News APP

NewsApp (Free)

Read news as it happens
Download NewsApp
Rediff.com  » Business » Are Indian BPOs facing a mid-life crisis?

Are Indian BPOs facing a mid-life crisis?

By Subir Roy
June 15, 2006 13:01 IST
Get Rediff News in your Inbox:

The Indian ITES-BPO industry is perceived to be facing a mid-life crisis. This is a little different from the earlier concern, shared by this writer that it was maturing too fast, even before it could properly grow up.

The less than six-year-old industry's exports are now more than a third of the exports of the over 20-year-old software industry and are on a breathtaking near 40 per cent year on year growth path. It is possible to visualise a day when ITES-BPO will lead software in both total value and jobs and have a huge range of offerings stretching across the entire value chain.

Most of the earlier concerns about the future of ITES-BPO centred around the perception that it was too heavily loaded towards the low-value voice and call centre business, commoditised and driven by severe price competition.

India and outsourcing: Complete coverage

Critically, in the last year and more, the industry has managed to get out of the voice and call centre corner and is handling larger bits of processes instead of just individual transactions.

This change is best demonstrated by the transformation in Wipro BPO from what it was in its Spectramind days. The industry continues to get fresh voice business in good volume but there is a growing wider play beyond it.

Volume growth for Indian BPO comes most from the captive business of MNCs, which is now creeping up from its earlier 60 per cent share of the total business. A day may well come when IBM will have the largest headcount among IT-ITES behemoths in India as Indian leaders focus more on acquiring a global presence.

But this is not the entire picture. The leading Indian IT-ITES combines and the former captives like Genpact and WNS are both growing vigorously and going up the value chain.

The value game is being played particularly by the latter and also the standalone niche players who are peopling the KPO (knowledge process outsourcing) space.

In this scenario, the one sector that has lost out is the plain vanilla third-party BPOs. But even among them are quality players like 24/7, which continue to beat the captives of their clients in operational excellence.

Undoubtedly, there aren't too many like 24/7 but Indian-owned volume play continues to be delivered with confidence by the broad spectrum Indian it leaders.

In real life, things happen first. Then players with insight articulate the change and eventually wordsmiths and slogan writers give distinguishing labels to the before and after stages for latter-day theorists to rationalise the whole process of change.

Romi Malhotra, managing director of Dell International Services, performed this role of insightful player and slogan writer when he told Nasscom's BPO summit in Bangalore recently that the earlier slogan "Come to India for cost and stay for quality" can now be changed to "Come to India for quality and stay for innovation".

This is a significant change, which is true also of what is happening in IT and has a remarkable parallel with the transformation and rise of Japan in the post-war period. The transformation first occurs in transiting from cost advantage (wage arbitrage) to quality.

Then comes the stage where quality is taken for granted, like hygiene, and clients start demanding innovation as a matter of course. Indian BPO as also IT are here right now and the ability of Indian players to innovate, in which they are still beginners, will determine their future.

Once the RFPs are out for innovation, the question arises - should it be business and process innovation or technological innovation also? A very educative controversy developed on this at the recent Nasscom summit in Bangalore.

John McCarthy, vice-president at Forrester Research, said, to keep going ahead you have to back your process delivery excellence in a particular industry by creating your own technology engine or platform.

This will automate a lot of processes, offering clients continued cost savings. Additionally, being able to license the same solution to multiple customers will make you a winner.

There is no question that more and more processes are getting automated; software development time is being crashed and quality is being tested and ensured during development itself with the help of automated tools.

These tools come from the likes of Mercury (testing) and Cadence (silicon designing). But another technology trend is also developing. Service-oriented architecture and web-based services are increasingly forcing solution providers to become platform agnostic.

Your solution will have to work on top of any hardware and software the client already has. But McCarthy says you have to become like Hewitt Associates, which is able to sell its own platform to deliver top-class HR processes to multiple clients.

The jury is out on whether exclusive platforms are a must for top players but there is no question that to get ahead in ITES-BPO, as also in IT, you have to innovate - be it in process or technology.

A McKinsey study for Nasscom has identified a disconnect between ITES-BPO clients and their outsourced service providers. 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. Innovation thus holds the key to the future of Indian ITES-BPO, in which it is not so good right now.

What can be delivered out of India is illustrated by Dell's captive BPO operations, developing process innovations, which are being adopted worldwide in the organisation.

Similarly, Genpact, having innovatively improved process while within GE, is continuing to do so outside it.

There is little doubt that innovation will continue to take Indian ITES-BPO forward. Whether it will be done by Dell or Genpact, which is based in India but may eventually list in New York, becomes secondary in an industry which is the child of globalistion.
Get Rediff News in your Inbox:
Subir Roy
Source: source
 

Moneywiz Live!