Skyline Business School

BPO |Update|

Issue 38

GECIS tops the list in BPO game
In terms of sheer revenues, GECIS is undoubtedly the largest independent BPO services company with more than $400m in revenues. But the catch is that a substantial part, almost $365m, comes from GE. GECIS had around $35m of revenues from non-GE entities for the fiscal year ‘03-04. The second company on the list is Sutherland Technologies, which is a pure-play third-party services provider. The company has more than 10,000 people, of which 7,000 are in India. Sutherland had revenues of $120m for the fiscal year ’03-04. Sutherland is followed by WNS Global, which is said to have revenues of $103m. Wipro Spectramind comes next. Spectramind had revenues of $95m for ’03-04 and projects $130-140m in revenues for ’04-05. It has already crossed employee strength of 15,000. The fifth spot is taken by Delhi-based Daksh, which is now owned by IBM. Daksh had less than 6,000 people when it was acquired by IBM, and claimed to have revenues of $60m. The sixth spot is a tie between MphasiS and EXL on the basis of projections. MphasiS had revenues of more than $40m from its BPO business and had projected a 60% growth for the full year. This would take its revenues to around $65m, about the same as EXL. 
Source: The Economic Times, January 24th

Catering biz at a BPO - big money
With the BPO boom in India, another industry that’s gathering steam is the food and catering business. According to Nasscom, India has around 8.13 lakh IT professionals, which amount to at least 8.13 lakh meals per day. Taking Rs 30 as the minimum cost of a thali, you can earn a mouth-watering Rs 244 lakh per day!

Manu Trikha used to supply 80 tiffins a month to offices in Connaught Place. That was way back in 1997, when he used to cook and pack lunch boxes from his home in Laxmi Nagar, East Delhi. Now Trikha supplies over 1,200 meals a day to BPOs like Wipro Spectramind. And with outsourcing booming, the figure is set to rise.

The BPO food industry in India is around Rs 1,500 crore. With 2,000 meals a day in a mid sized BPO, there can be a daily cash flow of around Rs 60,000 in your bank account. And subtracting overhead costs, you can pocket a cool Rs 15 lakh per month.

International BPOs provide instant payment. But, in domestic ones the payment gets credited to the caterer’s account after 30-45 days. So, one must have a decent capital base to sustain oneself.

Even giants like Taj Group of Hotels have jumped on to the gravy train. Taj provides meals to ebookers.com. 
Source: www.yahoonews.com, January 25th

Cognizant, Pfizer in BPO pact
Cognizant Technology Services (Cognizant) has ventured into the BPO space through a multi-year relationship with Pfizer Global Research & Development (PGRD) to provide clinical data management and biometrics services. Cognizant will open its first facility in six months in Mumbai and hire an initial 90 personnel for the deployment of the high-end services to PGRD's affiliate in India. The bulk of those hired will be bachelors and masters in pharmacy, statistics and analytics. . The services would be rendered from PGRD's facility in Mumbai initially and then moved to Cognizant's leased facility.

Pfizer discovers, develops, manufactures, and markets leading prescription medicines for humans and animals. The company has three business segments: health care, animal health and consumer health care.

The Pfizer India biometrics division has been providing data capture, data management, statistics and programming services for its parent’s Phase I, II, III global trials for seven years. 
Source: www.business-standard.com, January 25th

US job loss: IMF gives clean chit to BPO biz
Fears that the outsourcing of services to India could lead to job losses in the US are unfounded, according to a study by IMF economists Mary Amiti and Shang-Jin Wei. In the US, they studied 450 industries, which had a small negative effect on employment. But there were 100 sectors where there were no job losses associated with service outsourcing. This, according to them, implies that a worker could lose his/her job due to outsourcing, but may later find a job in another firm within the broader industry classification. Hence, they conclude that there are no net job losses when there is sufficient job creation in another sector, which indeed seems to be the case. They contend that even if outsourcing leads to some shedding of labor, increased efficiency could lead to higher production and an expansion of employment in other lines of work.

The US is a large importer of services, it is also a large exporter of services and therefore, has a net surplus in all services, in contrast to its goods trade, in which it has a net deficit. From this, a very small proportion comes from India. In 1992, imports of private services from India were only 0.5-1% of total US imports of private services, which went up to 1% in ‘02. There was a larger increase in business services — a sub-category of private services — that has been the focus of media attention. They increased from 0.45% in 1992 to nearly 2% of total imports of business services in ‘02. 
Source: The Economic Times, February 5th

Why China will never beat India in the BPO space
Says Partha Iyengar, a Gartner group BPO specialist: "Companies that want a base in China are either asking their Indian providers to establish this base for them, such as General Electric Corp., or else setting up captive centers in China, in addition to either captive or outsourced centers in India."

If you're interested in setting up a BPO in China, the Chinese will take care of your business needs. Whether it's land requirement or construction of a building. Everything is under single window processing. No red tape.

Even if China can't beat India, the dragon may snatch a big piece of the global BPO pie from the tiger's mouth. India's BPO exports in 2003 were close to $3.1 billion. China's was only a fraction of it - $210 million. But China's outsourcing market grew at 34.2 per cent, higher than the Asia-Pacific region. Be it better telecom infrastructure, roads or government support, China gains over India. But the deregulation of Indian telecom market has surely made it globally competitive. In the IT domain too, India is far ahead of China with close to $10 billion in exports. China's IT exports in 2003 stood at $700 million.

The Chinese government has invested more than $5.4 billion in English education at Universities. China is imparting IT education in a big way. And no prizes for guessing who is helping. It's India, of course. Although NIIT has set up over 100 centers all over China, the courseware is in Mandarin.

Cost Advantage is an area where China clearly surges ahead. The average salary of an Indian programmer stands at $6000 to $12,000. But, it's much lower in China at $5700 to $9000.

China has over 200,000 IT professionals and 50,000 new graduates are added to the pool every year. India leads the world in this area. Over 2,100,000 English-speaking graduates are added annually and 460,000 of them are IT grads. The number of IT (including ITES-BPO) professionals employed in India has grown from 284,000 in 1999-2000 to 813,000 in 2003-04. Out of this, as of 2003-04, 245,000 professionals are employed in the ITES-BPO sector. 
'IPR framework - China is bad' 
Says Mark Kobayashi Hillary, author of Outsourcing to India: The Offshore Advantage: "Being a democracy certainly helps. India has a proper IPR and regulatory framework in place. It's unlike China where only 5% of music is sold in shops and the rest is pirated." India certainly leads with more than 70 per cent of the global BPO market. And the future looks certainly bright. 
Source: www.economictimes.com, January 25th

EDS moves to capture share of BPO market
EDS is moving in the fast-expanding and higher-margin area of BPO. The company has announced the acquisition of the HR outsourcing practice of Towers Perrin and the organizational restructuring of the management of its BPO division. EDS and Towers Perrin have agreed to create a yet to be named joint venture that will provide HR outsourcing services. The deal will cost EDS $420 million and the company will own 85 percent of the new company, while Towers Perrin will own the remaining 15 percent. In a separate agreement, Towers Perrin awarded EDS a 10-year, $365 million information technology outsourcing contract. The joint venture is projected to have annual global revenues of about $600 million, about half contributed by each company, and more than 400 clients in the US, Canada, Europe, and Central and South America. About 2,600 Towers Perrin employees will transfer either to EDS or to the new company.

Last year, BPO accounted for nearly a third of awarded outsourcing contracts valued at $1 billion and greater, according to consultants Technology Partners International Inc. It estimated large BPO deals hit $9.8 billion deals, compared with just $2 billion in 2003. New contracts for all types of outsourcing hit $72 billion last year, it said. 
Source: www.consultant-news.com, January 26th

BPO: Cost Takes a Back Seat
The possibility of substantial cost savings remains the foremost reason why most companies decide to outsource, but according to a new Capgemini/IDC survey, when it comes to selecting a BPO provider, cost is no longer the main factor. About 35 percent of survey respondents said that cost reduction was the primary driver for deciding to outsource, followed by 29.4 percent who rated focus on core competency and outsourcing non-core processes as the top priority.

Only 18.8 percent declared that the lowest cost solution was the most important selection criteria when choosing an outsourcing provider. Just under one-third, 32.8 percent, designated cultural fit with provider as the top reason, while another 29.7 percent admitted that the ability to offer transformation service plus operating capability as their top priority for selecting a BPO provider.

When segmented by department, 30 percent of respondents said that they plan to outsource IT in 2005 and 25 percent plan to outsource HR, but perhaps most surprisingly, just 18.8 percent of respondents said they plan to outsource customer care in 2005. According to Chris Carrington, vice president of Capgemini's BPO practice "HR and IT have been around a long time, and people have gotten more comfortable with the delivery results. They are farther along in their maturity curve," Carrington says. Customer care is still sensitive to outsourcing. "[Companies] are in business to serve their clients, so it's almost hard for them to fathom that someone might be able to serve their customers in an equal or better fashion."

Survey results also indicate a shift in how companies measure ROI generated from BPO initiatives. Only 20 percent of respondents said their companies define successful BPO ROI by pure cost savings, while 31.4 percent responded that they use the delivery of internal value and shareholder value through competitive advantage to determine a successful BPO project. About 17 percent said that they define a successful BPO initiative by its ability to focus on its core competencies, 15.7 percent do by its ability to drive greater process visibility, efficiency, and integration, and the remaining 8.6 percent judge success by being able to access or enhance its technology environment. 
Source: www.destinationcrm.com, January 26th

E-education, the new outsourcing mantra
Indian tutors are latching onto the outsourcing business. EPO is the latest.
After the software services outsourcing controversy, the spotlight has turned to a little known professional group-- Indian tutors are now emerging on the world stage. But the fledgling industry is still under wraps. The new offshoot of India's outsourcing business is e-education. Anita is among Career Launcher's five teachers who conduct personal classes with children in America. Sitting in her small cubicle, fitted with a headset and pen mouse, Anita works on pre-designed content packages.

Anirudh Phadke, Principal Consultant,Career Launcher said, "Several pilots, tutoring in the US are four years old but the non-voice platform is a year old. March last year started with a pilot and now it's a live project."

A natural progression from BPO, EPO or education process outsourcing, is India's new emerging service offering. According to one estimate, the US needs close to 1 million teachers over the next 10 years.

Career Launcher cashed in on its e-tutoring experience in India and the Middle East to start the service. Satya Narayanan, Chairman, Career Launcher said, "For live tutoring this plus curriculum development, monitoring, testing/evaluation. Each of these can be outsourced."

There are just three players in this business. Given the shortage of teachers in the US, industry observers expect the number to go up to 500 players by the year-end. 
Source: www.moneycontrol.com, January 28th

Convergys to hire 4000 in Mumbai
BPO Company Convergys India will open a new call centre office near Mumbai by June. The company, which currently employs 10,000 people in India, is looking to further increase its manpower by 4000. "Our new Mumbai office should be ready by June. We should be adding between 2000-4000 people in our Customer Care division," said Jaswinder Ghumman, Vice President and Country Manager for Convergys Customer Management India (private) Ltd. Convergys currently operates out of seven offices in India with three in Delhi and one each in Mumbai, Pune, Hyderabad and Bangalore. The company will also open its new Software Research & Development office in Hyderabad on February 9. The company is also evaluating Chandigarh and Bangalore for setting up of software development centers in India.

Convergys does worldwide business in billing, customer care and human resource outsourcing. 
Source: Press Trust of India, February 8th

Cash-squeezed mid-size firms turn to IT outsourcing
Pressure to cut costs is increasingly forcing medium-sized companies to outsource their IT operations, according to new research.

The IDC survey, sponsored by WCI, found that 48 per cent of firms have already outsourced their desktops and 39 per cent have outsourced their data centre. Over three-quarters of respondents (77 per cent) stated that cost savings were the key business pressure for going down the outsourcing route. The ideal outsourcing deal length is three to five years (70 per cent of respondents) but medium-sized firms also favour tough penalties for supplier failures. Almost half (48 per cent) said the outsourcer should pay three times the annual contracted revenues as compensation.

And while mid-size companies are increasingly looking at IT outsourcing, they still remain skeptical of full business process outsourcing (BPO). Most perceive the procurement cycle for BPO to be too long and 60 per cent said they would only pursue BPO if there were guaranteed cost savings of at least 10 per cent. 
Source: www.silicon.com/eresearch, February 8th 

Prepared by
Abhimanyu Puri, BBA (MAHE) 2nd year

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