Introduction
Business process outsourcing (BPO) is a form of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of services.
BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact center services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near shore outsourcing. Given the proximity of BPO to the information technology industry; it is also categorized as an information technology enabled service or ITES. Knowledge process out sourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.
India has revenues of 10.9 billion USD from offshore BPO and 30 billion USD from IT and total BPO. India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year, despite the industry growing 38% in India last year, other locations like Eastern Europe, Philippines, Morocco, Egypt and South Africa have emerged to take a share of the market. China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Kolkata, Mumbai, Pune, Chennai and New Delhi. The top five Indian BPO exporters for 2006-2007 according to NASSCOM are Genpact, WNS Global Services, Transworks Information Services, IBM Daksh, and TCS BPO.
Threats Possessed by BPO’s
Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing leads to a different relationship between an organization and its contractor.
Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, and minimizing risks and avoiding any threats, a Business Continuity Management (BCM) model is setup. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.
Business Process Outsourcing in India
The business process outsourcing industry in India refers to the services outsourcing industry in India, catering mainly to Western operations of multinational corporations (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.
History
Airlines
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 Global Services in 2002.
Amex
In the second half of the 1980s, American Express consolidated its JAPAC (Japan and Asia Pacific) back office 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 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
Until 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 client base by marking this transition to KPO 's.
In 2002 Spectra mind was bought by software major Wipro, and BPO by then had become main stream like the IT Industry in India. The team that had setup Spectra mind 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 was acquired 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 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 have found an opportunity here - setting Rural BPOs. The transformation of rural India started with the emergence of these Rural BPOs. The major hurdle that these BPOs faced is quality man power. As a result these rural BPOs have remained targeting low end jobs like data entry.
Challenges to outsourcing services in India
Many analysts believe that the growth of India outsourcing sector is widely optimistic and it will slow down in future. Both IT and BPO sector is extremely dependent in USA and if the US dollar depreciates can adversely impact the entire sector. Additionally countries like China, Mexico and Vietnam are also expanding outsourcing operations and often providing cheaper services.
Leading BPO cities in India
Bangalore, Chennai, Hyderabad, NCR (New Delhi, Delhi, Gurgaon, Faridabad, NOIDA, Greater Noida, Jaipur, Lucknow, Dehradun, Rewari, Ghaziabad), Pune, Mumbai and Kolkata 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, Aurangabad (Maharashtra), Mangalore, Mysore, Hubli-Dharwad, Belgaum, Coimbatore, Madurai, Hosur, Nagpur, Kochi, Trivandrum, Chandigarh, Mohali, Panchkula, Ahmedabad, Bhubaneshwar, Jaipur, Vishakapatnam and Lucknow
Tier II cities offer lower business process overhead compared to Tier I cities, but may have a less reliable infrastructure system which may hamper dedicated operations. The Government of India in partnership with private infrastructure corporations is working on bringing all around development and providing robust infrastructure all over the nation.
BPO Attrition
Attrition means “A reduction in the number of employees through retirement, resignation or death” In the best of worlds, employees would love their jobs, like their co-workers, work hard for their employers, get paid well for their work, have ample chances for advancement, and flexible schedules so they could attend to personal or family needs when necessary. And never leave. But then there’s the real world. And in the real world, employees, do leave, either because they want more money, hate the working conditions, hate their co-workers, want a change, or because their spouse gets a dream job in another state. There are massive costs associated with attrition or turnover and, while some of these are not visible to the management reporting or budget system, they are none the less real.
Perhaps the greatest HR challenge facing globally distributed back-office and customer care centers is the retention of talented employees. Interviewees described attrition rates ranging from 15 to 50 percent in particularly active labor markets within countries such as India. While some attrition in this industry is expected and may be beneficial, firms are concerned about not recouping their upfront investments in people. Clearly, employee retention is being influenced by a number of different factors. The demand for experienced individuals, particularly at the supervisory level, is prompting firms to use signing bonuses and salary increases to entice talented individuals to switch firms. Also, these back-office and customer care centers – particularly those that are focused on working directly with customers – are often high-pressure, stressful environments. Contact centers are often required to meet fairly stringent service level agreements regarding expected call volumes and
average call length. These expectations cascade down to employees, and, as a result, many front-line workers face extremely demanding workloads. Given these conditions, many workers opt to leave the company soon after the firm has invested in their recruitment and training.
average call length. These expectations cascade down to employees, and, as a result, many front-line workers face extremely demanding workloads. Given these conditions, many workers opt to leave the company soon after the firm has invested in their recruitment and training.
Why People leave BPO’s
The reason for the high rate of attrition in the BPO sector particularly call centre segment range from lack of comfort of enrichment potential in terms of career growth. The growth of BPO industry is mainly depending on the cost effectiveness and quality of the manpower. Attrition is not a new problem and it has existed earlier and will continue to exist in any industry.
In spite of the salaries and facilities being high (especially for a graduate who starts his / her career with a BPO company) the average attrition rate is very high in this industry. There are numerous reasons for the attrition to be high which can be categorized into two broad classifications.
The first can be coined as “Drive Attrition” which is caused due to the employer; the second one can be termed as “Drag Attrition” which is caused due to the employee.
The reasons for Drive Attrition are due to employer’s policy / policies of terminating the employee at the end of the contract period for employment. Also the quality policy of the BPO companies guides them to retain only the most productive employee and hence makes them to terminate employee at regular intervals. A BPO company operates 24 hours a day and 365 days a year. Graveyard shifts and odd hours which suit the foreign clients create lot of problems to the employees. Symptoms of Insomnia and even depression are caused due to change of 24-hour biological rhythm of the body, and also, loss of employee’s personal life hence Drive attrition rate shoots up.
The companies do not have a particular day as weekly off for its employees. The employees are not even entitled for national holidays declared by Government of India, as the company works with client calendar. The call agents can avail leave (which should not affect the schedule) only with prior consent, and any unauthorized absence is a sufficient reason for terminating an employee.
Drag Attrition is basically due to the host of insecurities and vulnerabilities associated with the taking up a career with a BPO company. They are:-
1. No Career Prospects
The job of a call center agent (to start off) can be compared to a telemarketing or a telephone operator. Hence the scope to take up any other job (in case needed) or change of field is ruled out, as the experience gained in a call center will not be an iota of importance. Many others quit, as the chance to climb up the corporate ladder is bleak. Only a few very get promoted to the cadre of team leader and as soon as promotions are announced the many of frustrated employees quit.
2. Lack of Creativity
The work in the BPO Company needs no new creativity which adds to the enthusiasm of the employee. Voice Calls are the only thing which governs the activity of the BPO. Further BPO company work does not provide any scope for skill up gradation for the employee. The employer trains the employee to speak good English and nothing else which adds to the Drive attrition rate.
In spite of the salaries and facilities being high (especially for a graduate who starts his / her career with a BPO company) the average attrition rate is very high in this industry. There are numerous reasons for the attrition to be high which can be categorized into two broad classifications.
The first can be coined as “Drive Attrition” which is caused due to the employer; the second one can be termed as “Drag Attrition” which is caused due to the employee.
The reasons for Drive Attrition are due to employer’s policy / policies of terminating the employee at the end of the contract period for employment. Also the quality policy of the BPO companies guides them to retain only the most productive employee and hence makes them to terminate employee at regular intervals. A BPO company operates 24 hours a day and 365 days a year. Graveyard shifts and odd hours which suit the foreign clients create lot of problems to the employees. Symptoms of Insomnia and even depression are caused due to change of 24-hour biological rhythm of the body, and also, loss of employee’s personal life hence Drive attrition rate shoots up.
The companies do not have a particular day as weekly off for its employees. The employees are not even entitled for national holidays declared by Government of India, as the company works with client calendar. The call agents can avail leave (which should not affect the schedule) only with prior consent, and any unauthorized absence is a sufficient reason for terminating an employee.
Drag Attrition is basically due to the host of insecurities and vulnerabilities associated with the taking up a career with a BPO company. They are:-
1. No Career Prospects
The job of a call center agent (to start off) can be compared to a telemarketing or a telephone operator. Hence the scope to take up any other job (in case needed) or change of field is ruled out, as the experience gained in a call center will not be an iota of importance. Many others quit, as the chance to climb up the corporate ladder is bleak. Only a few very get promoted to the cadre of team leader and as soon as promotions are announced the many of frustrated employees quit.
2. Lack of Creativity
The work in the BPO Company needs no new creativity which adds to the enthusiasm of the employee. Voice Calls are the only thing which governs the activity of the BPO. Further BPO company work does not provide any scope for skill up gradation for the employee. The employer trains the employee to speak good English and nothing else which adds to the Drive attrition rate.
3. Monotony of work
The job remains same as to call clients and talk business. Same kind of lines repeated in the calls from the login point to logout point. Employees are bored of the same talks all through their working hours which lead to mental fatigue. Also the same kind of techniques and no manual intervention, everything is done technologically which makes a person as a robot which ultimately leads to fatigue.
4. Stressful Job
Also the nature of job in a typical BPO company is psychologically very stressful. The working hours are artificially created which affect the natural rhythm of human body. The symptoms of chronic fatigue, gastrointestinal problems, peptic ulcer, insomnia and even d The daily targets fixed to achieve push employees to work harder and harder leading to stress.
5. Switching jobs for high salaries
Poaching of employees by other competitive BPOs for higher salaries drives them to change jobs. The employees expect salary revision once in 4-6 months and if not they move to other organizations because of the rapid growth of the industry. Sometimes due to personal reasons like getting married (especially for the male employees) or falling in love or change of place.
6. Drive towards Higher Education
Most of the employees with professional degrees like BE, MCA and others appear for higher education or grooming them, for highly specialized courses quickly move out.
The job remains same as to call clients and talk business. Same kind of lines repeated in the calls from the login point to logout point. Employees are bored of the same talks all through their working hours which lead to mental fatigue. Also the same kind of techniques and no manual intervention, everything is done technologically which makes a person as a robot which ultimately leads to fatigue.
4. Stressful Job
Also the nature of job in a typical BPO company is psychologically very stressful. The working hours are artificially created which affect the natural rhythm of human body. The symptoms of chronic fatigue, gastrointestinal problems, peptic ulcer, insomnia and even d The daily targets fixed to achieve push employees to work harder and harder leading to stress.
5. Switching jobs for high salaries
Poaching of employees by other competitive BPOs for higher salaries drives them to change jobs. The employees expect salary revision once in 4-6 months and if not they move to other organizations because of the rapid growth of the industry. Sometimes due to personal reasons like getting married (especially for the male employees) or falling in love or change of place.
6. Drive towards Higher Education
Most of the employees with professional degrees like BE, MCA and others appear for higher education or grooming them, for highly specialized courses quickly move out.
Companies have different other kinds of strategies adopted to tackle the problem of retaining human capital. It ranges from cash incentives to career concern for the employee. As only 5 out of 150 employees become team leaders in a year, companies like Daksh services and Global Vantedge believe that cash incentives are a great way to get employees to stay on. They are also offering management diplomas and MBA courses to their employees, as most fresh graduates want to study further.
1. Group Medi-claim Insurance Scheme; Personal Accident Insurance Scheme; This scheme is to provide adequate insurance coverage for Hospitalization expenses arising out of injuries sustained in an accident. This covers total / partial disablement / death due to accident and due to accidents.
2. Subsidized Food and Transportation; BPO’S provide transportation facility to all the employees from home till office at subsidized rates or even at zero cost. Lunch is also provided free of cost.
3. Company Leased Accommodation; Some of the companies provides shared accommodation for all the out station employees,
4. Recreation, Cafeteria, ATM, gym and Concierge facilities; The recreation facilities include pool tables, chess tables and coffee bars. BPO’S Companies also have well equipped gyms, personal trainers and showers at facilities.
5. Personal Health Care (Regular medical check-ups); Some of the BPO'S provides the facility for extensive health check-up. For employees with above 40 years of age, the medical check-up are given once in a year.
6. Loans; Many BPO companies provide loan facility on different occasions like, during the times of medical emergency, at the time of their wedding, also new recruits are provided with interest free loans to assist them in their initial settlement at the work location
3. Company Leased Accommodation; Some of the companies provides shared accommodation for all the out station employees,
4. Recreation, Cafeteria, ATM, gym and Concierge facilities; The recreation facilities include pool tables, chess tables and coffee bars. BPO’S Companies also have well equipped gyms, personal trainers and showers at facilities.
5. Personal Health Care (Regular medical check-ups); Some of the BPO'S provides the facility for extensive health check-up. For employees with above 40 years of age, the medical check-up are given once in a year.
6. Loans; Many BPO companies provide loan facility on different occasions like, during the times of medical emergency, at the time of their wedding, also new recruits are provided with interest free loans to assist them in their initial settlement at the work location
7. Giving employees a choice of rewards; Rewards are as different as the people who receive them and it doesn't make sense to give rewards that recipients don't find rewarding. Some people are excited about sports events, others about movies. Some employees would love a dinner in a romantic restaurant, others a book by their favorite author. Food, fun, education, improved work environment, gifts, travel, family-oriented activities - the options are endless.
8. Performance Incentives; Bonuses and incentives are paid after every quarter if the employee sustains in the organization and he gets extra rewards if his performance exceeds the target assigned to him.
9. Present Recruitment Strategies Adopted To Retain Human Capital
The Recruitment Manager keeps on innovating new techniques to hire the best of the best people and the strategies are continuously renewed as per the changing scenario. Considering the High Attrition rates the organization plans a very effective policy at the entry level (recruitment) which ultimately helps in sustaining human resource for the benefit of the organization.
Exl Service.com and ICICI one source hires outstation candidate Mainly Non-Metros. Also for leading call centers like 24/7 customer and MsourceE non metro talent currently constitutes nearly 25-35 per cent of total hiring, and the main reason for this to happen is to reduce attrition rate
Many companies like HCL Tech BPO Services, GTL, Tracmail, and Vertex India use various IQ and EQ tests to get people who can work at night and can handle the monotony. They also believe that giving career counseling and planning career paths to its employee help to control attrition.
Some of the BPO firms have adapted to the strategy of employing housewives and retired school teachers. They believe that this would help in controlling attrition, as they feel that the tendency and the potential of the employed to get shifted would reduce drastically.
Where as some other BPO majors like Wipro’s Spectra mind believes that recruiting the undergraduates itself is a strategy to control attrition. Spectra mind removed the graduation prerequisite for their employees in order to keep human resource level from waning.
Selection of able individuals in the interview process with a tough HR Selection round , Which identifies able executives who have the innate skills required for the job and who are more likely to play a long innings in the organization.
As per IBM policy, recruitments are done in bulk considering the high attrition rate and recruitments are done regularly. Hiring in bulk reduces the supply factor of the equilibrium and it keeps the work of the organization going. The demand supply disparity is lessened with high availability of the staff and keeps the company at the safer side.
Employees with short span of experience (4 – 6 months) are hired and they are likely to be placed at a higher level which keeps them stable in the job and saves the training costs to the company.
9. Present Recruitment Strategies Adopted To Retain Human Capital
The Recruitment Manager keeps on innovating new techniques to hire the best of the best people and the strategies are continuously renewed as per the changing scenario. Considering the High Attrition rates the organization plans a very effective policy at the entry level (recruitment) which ultimately helps in sustaining human resource for the benefit of the organization.
Exl Service.com and ICICI one source hires outstation candidate Mainly Non-Metros. Also for leading call centers like 24/7 customer and MsourceE non metro talent currently constitutes nearly 25-35 per cent of total hiring, and the main reason for this to happen is to reduce attrition rate
Many companies like HCL Tech BPO Services, GTL, Tracmail, and Vertex India use various IQ and EQ tests to get people who can work at night and can handle the monotony. They also believe that giving career counseling and planning career paths to its employee help to control attrition.
Some of the BPO firms have adapted to the strategy of employing housewives and retired school teachers. They believe that this would help in controlling attrition, as they feel that the tendency and the potential of the employed to get shifted would reduce drastically.
Where as some other BPO majors like Wipro’s Spectra mind believes that recruiting the undergraduates itself is a strategy to control attrition. Spectra mind removed the graduation prerequisite for their employees in order to keep human resource level from waning.
Selection of able individuals in the interview process with a tough HR Selection round , Which identifies able executives who have the innate skills required for the job and who are more likely to play a long innings in the organization.
As per IBM policy, recruitments are done in bulk considering the high attrition rate and recruitments are done regularly. Hiring in bulk reduces the supply factor of the equilibrium and it keeps the work of the organization going. The demand supply disparity is lessened with high availability of the staff and keeps the company at the safer side.
Employees with short span of experience (4 – 6 months) are hired and they are likely to be placed at a higher level which keeps them stable in the job and saves the training costs to the company.
Conclusion
The Indian BPO industry has been growing and maturing and has established itself a major outsourcing hub. As of today, India India
There are certain challenges arising out of the financial meltdown in the consumer markets of USA and Europe some of which is as under:
There are certain challenges arising out of the financial meltdown in the consumer markets of USA and Europe some of which is as under:
A. Emerging risks & exposure in the market place
- Increasing Global Competition
- Subprime mortgage crisis and subsequent financial problems
- Slackening Consumer demand and currency risks
B. Existing risks & exposure in the domestic industry
- Rising Cost and non-availability of labor
- Infrastructure deficiency and gaps which need to be covered on an immediate basis
- The ‘Talent gap’ would have huge consequences for the services sector and has the potential to be a dampener to the India growth story by as early as 2012.
C. Challenges arising out of fiscal & monetary policies
- STP Units are to lose income tax benefits
- High Interest Rates,
- Lack of foreign exchange liquidity and pressure on domestic liquidity
D. Challenges arising out of Non fiscal issues
- Terrorism , Threats of war , Global warming (State & City Level Responses , Citizen ID Program , Civilian and homeland security must be taken seriously)
- Risk to
- The likely impact of the slowdown in the Business Process Industry could effect as follows -
- Loss of jobs
- Loss of
- Loss of confidence level within Indian industry as BPO employees start hunting for jobs in other Industry verticals, as the BPO industry has always been associated with liberalization and reforms.
Suggestions
The likelihood and impact of the risk to GDP is significant for the Government to look at adequate response. We suggest the following risk response, sooner than later so that the negative impact gets addressed and contained well in advance:
1. Financial Package at all levels of BPO’s as Domestic / International & Rural BPOs so that jobs can be generated. Each level of BPO’s work at different segments and price points. Together they make Indian BPO a competitive brand.
2. Incentives for skill development and secondary education in Tier 2 and Tier 3 cities.
3. Removal of “Bank Guarantee/Large Deposits “for carrying out Domestic/ International Calling from the same premises.
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