Business Process Outsourcing (BPO)

In business process outsourcing, companies outsource their business operations like accounting, human resource management, sales and marketing assistance to other companies to reduce the cost of managing these functions.

Several global majors, including some of the top Fortune 500 companies – banks/ financial institutions, business conglomerates and technology majors - already have strategic outsourcing partners, acquisitions and captive development centres in India. Some of the leading global majors who have based their BPO operations in India are American Express, Convergys, e-Serve International (formerly known as Citicorp Securities), GE Capital International Services, HSBC, Hughes, IBM, Standard Chartered, ABN Amro etc.

A number of leading Indian software services companies have also forayed into the ITES/BPO domain, either directly, or through mergers and acquisitions route. Most Indian IT leaders today such as Wipro (Spectramind), Infosys (Progeon), Patni, Satyam, HCL among others, have a presence in this market.

The ITES/BPO sector in India is on a sound track and is projected to grow by around 40 per cent during the current year as well, according to NASSCOM, to reach $8-8.5 billion as against $6.3 billion in the previous fiscal (2005-06). The BPO sector in India has maintained a steady growth of about 40% per year - from US$ 2.5 billion in 2002-03 to touch US$ 3.6 billion in 2003-04 and US$ 5.1 billion in 2004-05.

The US and UK account for over 75-80% of the total business handled by the Indian BPO industry, with major contributors to the industry growth coming from captive units set up by global majors.

The BPO industry provides direct employment to close to half-a-million people.

The growth in BPO services revenue reflects a growing trend by US and European companies to outsource services like call centres and back office operations to their Indian subsidiaries and other companies in India. However US and European companies and governments have been criticised for moving jobs to India by outsourcing, and some state legislatures in the US such as New Jersey are considering a ban on government business to technology companies that outsource work.

Segmentation:
Like the IT services sector, Indian ITES-BPO companies are adopting global quality standards like six sigma, COPC, ISO 9001, etc. While MNCs dominate the ITES-BPO space, an increasing number of Indian companies are making a foray into this sector, which are well-capitalised third party units. Presently the ITES-BPO industry in India is segmented along the following lines:

Specialised, Vertical-specific Services:
Medical transcription
Legal database processing
Digital content development/animation
Online education
Remote maintenance
Engineering and Design

General Services:
Contact centres
Telemarketing/pre-sales
Consumer care
Technical support
Back office operations, accounts, financial services, etc
Data processing

Initially concentrated in just a few cities of the country (Bangalore, Delhi/NCR, Mumbai, Chennai, Hyderabad), the ITES/BPO activity is now spreading across other cities and towns such as Kolkata, Kochi, Ahmedabad, Pune etc, driven by increased competition from within India as well as from other low-cost destinations like Philippines and China.