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May 2, 2011 GROUP 8 1

OUTSOURCING: THE CASE OF INDIAN BPO SEGMENT has been submitted in partial fulfillment of the PGDMcourse, 3rd Trimester of PGDM Program at Jaipuriainstitute of management By Members of Group 8

Shivam -PGMF0923Sanjay -PGMF0920Shubham -PGMF0921

Submitted To : Dr. Banash r ee D ey (Faculty: Ma rk eting Of Se rv ices)

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May 2, 2011 GROUP 8 2

BREIF INTRODUCTION

Outsourcing refersto a comp a ny th a t

contr a cts w ith a nother comp a ny to

provide services th a t

might other w ise b e performedb y in-house employees .

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May 2, 2011 GROUP 8 3

BUSINESS PROCESS OUTSOURCING

Form of outsourcing that involves the contracting of the operations andresponsibilities of specific business functions (or processes) to a third-partyservice provider.Originally, this was associated with manufacturingfirms, such as Coca Cola that outsourced large segments of its supplychain. In the contemporary context, it is primarily used to refer to theoutsourcing of services.BPO that is contracted outside a company's country is called offshoreoutsourcing.BPO that is contracted to a company's neighboring (or nearby) country iscalled near shore outsourcing.

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May 2, 2011 GROUP 8 4

BPO enables companies to reduce cost and Start up operations with greater speedEnsure uniformity of management practices across the globeTap into alternative sources of revenueHave more consistent training practices.

There are three distinct process areas in an organizations cost structure that can be

outsourced, as B usiness administrationSupply chain management, andCustomer service, sales and marketing .

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May 2, 2011 GROUP 8 5

TYPES OF SERVICES BEING OFFERED BY BPO'S

Customer Support ServicesTechnical Support ServicesTelemarketing ServicesEmployee IT Help-desk ServicesInsurance ProcessingData Entry Services / Data Processing ServicesData Conversion Services

Scanning, OCR with Editing & Indexing ServicesB ook Keeping and Accounting ServicesForm Processing ServicesInternet / Online / Web Research

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May 2, 2011 GROUP 8 6

NATURE OF OUTSOURCING Companies seeking to outsource their business processesto external parties need to evaluate them thoroughly beforethey begin operations as most B PO activities tend to havemaximum benefit to the outsourcing organization whenthey have a degree of continuity.

This continuity is derived from long-term partnerships. Theservice provider goes through a learning curve beforeefficiencies and effectiveness in managing andimplementing the set of processes set in.

Unlike other outsourced activities such as applicationdevelopment or system integration that tend to be project based and relatively short term, B PO is a long-termundertaking with contracts lasting several years.

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May 2, 2011 GROUP 8 7

63 percent of BPO contracts are for 5-10 years

25 percent for three-to-five years. This is mainly because of the highcost of switching between vendors.In addition, renewal rates are high. According to vendor responses tothe Gartner survey, nearly 90 percent of contracts are renewed, withonly a 10 percent rate of non-renewals.

Companies that outsource their business process also have to decidewhat the nature and extent of the relationship with their service provider will be. To what extent are they going to outsource will it be purely ona transactional basis, or will it be more of a long-term project?

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May 2, 2011 GROUP 8 8

INDIAS BPO INDUSTRY India's BPO industry is at a significant turning point. Over the last five tosix years the industry has grown faster than the IT services industry toachieve USD 11 billion revenues by 2008.Next 10 to 15 years can be fundamentally different from the last 5years. A number of demand and supply side factors are likely to alter the industrys growth trajectory.

For e.g. on the demand side, the global economic crisis and changingsocio-economic, demographic and environmental landscape are goingto redefine the addressable opportunity.On the supply side, increasing competition from other low costcountries, shortage of talent and need for new business models arelikely to affect the industry significantly.

It is therefore imperative for BPO customers and providers tounderstand the impact of these factors and transform their approachand business models accordingly.

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May 2, 2011 GROUP 8 9

BPO: INDIA SWOT BPO: INDIA SWOT

OpportunityOpportunity

Move up the value chain Expand into other countries other than US

StrengthStrength

Huge Skilled labour Superior service maturity Strong governmental support Cost competitiveness

Threat & ChallengeThreat & Challenge

Emerging low-cost nations Unstable geopolitical situation Rising costs Continue supply of talent pool

WeaknessWeakness

Physical Infrastructure Bureaucracy

9

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May 2, 2011 GROUP 8 10

MARKET SIZE

India's domestic B PO market, with nearly 500 players, isset to grow at a CAGR of 33.3 per cent to touch revenues of $6.82 billion by 2013, up from $1.62 billion recorded in2008.

the B PO market around the globe is around $300-544billion, of which $20 billion will be India's share by theyear 2008.

Revenue \ Year 2003-04 2004-05 2005-06 2006-07 2007-08

Domestic BPO 0.3 0.6 0.9 1.1 1.6

Overall BPORevenue 3.4 5.2 7.2 9.5 12.5

Figures in $ billion Source: Nasscom

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May 2, 2011 GROUP 8 11

According to Nasscom, total IT-BPO clocked (or will clock)

2007-08: $52 billion (growth of 28%).$40.4 b from exports & $11.6 domestic.

Of the exports, IT grew by 28% to 23.1 b B PO exports went

up by 30% to $10.9 b2008-09*: $62-64 billion2010*: 110 billion

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May 2, 2011 GROUP 8 12

Top 5 India-Centric Providers BPO Revenue Estimates by Geography,2008 (Millions of Dollars) I ndi a -He a dqu a rtered P roviders R evenue Asia/Pacific Europe North America2008 W orld w ide BP O

Genpact 833 100 233 500 Aditya Birla Minacs 392 4 27 361Firstsource 367 38 100 229WNS 366 2.9 232.4 131.7TCS 361 4.9 188 168.1Total for 4,070.6 407.6 400.2 262.75Top 20 Vendors

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May 2, 2011 GROUP 8 13

INDIA:THE OUTSOURCING DESTINATION

Cost and quality benefits play a positive role in making India a choicedestination for outsourcing of technology.

According to a study conducted by Forrester Research in November,2001, Indias edge over other competing nations in the IT outsourcingand remote development business is based on the

1. countrys decade old experience in this area.2. Fluency in the English language3 . Corporate friendly atmosphere created by liberal policies of the

Government.

Today, there is a greater focus by MNCs on the Indian IT outsourcingand remote development market. A large number of companies are

1. outsourcing their software development to Indian companies.2. Others are establishing a presence in India and participating actively in

the software export arena.India can be an ideal offshore destination for remote development,remote programming and IT outsourcing.

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May 2, 2011 GROUP 8 14

COMPETITIVE EDGE

Going forward, China and Philippines can emerge as seriouscompetitors to India.B esides the low cost of labour, the other factors influencingcompanies to outsource to India are the superior quality andlow turnover rates as compared to other countries.

Over the last decade or so India has seen a quantumimprovement in terms of its technical, technological, andtelecommunications infrastructure.

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PE O PLEEnglish speaking workforce

Highly skilled,

IT savvy workersStrong work ethicsHigh level of educationCosmopolitan culture

CA P ACITY2.5 Million graduates

every year

World s second largest Low labour cost

English speaking population Abundant world class

Office space at low cost

L O CATI ON12 Hour time zone difference

Government support

for IT & ITESPolitical stability

Strong financial systemStrong legal system

Cosmopolitan culture

T E C HNO L OG YProven expertise inIT related services

IPCL and other telecomcost going down.Private players in telecom

and Internet service .

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May 2, 2011 GROUP 8 16

Key Operational Challenges in the BPO-ITES Industry

Soaring revenues, increasing job opportunities, changes in lifestyle, excellent growth prospects and a global footprint - theIndian B PO/ITES industry has achieved it all. Currently sizedat $2.3 billion, the Indian B PO and ITES business in thecountry has been pegged at $21-$24 billion by 2008. Some of the key factors that have led to this unprecedented successare:Financial B enefit - Cost Arbitrage

Process Maturity and Delivery CapabilitiesHuman ResourcesGovernment Support

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Overcome the drawbacks

In order to sustain its success, the Indian BPO/ITESindustry needs to concentrate on strategic issues like

o avoidance of price war,o acquisition of domain knowledge,o growing from low margin businesses to high margin

businesses (Analytics, Financial Management, etc.) and

o leveraging existing IT off shoring services for crossselling to existing clients.

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May 2, 2011 GROUP 8 18

Apart from the strategic issues, there are a lot of operational challenges

Infrastructure Management 1. Facility Location2. Telecommunication Infrastructure3. Financial Requirements

Human R esources Management 1. High Attrition rates2. Recruitment Strategies

Project Management 1. Estimation Techniques2. Process Maturity

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The challenges have

been classified into ten themes Key Process ChallengesEffective Practice for Improving ResponsivenessProcess Improvement Improving Quality and AccuracyCost-Effective TrainingRetentionOrganization StructureEnd-User SatisfactionManaging Client RelationshipStrategies to Increase B usiness .

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May 2, 2011 GROUP 8 21