Business process outsourcing in India
Encyclopedia
The business process outsourcing industry in India refers to the business process outsourcing
Business process outsourcing
Business process outsourcing is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments...

 services in the outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

 industry in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

, catering mainly to Western operations of multinational corporation
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...

s (MNCs).

As of 2008, around 0.7 million people work in outsourcing sector (less than 0.1% of Indians). Annual revenues are around $11 billion, around 1% of GDP. Around 2.5 million people graduate in India every year. Wages are rising by 10-15 percent as a result of skill shortage.

Airlines

In the early 1980s several European airlines started using Delhi as a base for back office operations, British Airways
British Airways
British Airways is the flag carrier airline of the United Kingdom, based in Waterside, near its main hub at London Heathrow Airport. British Airways is the largest airline in the UK based on fleet size, international flights and international destinations...

 being one among them. The BA captive was finally spun off as a separate organization called WNS Global Services
WNS Global Services
WNS Limited is a global Business Process Outsourcing company headquartered in Mumbai, India. The company is a wholly owned subsidiary of WNS Limited, which is incorporated in Jersey, Channel Islands...

 in 2002.

Amex

In the second half of the 1980s, American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...

 consolidated its JAPAC (Japan and Asia Pacific) back office
Back office
A back office is a part of most corporations where tasks dedicated to running the company itself takes place. The term "Back office" comes from the building layout of early companies where the front office would contain the sales and other customer-facing staff and the back office would be those...

 operations into New Delhi and NCR region. This center was headed by Raman Roy, and has been a source of several leading names in the Indian BPO Industry.

General Electric

In the 1990s Jack Welch
Jack Welch
John Francis "Jack" Welch, Jr. is an American chemical engineer, business executive, and author. He was Chairman and CEO of General Electric between 1981 and 2001...

 was influenced by K.P. Singh, (a Delhi based realtor) to look at Gurgaon
Gurgaon
Gurgaon is the second largest city in the Indian state of Haryana. Gurgaon is the industrial and financial center of Haryana. It is located 30 km south of national capital New Delhi, about 10 kilometers from Dwarka Sub City and 268 km south of Chandigarh, the state capital...

 in the NCR region as a base for back office operations. Pramod Bhasin
Pramod Bhasin
Pramod Bhasin is the Non-Executive Vice Chairman and former President and CEO of Genpact, the largest business process outsourcing company in India .-Foundation of Business Process Outsourcing:...

, the India head of G.E. hired Raman Roy and several of his management from American Express to start this enterprise called GECIS
GECIS
Gecis or GE Capital International Services is the name on the Business Process Outsourcing company of General Electric. It is the pioneer of BPO in India and the largest BPO company in India. Headquartered in Gurgaon in India, it has offices in China, Romania, Hungary, Mexico, UK and USA.It was...

 (GE Capital International Services). Raman for the first time tried out voice operations out of India, the India operations also was the Beta site for GE Six sigma
Six Sigma
Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...

 enterprise. The results made GE ramp up their Indian presence and look at other locations. In 2004 GECIS was spun off as a separate legal entity by GE, called Genpact
Genpact
Genpact Limited is a global business process and technology management company. It was formerly a GE owned company called GE Capital International Services or GECIS. It operates from India, China, Guatemala, Hungary, México, Morocco, the Philippines, Poland, the Netherlands, Romania, Spain, South...

. GE has retained a 40% stake and sold a 60% stake for $500 million to two equity companies, Oak Hill Capital Partners and General Atlantic Partners.

Third party BPO's

Until G.E most of the work was being done by "captives"- a term used for in house work being done for the parent organisation. In 2000 Raman Roy and some team members from GECIS quit, and with VC funding from Chrysalis Capital started Spectramind. At the same time an organisation called Efunds started in Mumbai and Gurgaon, and Daksh in Gurgaon. However, recently most of the Indian BPO's even smaller and mid-sized ones are actually setting-up their onshore presence. Most of the serious players are actually improving the outsourced business processes by leveraging on years of experience and now some of them are directly competing with their own older clientbase by marking this transition to KPO
Knowledge process outsourcing
Knowledge process outsourcing is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost...

's.

Entry of IT majors

In 2002 Spectramind was bought by software major Wipro
Wipro
Wipro Limited formally Western India Products Limited is a global IT services and consulting company headquartered in Bangalore, India. As of 2011, Wipro is the second largest IT services company by turnover in India and employs more than 120,000 people worldwide as of March 2011...

, and BPO by then had become mainstream like the IT Industry in India. The team that had set up Spectramind went on to start Quatrro
Quatrro
Quatrro BPO Solutions is a business process outsourcing company based in India and Chicago and with fulfillment operations centers in Madison , San Francisco, Montreal, Pleasant Prairie , Gurgaon, Chennai, Mumbai, Dubai, Colombo, Shanghai and Singapore...

 in 2006, a BPO specialising in high end BPO/KPO services. By 2002 all major Indian software organizations were into BPO, including Infosys
Infosys
Infosys Limited, formerly Infosys Technologies Limited is a global technology services company headquartered in Bangalore, India. It is the second largest IT exporter in India with 133,560 employees as of March 2011. It has offices in 33 countries and development centers in India, China,...

 (Progeon
Progeon
Infosys BPO Limited is the BPO subsidiary of Infosys Technologies Ltd.. Infosys BPO closed FY 07-08 with a revenue of $ 250.3 million with 11 centers worldwide employing 16,295 employees and 44 clients.-History:The company was started as Progeon Limited in April 2002 and is today among the top...

), Inforlinx, HCL
Hindustan Computers
HCL is a global technology and IT Enterprise company based in Noida, India. The company comprises two publicly listed companies, HCL Technologies and HCL Infosystems....

, Satyam (Nipuna) and Patni
Patni Computer Systems
iGATE Patni , is a provider of Information Technology services and business solutions. The company employs over 15,000 people, and has 23 international offices across the Americas, Europe, and the Asia-Pacific region, as well as offshore development centres in eight cities in India...

. By 2003 Daksh was bought out by IBM, and later in 2006 MphasiS was acquired by EDS
Electronic Data Systems
HP Enterprise Services is the global business and technology services division of Hewlett Packard's HP Enterprise Business strategic business unit. It was formed by the combination of HP's legacy services consulting and outsourcing business and the integration of acquired Electronic Data Systems,...

.
Even international 3rd party BPO players like Convergys
Convergys
Convergys Corporation is a corporation based in Cincinnati, Ohio that provides solutions in customer management and information management. Customer management solutions include agent assisted, self-service and proactive care solutions tailored to the communications, financial services,...

 and Sitel
Sitel
Sitel is a telemarketing and outsourcing business headquartered in Nashville, TN. It maintains over 140 call centers in 27 countries.Prior to its acquisition by ClientLogic, described below, it had 70 call centers in 25 countries and over 30,000 employees...

 had set up shop in India, swelling the BPO movement to India.
Then service arms of organizations like Accenture
Accenture
Accenture plc is a global management consulting, technology services and outsourcing company headquartered in Dublin, Republic of Ireland. It is the largest consulting firm in the world and is a Fortune Global 500 company. As of September 2011, the company had more than 236,000 employees across...

, IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...

, Hewlett Packard, Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...

 also set up shop in India.

Emergence of Rural BPOs

Booming India Inc has led to skyrocketing real estate and infrastructure costs in Tier-1 cities. BPO industry has thrived all these years because of its ability to deliver services at a low cost. Increasing infrastructure costs, real estate costs, and salaries have raised BPO costs significantly and as a result Indian BPOs in Tier-1 cities are looking at Tier-2 and Tier-3 cities for operation.

Few entrepreneurs who had a vision of bringing the rural India into the mainstream of knowledge economy
Knowledge economy
The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...

 have found an opportunity here - setting Rural BPOs. The transformation of rural India started with the emergence of these Rural BPOs.

Future of outsourcing services to India

Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8-10% for the next decade. In addition, outsourcing efforts to India are held up as an effective remedy for concerns about both Chinese government policy and labor force issues, such as increasing costs and shortages.

Size of industry

The industry has been growing rapidly. It grew at a rate of 38% over 2005. For the FY06 financial year the projections is of US$7.2 billion worth of services provided by this industry. The base in terms of headcount being roughly 400,000 people directly employed in this Industry. The global BPO Industry is estimated to be worth 120-150 billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India thus has some 5-6% share of the total Industry, but a commanding 63% share of the offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO Industry which is in total expected to have revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of the approximate one million workers estimated to be directly employes in the IT and BPO Sector.

The related Industry dependent on this are Catering, BPO training and recruitment, transport vendors, (home pick up and drops for night shifts being the norm in the industry). Security agencies, Facilities management companies.

From a PricewaterhouseCoopers survey

Table 1: Global BPO Market by Industry
Industry Percentage (%)
Information Technology 43
Financial Services 17
Communication (Telecom) 16
Consumer Goods/ Services 15
Manufacturing 9

Table 2: Global BPO Market by Geography
Country Percentage (%)
United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 
59
Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

 
27
Asia-Pacific
Asia-Pacific
Asia-Pacific or Asia Pacific is the part of the world in or near the Western Pacific Ocean...

 
9
Rest of the World 5

Table 3: Size of Global Outsourcing Market
Year Size (USD Bn)
2000 119
2005 234
2008 (est.) 310

Table 4: Size and Growth of BPO in India
Year Size (US$ Bn) Growth Rate (%)
2003 2.8 59
2004 3.9 45.3
2005 5.7 44.4


Currently the Indian BPO Industry employs over 245,100 people and another 94,500 jobs are expected to be added during the current financial year (2005–2006)
Table 5: Call Center Employee cost
Country Cost (USD/yr)
United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 
19,000
Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 
17,000
India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

 
<7,500


Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12–24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.

Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

Leading BPO-ITes cities in India

Bangalore
Bangalore
Bengaluru , formerly called Bengaluru is the capital of the Indian state of Karnataka. Bangalore is nicknamed the Garden City and was once called a pensioner's paradise. Located on the Deccan Plateau in the south-eastern part of Karnataka, Bangalore is India's third most populous city and...

, Chennai
Chennai
Chennai , formerly known as Madras or Madarasapatinam , is the capital city of the Indian state of Tamil Nadu, located on the Coromandel Coast off the Bay of Bengal. Chennai is the fourth most populous metropolitan area and the sixth most populous city in India...

, Hyderabad, Indore
Indore
Indore is one of the major city in India, the largest city and commercial center of the state of Madhya Pradesh in central India. Indore is located 190 km west of the state capital Bhopal. According to the 2011 Indian census, Indore city has a population of 1,960,631...

, Kolkata
Kolkata
Kolkata , formerly known as Calcutta, is the capital of the Indian state of West Bengal. Located on the east bank of the Hooghly River, it was the commercial capital of East India...

, NCR
National Capital Region (India)
The National Capital Region in India is a name for the conurbation or metropolitan area which encompasses the entire National Capital Territory of Delhi as well as urban areas ringing it in neighbouring states of Haryana, Uttarakhand, Uttar Pradesh and Rajasthan...

, Pune
Pune
Pune , is the eighth largest metropolis in India, the second largest in the state of Maharashtra after Mumbai, and the largest city in the Western Ghats. Once the centre of power of the Maratha Empire, it is situated 560 metres above sea level on the Deccan plateau at the confluence of the Mula ...

, Mumbai
Mumbai
Mumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...

 and Ahmedabad
Ahmedabad
Ahmedabad also known as Karnavati is the largest city in Gujarat, India. It is the former capital of Gujarat and is also the judicial capital of Gujarat as the Gujarat High Court has its seat in Ahmedabad...

 are Tier I cities that are leading IT cities in India.

With rising infrastructure costs in these cities, many BPO's are shifting operations to Tier II cities like Nashik, Sangli
Sangli
Sangli is a city in the state of Maharashtra of India. Sangli is known as the Turmeric city for its vast production of Turmeric. Sangli is situated on the banks of river Krishna and is the largest market place for Turmeric in Asia and houses many sugar factories, which it is also noted for...

, Aurangabad (Maharashtra), Mangalore
Mangalore
Mangalore is the chief port city of the Indian state of Karnataka. It is located about west of the state capital, Bangalore. Mangalore lies between the Arabian Sea and the Western Ghat mountain ranges, and is the administrative headquarters of the Dakshina Kannada district in south western...

, Mysore, Hubli-Dharwad, Belgaum
Belgaum
Belgaum is a city and a municipal corporation in Belgaum district in the state of Karnataka, India. It is the fourth largest city of the state of Karnataka, the first three being Bangalore, Mysore, Hubli-Dharwad....

, Coimbatore
Coimbatore
Coimbatore , also known as Kovai , is the second largest city in the Indian state of Tamil Nadu. It is a major commercial centre in Tamil Nadu and is known as the "Manchester of South India"....

, Madurai
Madurai
Madurai is the third largest city in the Indian state of Tamil Nadu and one of the oldest continuously inhabited cities in the world. It served as the capital city of the Pandyan Kingdom. It is the administrative headquarters of Madurai District and is famous for its temples built by Pandyan and...

, Hosur
Hosur
Hosur is a town and a municipality in Krishnagiri district in the Indian state of Tamil Nadu.The name of the town is from Kannada language which means 'New settlement/town' . It is a taluk of Krishnagiri district. It is located about 40 kilometres south-east of Bangalore and 38 kilometres from...

, Nagpur
Nagpur
Nāgpur is a city and winter capital of the state of Maharashtra, the largest city in central India and third largest city in Maharashtra after Mumbai and Pune...

, Kochi, Trivandrum, Chandigarh
Chandigarh
Chandigarh is a union territory of India that serves as the capital of two states, Haryana and Punjab. The name Chandigarh translates as "The Fort of Chandi". The name is from an ancient temple called Chandi Mandir, devoted to the Hindu goddess Chandi, in the city...

, Mohali
Mohali
Mohali is a city adjacent to Chandigarh, 18th District in Punjab, India. It is officially named after the eldest son of Guru Gobind Singh, Sahibzada Ajit Singh . It, along with Chandigarh and Panchkula, form a part of the Chandigarh Tricity...

, Panchkula
Panchkula
Panchkula is a planned city in Panchkula district, Haryana, India. It is a satellite city of the Union Territory of Chandigarh. It also shares seamless border with Mohali district in Punjab. The prestigious Chandimandir Cantonment Headquarters of the Indian Army Western Command, is also located in...

, Ahmedabad
Ahmedabad
Ahmedabad also known as Karnavati is the largest city in Gujarat, India. It is the former capital of Gujarat and is also the judicial capital of Gujarat as the Gujarat High Court has its seat in Ahmedabad...

, Bhubaneshwar, Jaipur
Jaipur
Jaipur , also popularly known as the Pink City, is the capital and largest city of the Indian state of Rajasthan. Founded on 18 November 1727 by Maharaja Sawai Jai Singh II, the ruler of Amber, the city today has a population of more than 3.1 million....

, Vishakapatnam , Raipur and Lucknow
Lucknow
Lucknow is the capital city of Uttar Pradesh in India. Lucknow is the administrative headquarters of Lucknow District and Lucknow Division....



Tier II cities offer lower business process overhead compared to Tier I cities, but have a less reliable infrastructure system which may hamper dedicated operations. The Government of India
Government of India
The Government of India, officially known as the Union Government, and also known as the Central Government, was established by the Constitution of India, and is the governing authority of the union of 28 states and seven union territories, collectively called the Republic of India...

 in partnership with private infrastructure corporations is working on bringing all around development and providing robust infrastructure all over the nation.

See also

  • Globalization
    Globalization
    Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

  • Software Technology Parks of India
    Software Technology Parks of India
    'Software Technology Parks of India' is a government agency in India, established in 1991 under the Ministry of Communications and Information Technology, that manages the Software Technology Park scheme. It is an export oriented scheme for the development and export of computer software,...

  • Information Technology Outsourcing
    Information Technology Outsourcing
    Information technology outsourcing or ITO is a company's outsourcing of computer or Internet related work, such as programming, to other companies...

  • Nalini by Day, Nancy by Night
    Nalini by Day, Nancy by Night
    Nalini by Day, Nancy by Night is a 2005 documentary film by filmmaker Sonali Gulati.This film explores business process outsourcing in India. Told from the perspective of an Indian living in the United States, the film provides us with a glimpse into India’s call centers,where telemarketers acquire...

    — 2005 documentary on outsourcing in India
  • Globalisation and outsourcing author Mark Kobayashi-Hillary
    Mark Kobayashi-Hillary
    Mark Kobayashi-Hillary is a British journalist, blogger, and editor based in São Paulo, Brazil - he is the chief executive officer of research company IT Decisions...

  • Call center security
  • Tidel Park
    Tidel Park
    TIDEL Park is an information technology park situated in the city of Chennai, India. The name TIDEL is a portmanteau of TIDCO and ELCOT. An ISO 9001/14001 company, it is the largest IT park in Asia...

  • HITEC City
    HITEC City
    HITEC City stands for Hyderabad Information Technology Engineering Consultancy City, a major technology township which is at the center of the information technology industry in Hyderabad, Andhra Pradesh, India....

  • InfoPark, Kochi
    InfoPark, Kochi
    Infopark, Kochi is an information technology park situated in Kakkanad, a suburb of the city of Kochi, India. Established in 2004 by the Government of Kerala, Infopark is spread over a campus with more than of built up area, housing over 75 companies which employ around 15,000 professionals...

  • Technopark Kerala
    Technopark Kerala
    Technopark is a technology park in Thiruvananthapuram , Kerala, India. The park is dedicated to IT ventures. It is the first and largest technology park in India....

  • Silicon Valley of India
    Silicon Valley of India
    The Silicon Valley of India is a nickname of the Indian city of Bangalore. The name signifies Bangalore's status as a hub for information technology companies in India and is a comparative reference to the original Silicon Valley, based around Santa Clara Valley, California, a major hub for IT...

  • Azim Premji
    Azim Premji
    Azim Hashim Premji is an Indian business tycoon and philanthropist who is the chairman of Wipro Limited, guiding the company through four decades of diversification and growth to emerge as one of the Indian leader in the software industry...

     — Father of the Indian Outsourcing phenomenon
  • Medical Transcription
    Medical transcription
    Medical transcription, also known as MT, is an allied health profession, which deals in the process of transcription, or converting voice-recorded reports as dictated by physicians and/or other healthcare professionals, into text format.-History:...


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