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Business process outsourcing in India

August 12, 2009
The business process outsourcing industry in India refers to the Services Outsourcing Industry in India, catering mainly to Western operations of MNCs (Multinational Corporations).
The sector witnessed considerable activity during 2004-2005, including a ramping up of operations by major multinational corporation’s players and Indian organizations stepped up hiring. The domestic BPO market, catalyzed by demand from the telecommunications and BFSI segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, including captive units (of both MNCs and Indian companies) and third-party services providers. The key enabler for this has been cheaper bandwidth leading to low telecom costs for leased lines and availability of educated English speaking workforce in India.
The Indian BPO industry remains on a growth path, emerging as one of the key investment markets in the country. It is also referred to as Information Technology Enabled Services or ITES, and high end work with specialization is referred to as Knowledge Process Outsourcing or KPO. There are other variants in use such as Legal Process Outsourcing (LPO).NASSCOM is a chamber of commerce that represents this body and lobbies for it, as well as creates a platform for members to take up common issues. NASSCOM services both the Indian Software and the Indian BPO industry.
In the early 1980s several European airlines started using Delhi as a base for back office operations, British Airways being one among them. The BA captive was finally spun off as a separate organization called WNS in the current millennium.
In the second half of the 1980s, American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into New Delhi. 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 was influenced by K.P. Singh, (A Delhi based realtor) to look at Gurgaon in the NCR region as a base for back office operations. Pramod Bhasin, the India head of G.E. hired Raman Roy and several of his management from American Express to start this enterprise called GECIS (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 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. 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
Till G.E most of the work was being done by “captives”- a term used for in house work being done for the parent organization. In 2000 Raman Roy and some team members from GECIS quit, and with VC funding from Chrysalis Capital started Spectra mind. At the same time an organization called EXL started in Noida and 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 ‘s.
Entry of IT majors
In 2002 Spectra mind was bought by software major Wipro, and BPO by then had become mainstream like the IT Industry in India. The team that had setup Spectra Ming went on to start Quatrro in 2006, a BPO specializing in high end BPO/KPO services. By 2002 all major Indian software organizations were into BPO, including Infosys (Progeon), Inforlinx, HCL, Satyam (Nipuna) and Patni. By 2003 Daksh was bought out by IBM and later in 2006 MphasiS by EDS. Even international 3rd party BPO players like Convergys and Sitel had set up shop in India, swelling the BPO movement to India. Then service arms of organizations like Accenture, IBM, Hewlett Packard, Dell too set up captives in India.
Size of industry:
The industry has been very 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 employees 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.
One Comment leave one →
  1. August 25, 2009 7:33 pm

    Hi Nice insight in to the Business Process Outsourcing.Really most of the Indian BPO’s are working for western Operations of Multinational Companies.This is just because of Qualitative trained people offering their services to a lower cost..Thank you

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