather support from its employees before ta!ing the outsourcing plunge. The
first step towards this is early communication of the outsourcing decision to the employees
and even the shareholders.
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ourcing advisors are consulted for negotiating a deal.
Gendor is selected based on various criteria such as quality commitment, cost,
transparency of operations, data security, etc.
The advantages offered by outsourcing in general are valid for BPO as well, and these
advantages act as internal drivers for BPO. +n addition to these internal drivers, companies are
lured to choose the BPO option due to the following e-ternal drivers6
Robust IT and tele"o&&uni"ations infrastru"ture6 The developments in +T and
telecommunications infrastructure has enabled companies to transfer data to any place in the
world instantaneously at very little cost. This infrastructure also allows them to increase their
3O+ and shareholder value.
Pressure to lo/er "osts6 ,ompanies are facing huge competition from their competitors
to provide better services, and at the same time lower their costs. ,ompanies are constantly
innovating the way they are conducting businesses and BPO allows them to partner with
e-ternal speciali"ed vendors for efficient operations. Offshore BPO is cheaper than onshore
BPO and many companies are now moving their operations to offshore locations, +ndia being
the most preferred destination.
Little infrastru"ture for auto&ation6 The +T revolution has not achieved success in
automating business processes and most of the business processes still need human labor for
productive delivery. +n such a scenario, resorting to BPO, which provides human labor at a
lower cost, enables companies to ma-imi"e their 3O+.
The perceived ris1s of outsour"in* act as a big inhibitor for BPO. ome of these ris!s have
been described below6
Loss of "ontrol6 ,ompanies perceive the ris! of losing control over the operations of
their processes. 1lso, if the (trained) employees in the vendor firm leave the Dob, the buyer
may be at ris!.
+inan"ial instabilit- of t'e vendor6 +f the vendor becomes financially unstable in some
years, the buyer will have to search another vendor5 the operations being at ris!, if it does not
search the new vendor fast.
Loss of e5)ertise6 ,ustomers may lose the e-pertise and !nowledge of carrying out the
outsourced processes with time.
Data se"urit-6 $ata confidential to the customer may be prone to theft if the vendor firm
does not have stringent security policies.
BPO Drivers and In'ibitors
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The advanta*es offered b- outsour"in* in general are valid for BPO as well, and these
advantages act as internal drivers for BPO. +n addition to these internal drivers, companies are
lured to choose the BPO option due to the following e-ternal drivers6
Robust IT and tele"o&&uni"ations infrastru"ture6 The developments in +T and
telecommunications infrastructure has enabled companies to transfer data to any place in the
world instantaneously at very little cost. This infrastructure also allows them to increase their
3O+ and shareholder value.
Pressure to lo/er "osts6 ,ompanies are facing huge competition from their competitors
to provide better services, and at the same time lower their costs. ,ompanies are constantly
innovating the way they are conducting businesses and BPO allows them to partner with
e-ternal speciali"ed vendors for efficient operations. Offshore BPO is cheaper than onshore
BPO and many companies are now moving their operations to offshore locations, India
bein* t'e &ost )referred destination6
Little infrastru"ture for auto&ation6 The +T revolution has not achieved success in
automating business processes and most of the business processes still need human labor for
productive delivery. +n such a scenario, resorting to BPO, which provides human labor at a
lower cost, enables companies to ma-imi"e their 3O+.
The perceived ris1s of outsour"in* act as a big inhibitor for BPO. ome of these ris!s have
been described below6
Loss of "ontrol6 ,ompanies perceive the ris! of losing control over the operations of
their processes. 1lso, if the (trained) employees in the vendor firm leave the Dob, the buyer
may be at ris!.
+inan"ial instabilit- of t'e vendor6 +f the vendor becomes financially unstable in some
years, the buyer will have to search another vendor5 the operations being at ris!, if it does not
search the new vendor fast.
Loss of e5)ertise6 ,ustomers may lose the e-pertise and !nowledge of carrying out the
outsourced processes with time.
Data se"urit-6 $ata confidential to the customer may be prone to theft if the vendor firm
does not have stringent security policies.
Outsour"in* to India
Over the past decade or so, +ndia has emerged as an attractive destination for
offshore outsour"in*. ,ompanies all over the world are offshoring many different processes
to +ndia to harness the benefits offered by the country. 9any Aortune ()) companies have
either outsourced their processes to +ndia or set up their own captive centers in the country,
thus validating +ndiaHs value proposition for an offshore services hub.
T'e Infor&ation te"'nolo*- 2IT3 Outsour"in* and Business Pro"ess Outsour"in*
2BPO3 mar!et in +ndia is growing rapidly. 1ccording to the estimates of C1,O9, +ndian
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offshore +T and BPO mar!et is worth #$ /7.. billion, which is about ** percent of the total
global +T and BPO offshoring mar!et (about #$ *) billion).
Introdu"tion
Over the past decade or so, +ndia has emerged as an attractive destination for offshore
outsourcing . ,ompanies all over the world are offshoring many different processes to +ndia to
harness the benefits offered by the country. 9any Aortune ()) companies have either
outsourced their processes to +ndia or set up their own captive centers in the country, thus
validating +ndiaHs value proposition for an offshore services hub. The +nformation technology
(+T) Outsourcing and Business Process Outsourcing (BPO) mar!et in +ndia is growing rapidly.
1ccording to the estimates of C1,O9, +ndian offshore +T and BPO mar!et is worth #$
/7.. billion, which is about ** percent of the total global +T and BPO offshoring mar!et
(about #$ *) billion).
Garious offshore clusters have sprung in the country. Bangalore, $elhi=C,3 (C,3 stands for
national capital region comprising 2urgaon, Coida, 2ha"iabad and Aaridabad near $elhi),
9umbai, Pune, >yderabad and ,henai are established centers for outsourcing in +ndia. +n
addition to these cities, other emerging destinations include 9ysore, ,handigarh, Iaipur and
Jol!otta. Table / provides a list of some companies which have already made their presence
in these cities through captive offshore centers
Table 1: Captive Offshore Centers in India
Cit- Co&)anies
Bangalore British 1irways, $ell +nternational ervices
$elhi and C,3 ,onvergys, Aidelity +nvestments
9umbai 9organ tanley, IP 9organ
Pune PT,, ,ogni"ant
>yderabad 9icrosoft, Oracle
,hennai >ewlett Pac!ard, ,itiban!
9ysore oftware Paradigm +nternational
,handigarh $ell +nternational ervices
Iaipur 28
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Jol!otta >B,, Bloyds TB
Advanta*es of Offs'orin* to India
Aollowing are the !ey factors that contribute to +ndiaHs position as a preferred destination for
offshore outsourcing6
/. 1vailability of large talent pool
'. Bow cost
%. Aast turnaround time
1vailability of a large pool of talented and motivated professionals +ndia has a large pool of
young talented professionals. +ts %&) universities and //,')) higher education institutions
produce './ million graduates each year. 1s a result, companies have sufficient options to
choose from, while recruiting employees for their offshore captive centers. Aurther, it is
e-pected that the number of people in the wor!ing age group in +ndia will increase by '()
million from '))% to ')') at an average rate of about /( million per year. This will ensure
labor for companies in # and 8urope where the demand for labor is increasing. +ndia also has
the largest 8nglish spea!ing population in the world. This ensures good communication
between the customer and vendor when the wor! is outsourced to +ndia.
+ndian BPO employees are hard wor!ing and motivated. They are also satisfied with their
wor!5 this can be seen from the attrition rate in BPO in +ndia. 1s shown in Table %, attrition
rate in BPO in +ndia was /& percent in '))%, significantly lower than that in other economies.
Table %6 BPO Attrition Rates
1ccording to the Boston ,onsulting 2roup, access to the large talent pool and higher
employee satisfaction translates into better employee performance (and cost savings on
recruitment and training). This leads to a productivity increase of over %) percent in +ndia.
+ndians also produce superior quality of wor!. 3esearch has found that error rates in
accounting were reduced by .) percent when the wor! was outsourced to +ndia.
Si*nifi"ant "ost advanta*e
One of the biggest advantages of offshoring to +ndia is cost savings. ,ompanies have been
able to save about %) to *) percent for most services by outsourcing processes to +ndia. ,ost
savings in +ndia can be accounted for by savings in the following three heads6
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/. Labor6 +ndian professionals wor! at wages much lower than that in the # and 8urope.
'. Ca)ital6 +nfrastructure costs in +ndia are lower thus saving significantly on capital.
%. Labor &ana*e&ent6 The number of employees required during a proDect is not same
throughout the course of the proDect. >ence, when a business process is carried out in4house,
companies have to pay the employees and maintain office space for them, even if these
employees are not wor!ing on any proDect. Outsourcing enables companies to do4away with
the e-penditure on bench labor, as the outsourcing vendor allocates the bench employees to
proDects for other clients or bears the cost of inefficiency.
1n e-cellent e-ample of a company that has achieved cost savings by offshoring to +ndia is
2eneral 8lectric (28). 1fter offshoring its BPO operations to +ndia, 28 found a reduction of
'( percent on its labor cost. This lead to an increase of /() percent in the 8arnings Before
+nterest, Ta-es, $epreciation and 1morti"ation (8B+T$1). Table ' provides the pre4
offshoring and post4offshoring comparative figures.
Table '. 8ffect of Offshoring to +ndia on 28Hs BPO Operations

Pre4
offshoring
Post4offshoring 8ffect
ales /)) /))
Babor .) *( '( percent decrease
9aterials ') ')
2?1 /) /)
8B+T$1 /) '( /() percent increase
There is a vast difference in the labor costs in #=8urope and +ndia in the +T industry as well.
1n +T professional with /4' years of e-perience in the # and 8urope charges #$ (),))) to
7),))) per year. On the other hand, a professional with same e-perience level costs about
#$ &,))) per year in +ndia, about // to /. percent of that in the # and 8urope.
+ast turnaround ti&e
+n +ndia, clinical trials are conducted in %) percent less time, while there has been a bac!log
reduction of () percent in transcription processing. 1lso, +ndia and the # have a "onal time
difference of about /' hours, thus effectively giving companies a '* hours wor! environment.
9ost of the processing functions are performed during the day time in +ndia, when it is night
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time in the developed countries. 1s a result of this "onal time difference, there is no or little
bac!log in the front end and processing tas!s.
The advantage of this "onal time difference is more prominent in +T outsourcing. 9any +T
proDects have onsite and offsite teams. The onsite team wor!s during the day at the client site
and hands over the wor! to the +ndian team before retiring to bed. The offsite team then wor!s
on the same proDect as it is day time in +ndia. ;hen the +ndian team retires to bed, the onsite
team ta!es over the wor!, thus significantly reducing the proDect turnaround time. Cortel
Cetwor!s, an +T firm headquartered in ,anada, started its operations in +ndia to harness the
benefits of the time difference between +ndia and ,anada, along with cost savings.
The +ndian government also offers ta- holidays under ection /)1 and /)B of +ncome4ta- 1ct
on various +T enabled products and services. These services include bac!4office operations,
call centers, payroll, data processing, geographic information system, human resource and
training, insurance claim processing, legal services, medical transcription, engineering and
design, accounting, administration and support, and content development.
Evolution of Outsour"in* in India
+ndian became a prominent destination for outsour"in* in the services sector in the /00)s.
Outsourcing to +ndia started with the +T industry, which has responded to the changing mar!et
requirements by increasing the scale of operations and capability to handle comple-ity. The
+ndian software industry, according to Jris 2opala!rishnan, ,OO, +nfosys Technologies
Bimited, has gone through the following four stages of development6
/. 1789s to earl- 1779s6 There was a shortage of s!ills and cost was the prime driver for
outsourcing to +ndia. ,ompanies focused on e-panding their s!ill sets during this period.
'. 177: to 177;6 This was the most crucial time for +T outsourcing in +ndia. The post
liberali"ation reforms helped already e-isting companies speed up e-pansion. Cew
companies also got support in the form of incentives from the government. The important
tas!s outsourced to +ndia during this period were medium and large application proDects on
legacy migration and enterprise wide +T and problems related to @'J syndrome. ,ompanies
focused on acquiring diverse s!ills and e-ecution capabilities, along with achieving client
delight trough productive and quality delivery of proDects.
%. 1777 to %9916 ;hile proDects related to @'J syndrome were outsourced on a large scale to
+ndia, companies started acquiring additional competence especially in enterprise resource
planning and customer relationship management during this stage. The industry gave
importance to a variety of business aspects such as achieve e-cellence in quality of output
delivered, ma!ing investments in 3?$, ensuring business continuity and financial stability,
gaining world4class proDect management capabilities, e-panding services to +T consulting by
gaining domain s!ills and developing infrastructure for further growth.
*. %991 to )resent6 The industry now caters to large application development and maintenance
needs of corporate across the world. +ndian companies chal! out +T strategies for large
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corporations, and focus on providing end4to4end solutions. +ndian companies are now in the
process of aggressively gaining e-pertise for carrying out high end wor! such as 3?$,
architecture and business integration.
BPO in +ndia has grown rapidly as compared to software services as the advantages offered by
the country (low cost and abundant talent pool) were well !nown and tested in +T outsourcing.
9ost of the infrastructure required was already in place and companies needed to set the
processes right to get BPO going in +ndia. 1ccording to 9ohanbir awhney, Professor,
Jellogg chool of 9anagement, evolution of BPO in India has witnessed three prominent
phases. These waves are6
/. Barge multinational companies set up their captive centers in the country. 1merican
8-press, 28 and ,itiban! were among the pioneers which were followed by numerous
ban!s, financial services, manufacturing companies, etc. These companies performed their
bac!4office operations and customer services through these offshore captive centers.
'. The captive centers were followed by the establishment of start4up BPO operations by
e-perienced professionals. uch companies were often bac!ed by venture capital.
%. +T maDors such as +B9 ventured into +ndian BPO mar!et to tap the opportunity. These
companies had e-perience in managing offshore +T operations which helped them in gaining
an easy entry into the BPO mar!et.
<no/led*e Pro"ess Outsour"in* in India
+ndia has being the leader in offshored low end IT and BPO wor!, especially "usto&er
servi"e outsour"in*, however, the country is also gearing up to ta!e on comple- tas!s that are
higher up the value chain. +ndia is now receiving low end as well as high end wor! in both +T
and BPO. The BPO services offshored to +ndia can be categori"ed according to the following
three categories6
Lo/6 ,all center, bac! office operations, transcription, processing, accounting
.ediu&6 +nsurance claims, engineering
,i*'6 3esearch and development, underwriting, intellectual property, mar!et research,
equity research
Table * provides a list of functions that are being outsourced to +ndia in various verticals.
,learly, in all these verticals, high end tas!s are being outsourced to +ndia.
Table *6 >igh 8nd Tas!s Outsourced to +ndia
Industr- Transa"tion Pro"essin* Desi*n and Anal-sis R0D
+T @ @ @
15
Pharmaceutical = Biotechnology @ @ @
,hemicals 4 @ @
8ducation @ @ 4
8ngineering 4 @ @
Ainancial ervices @ @ 4
1ccording to research firm 8valueserve, the Jnowledge Process Outsourcing (JPO) mar!et is
growing faster than the low end services mar!et. JPO mar!et in +ndia is estimated to reach
#$ /7 billion by ')/) from #$ /.' billion in '))%, at a cumulative annual growth rate
(,123) of *. percent. On the other hand, the low end outsourcing services mar!et is
e-pected to grow at a ,123 of '. percent over these seven years and reach #$ %0.& billion
in ')/) from #$ 7.7 billion in '))%.
3ecently +ndia has also emerged as a global hub for carrying out 3?$. Bondon4based
8conomist +ntelligence #nit conducted a survey in '))* to find suitable 3?$ destinations
globally. 1ccording to the survey, +ndia is the third most favorable country for 3?$
investments, ,hina and the # being the top two destinations. 3?$ investments in +ndia
reached #$ ..& billion in '))* from #$ %.' billion in '))', at a ,123 of over *( percent.
This growth rate is e-pected to be over *) percent in the ne-t few years, thus further boosting
+ndiaHs 3?$ capabilities. Over /() 9C,s including 28, 2eneral 9otors, 9icrosoft, Te-as
+nstruments, 1straKeneca, +ntel, 1nalog $evices and +B9 have already initiated 3?$
activities in the country. ome have set up their own captive centers while others are forming
3?$ partnerships with other companies and research laboratories or contracting 3?$ wor! to
e-isting research laboratories.
+ndia produces %)),))) engineers each year as compared to .(,))) in the #. 1s a result,
companies have ready access to a large pool of researchers who charge much less than their
counterparts in the # and 8urope. +ndia also has presence of world !nown educational
institutions such as the +ndian +nstitutes of Technology (++Ts), Cational +nstitutes of
Technology (C+Ts) and +ndian +nstitute of cience (++c), and a vast networ! of ',0)) research
laboratories and *)) state run laboratories. 9C,s outsourcing their 3?$ to +ndia can
leverage this infrastructure to their benefit. The +ndian government has supported 3?$
activities in the country by offering various incentives to companies that conduct research in
+ndia. These factors enable +ndia to have a prominent position in the global 3?$ scenario.
Co&)arison /it' Ot'er Countries
Cumerous studies have shown that +ndia is the most attractive destination for offshore
outsourcing. 1T Jearney released a report on country attractiveness for outsourcing and
offshoring in '))*.
16
The report placed +ndia at the top of all the studied countries, followed by ,hina and 9alaysia.
Garious factors such as availability and education of human resources, cost considerations
including wages, infrastructure cost and ta-es, and the overall political stability and
intellectual rights security were used to find an attractiveness inde- for each country.
+ndia ran!ed highest in the availability of talented, s!illed and e-perienced wor! force. +ndia
also offers the best financial structure as it has a favorable ta- and regulatory environment,
labor costs and infrastructure costs. The research findings are summari"ed in Table (.
Table (6 1ttractiveness +nde- for Offshore Bocation
3an! ,ountry 1ttractiveness +nde-
/ +ndia 7./'
' ,hina (../
% 9alaysia (.(0
* ,"ech 3epublic (.(&
( ingapore (.*(
. Philippines (.*(
7 Bra"il (.**
& Poland (.%%
0 >ungary (.'0
/) Thailand (.')
Though ,hina is ne-t to +ndia as an attractive destination, it lags behind +ndia in a number of
parameters. Table . compares the two countries for their suitability for +T outsourcing based
on factors such as talent pool, government support, education, etc. ,learly, +ndia has a larger
talent pool which is proficient in 8nglish and which produces better quality wor! using
superior infrastructure. The ,hinese government is, however, ta!ing steps to improve ,hinaHs
value proposition for an offshore hub in services. +t is focusing on providing e-cellent higher
education to its youth by starting about /)) technological institutions similar to the ++Ts. The
,hinese government has also made 8nglish compulsory in schools to increase the number of
8nglish spea!ing people.
Table .6 ,ountry ,omparison for +T Outsourcing6 +ndia vs. ,hina
17
Para&eter India C'ina
Babor Pool >igh 9edium
8ducation ystem >igh >igh
8nglish Proficiency >igh Bow
,ost 1dv antage >igh >igh
+nfrastructure 9edium 9edium
2overnment upport >igh 9edium
:uality >igh Bow
,ultural ,ompatibility 9edium Bow
Business 8nvironment (includes political scenario) >igh
Bow

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