BPO industry will shed the 'call centre' tag soon

NEW DELHI: India’s heady growth in the IT/ITES sector is the talking point everywhere. In 2006 too, KPO will remain the buzzword of this sunshine industry, predicts a study by ValueNotes Database, a Pune-based consultancy. ‘‘The industry will finally shed the ‘call centre’ tag as it moves to a multi-faceted industry, characterised by an ever-increasing array of services,’’ says Arun Jethmalani, CEO of ValueNotes Database. ‘‘And what’ll drive this transition is the prolific growth of vendors who are aiming to add scale, service lines and geography to their operations.’’ The study predicts five clear trends this year: KPO jobs will be hot With India consolidating its position as a KPO destination, opportunities in the sector will grow. Studies predict it’ll do so by 40% to 50% in the next five years with revenues expected to touch $12 billion to $15.5 billion by 2010. The explosive growth will generate a huge number of jobs.

Although skills shortage will eventually become an issue, in 2006 it will not be a factor at all. Hiring professionals such as doctors, lawyers, engineers and editors is expected to rise. Another ValueNotes study had predicted workforce in publishing outsourcing alone will grow 5.6 times by 2010. Consolidation of services The emergence of KPOs will see a proliferation of new service providers. ‘‘Opportunities in knowledge services are attracting a new breed of entrepreneurs, typically professionals into the offshoring business,’’ says Jethmalani. Minimal entry barriers, low infrastructure and set-up costs will encourage small KPOs to come up. Unlike commodity services like call centres or large-scale back-end processing, the minimum critical mass for KPOs is not large.

Also, the high degree of specialisation enables small firms to exist profitably. As the KPO business is not scale driven, concepts such as home-shoring and freelance work will also gain ground. This will push fragmentation of service providers. Small towns to join party So far most of the ITES growth was concentrated in metros — Delhi, Mumbai, Bangalore, Pune, Hyderabad and Chennai. Rising attrition rates and wage costs here coupled with attractive benefits by state governments will drive BPOs to moffusil towns, says the study.

Many state governments along with Software Technology Parks of India are developing such parks to encourage companies to move to smaller cities. Punjab, Rajasthan and UP are following Maharashtra, Andhra Pradesh and Karnataka, and investing heavily in IT Parks. Captives in India for good The year will see many more MNCs jump into the offshoring bandwagon. Most will be fully-owned captives as increasing sensitivity towards IPR, data security and confidentiality make captives a simpler choice. Meanwhile, many large corporations that have been testing the offshore waters for some time will take the plunge this year. This will help them expand their presence in India too.

Acquisition, the buzzword This will reach a new high. The market will see mega-deals as well as smaller ones. However, as KPO outfits are generally smaller than BPOs the deals will be smaller. Acquirers will find it worthwhile to do small deals to acquire domain knowledge, new customers and position themselves. KPO acquisitions will be the growth strategy of two types of companies: those already established who want to gain specific domain expertise, or clients in a particular area or geographic region and multi-service BPO companies wanting to climb the value chain by adding high-end capabilities.

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.

IT & ITeS see $36bn revenue in FY06

(Ecomonic Times, The (India) (KRT) Via Thomson Dialog NewsEdge) Feb. 10--MUMBAI, India -- The Indian IT and IT-enabled services sector is on track to grow by 28 percent and mop up over $36bn in revenue in FY06. Out of this, software and services exports will bring in $23.4bn (a growth of 32 percent), while hardware will contribute $6.9bn and the domestic market will account for $6.1bn.

The share of the booming sector in India's GDP is also increasing steadily. The IT and ITeS sector contributed about 4 percent of GDP in '04-05 and is expected to reach 4.8 percent in FY06, according to the Nasscom Strategic Review '06."In spite of the growth, it is estimated that less than 10 percent of the addressable market for globally sourced IT-ITeS has been captured till date, indicating significant headroom for growth," Nasscom's president Kiran Karnik said, ahead of the Nasscom India Leadership Forum.The apex industry body is aiming for $60bn in exports by '10, provided the sector continues to grow at the current rate of 20-25 percent. In '05, the BPO sector contributed $5.2bn, of which $4.6bn were exports and the rest came from the domestic market. It is expected that domestic market will grow at 22 percent in the current fiscal.

"Healthy domestic market will fuel growth in sectors like banking, which rely heavily on IT applications," Mr Karnik said. The total employment in the current fiscal in IT software and services sector would reach close to 13 lakh.Currently, the BPO sector employs 230,000 people. Nasscom estimates there will be an addition of 4 lakh staff each in IT services and BPO sector by March 31, '06. S Ramadorai, Nasscom's chairman, and CEO and MD at TCS, said: "To continue growth in the sector, it is essential to focus on skill development to better leverage the world's largest working population." He said Nasscom was in talks with foreign investors to push for infrastructure development in tier II and tier III cities.