It’s young, it’s growing, and it’s known as BPO

Business process outsourcing, or BPO, as it is better known today, has changed the way young Indians in urban cities like Delhi, Mumbai and Bangalore work and spend.

The BPO industry basically thrives on back-office outsourcing and front- office functions performed by white collar and clerical workers. Examples include accounting, human resources, medical coding and transcription.

These are all important functions in a company or a medical institute, but they are not core to the company’s operations.

So functions like human resources or accounting or salary processing can be outsourced to companies that specialise in these functions rather than retain them in-house.

For BPO businesses to thrive, the leveraging of technology is very important. How else is it possible that when a customer of a credit card company in the US calls a toll-free line, an Indian sitting thousands of miles away in Bangalore or Delhi is able to deal with the concerned customer.

A big reason why India is a BPO destination is the army of young English- speaking graduates that Indian colleges spew out every year. With abundant supply, BPO companies can afford to price their services very competitively in India as compared to the US or the UK.

Another huge advantage is the time zone difference between us and the US, which is the largest market for outsourcing services. So when it is 10 am in the morning in the US, it is almost 10 pm here in India and Indian call centre workers can field calls from clients through the night.

The call centre segment is growing very fast and it typically employs young Indians who are fresh out of college. This kind of recruitment typically happens for call centres wherein customers form the western world call up toll-free numbers and these youngsters handle their calls and complaints. In India, the segment is also called as IT enabled services or ITeS.

Call centres are the lowest form of BPO that Indian companies offer to clients abroad. At a higher level, Indian BPO companies offer to take control of entire processes like accounting or human resources for clients. These kind of services require skilled professionals who have domain or industry expertise in a particular segment.

For example, an HR BPO will try to recruit personnel who have specialised in human resources. Today, the ITeS-BPO segment contributes to 30% of the technology exports from India. In the last financial year, ITeS-BPO export revenues grew by 44.5% to touch $5.2 billion. It is expected to touch $7.3 billon this fiscal. India has around 400 ITeS firms, most of them in the call centre and BPO domains.

In a recent study commissioned by Nasscom, it was revealed that the employee base at the end of FY05 in the ITeS-BPO segment was around 3.48 lakh, while the number of companies grew to 410 from 285 in FY04.

The study also revealed that captive units or BPO divisions set up by foreign companies for their own outsourced work, continue to be the single-largest earners of foreign exchange.

The Nasscom study pointed out that 65% of the revenues came from captive units and the estimated value of work outsourced (by domestic clients) was $600 million, double the $300 million in FY04. BPO offshored to India in FY05 was worth $165 million, up 120% from $75 million. Finance and accounting, and human resource BPOs are the fast-growing segments.

The report also said that ITeS-BPO firms were making global inroads with domestic providers of BPO services now offering services to their clients across the world by through multi-location delivery by expanding to China, eastern Europe, Ireland and Philippines, apart from within the country.