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From BPO to BPM: The Transition of India’s Outsourcing Industry

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A liberalized telecom policy unveiled by the Government of India in the late 90s ushered in a new era of economic growth and the birth of the India outsourcing industry (beginning of BPO in India). This new forward-looking policy paved the way for the entry of private telecommunication service providers in the country that led to the introduction of Internet Protocol (IP) telephony and drastically lowered the costs of international voice calls. This is turn, made it cost-effective and viable for a call center agent sitting in a remote corner of the world to provide voice-based support services to a customer from any part of the world.

The possibility of servicing customers in US and Europe by call center agents sitting in India at a fraction of the labor and infrastructure costs made an interesting business proposition to entrepreneurs. Sensing a good business opportunity, several BPO companies in India were founded during these initial years by enterprising professionals. In the initial years, BPOs in India primarily provided voice-based call center services and non-voice processes like data entry to clients in developed markets like the US and UK.

Buoyed by the success of the initial years, India became the center-stage of global back-office outsourced operations. Indian BPO companies offered all the right ingredients for a successful BPO operation – good telecom infrastructure, a qualified, young and readily available English speaking workforce and cheap labor costs compared to developed nations. The BPOs in India led many global corporations to either outsource their back-office and business support functions to a third-party BPO service provider in India or open their own captive centers to support their global operations.

Like all successful businesses, the industry of BPO in India also received its own share of criticism, both within and outside the country. It was labeled by many as “sweat shop” operations, wherein cheap young undergraduates/graduates students managed customer relationship functions for global corporations or cheap software engineers, writing generic code sitting in a remote office in India at one-tenth the cost of a European or American counterpart.  But the positives outweighed the negatives in large proportions and could not affect the rapid growth of the industry in successive years.

Recommended Article For You: An Insight into the BPO Industry

Middle years – From cost arbitrage to value differentiation

The success achieved by BPO service providers in the initial years prompted several new players to enter the fray. This led to increased competition amongst existing and new players to gain market share. It resulted in a fierce price competition amongst these firms and shrank their profit margins considerably.

The service providers realized soon enough that to remain competitive, they had to focus on developing value-added offerings to create a differentiation for themselves in the market.  

With increased competition in the low-end contact center services contracts, mature service providers started focusing on higher value services like finance & accounting, legal process outsourcing, insurance processing and analytics amongst several others. Few players of Indian BPO industry with such niche capabilities decided to distance themselves from the commoditized call center services terminology of BPO and instead termed themselves as Knowledge Process Outsourcing (KPO) service providers.  

The Philippines Challenge

The success of BPO in India led several countries across the world emulate the BPO industry growth model. Countries like the Philippines successfully replicated the Indian success story and within a few years started giving stiff competition to Indian BPO companies in the global sphere. Philippines had a historical relationship with the United States and its population is primarily English speaking. As such, clients on the US preferred the Asian nation over India for most voice-based processes. The preference of client and subsequent movement of voice based processes to the Philippines put further pressure on Indian BPO firms to rise-up the value chain and offer more value driven services to clients.

Read Also: Debunking the Myths about Business Process Outsourcing

Current times: Domain expertise, platforms and analytics

Cost arbitrage is passé. Clients are no longer looking for a cheap back-office/call center services provider. They are looking for a business partner who can offer them solutions to grow their business. Clients are no longer talking about ‘customer service’, they are talking about ‘customer experience’.  They are no longer asking for cheap undergraduates to process insurance claims, but domain specialists to delve deeper into insurance claims with analytics to provide faster claims processing and weed out fraudulent claims. The process of customer engagement has moved to newer areas like social media and mobiles and clients are looking for service providers who can help them manage customers in these new arenas.

The larger players of BPO in India had foreseen this future beforehand and accordingly filled their arsenal with the requisite capabilities. Two years back, NASSCOM, the industry body representing India’s IT & ITES companies rebranded the industry from Business Processing Outsourcing to Business Process Management (BPM).  The idea of this re-branding exercise was to provide the Indian outsourcing companies with the much-needed identity of an end-to-end service provider. 

In the past two years, a lot has been done by the Indian BPM industry to ensure and live up to this new found identity. Leading BPM players have developed cutting-edge platforms and analytics capabilities to remain competitive to deliver their clients the much needed competitive edge in their respective industries.  The high-growth rates experienced by them in the past few quarters testify that the Indian BPM industry has succeeded in keeping pace with the changing times and evolved to become a force to reckon with in the global business services industry.

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