7OUTSOURCE

ABSTRACT

This dissertation is on one of the emerging business trend “Business Process Outsourcing”. Because world business market is getting full of competition because of incoming competitors, and if a business want to survive in this global economy we have to accept the concept of TINA(There Is No Alternative). The only business will survive who cut cost from every possible sector of business processes. By using Business Process Outsourcing, business can enjoy competitive advantage.

As we can see that before it was industry revolution but now the upcoming trend is about service sector revolution, and we know that customer is the king of market and their needs are ever increasing. In this service sector revolution period call centers are playing role for “Customer Relationship Management”. So that I described Indian Call center industry in my dissertation. Because Indian call center industry is growing at very high speed an covering customers of all over the globe.

Lastly, evaluation and analysis has been carried out in ‘evaluation of evidence’. Conclusion of this research is based on evaluation and analysis carried out.

INTRODUCTION

1.1 Introduction to research

As a part of my masters’ education I am required to carryout a research project and to submit a report on it. The aim of the research is to give me an insight in to the actual world. What we study in our books and what actually happens in the outside world is totally different. My research would help me to observe the functioning of the outside world. Business Administration and Management is better learned through experience than through books. Books can only serve as a medium of information but the practical application of such education can only be learnt when one works in the real world. Business world is progressing at a very higher rate and everyday new concepts and principles keep emerging out. It is very important to any one to keep a track of an emerging trends in business and one of such emerging trends in today’s emerging world is outsourcing.

“ A Man who carries a Cat by the tail leans something he can learn in no other way” – Mark Twain,2000.

Outsourcing - Transferring a part or whole of a task out of a number of tasks to an independent unrelated professional body.

Outsourcing, a dynamic tool that has swept across North American business landscape is now on the path of an explosive world-wide growth. Corporate managers and executives are quickly realising the importance and effectiveness of outsourcing in their business. The global industry talks outsourcing. At such a point of time it is very difficult for one to ignore the importance of outsourcing. Simple definition of an outsourcing shall be “Transferring a part or whole of a task out of a number of tasks to an independent unrelated professional body.” Though this is not a full or a complete definition yet it describes a small bit of outsourcing.

In my research, I am trying to cover the current issue of Business Process Outsourcing and to explore the future of the same. Business Process Outsourcing is emerging as one of the main function of medium and big corporate organisations across the world. Though the impact of outsourcing can not be fully judged, the term itself is quite difficult to pin point and explain. Outsourcing is not a new or emerging branch of business, it has always been in existence, the only difference is that now it is being widely and extensively used in the business activity. During primitive ages, outsourcing was still prevalent in the form of services of carpenters, farmers, etc. and in the modern ages, it is widely available in various other forms such as banking, transportation, financial services, postal services, etc. The scenario is such, that you name a service and you can outsource it to an independent professional body, completely unrelated to you, which is skilled and equipped to carry out the required task with a greater efficiency.

If we look into the general achievements of outsourcing, or as to what is the purpose that outsourcing is required, one can say, that when it is difficult to manage a task or a number of tasks from a whole lot of tasks in an organisation, a need arises to transfer such tasks to be performed by someone else. The organisation may either go on to employ additional skilled or unskilled staff with its current staff, to undertake and complete the activity or may use the services of a professional body, which is competent enough and independent as well, to accomplish the task. The advantage of going through an independent professional body is that the management of any organisation can concentrate better on other activities of the business, as one or more of such activities is being performed by a professionally skilled entity and so it takes the load off the management.

“Tony Dawe, in one of his report in The Times dated 8th June 2004, expressed how the very small business of outsourcing is now emerging as a giant, which is already worth more than £272 million and is ever increasing.” Outsourcing has now spread to various fields and is boosting the speed of the business activity and the economic growth like a Bullet Train speeding through all destinations. Information is now available at fingertips and the press of a button. Inquire about your Banking queries, inquire about your deliveries, book a flight or holiday, process your claims, manage your mortgage, buy and sell investments, pay your Taxes, manage your Payroll, etc. and all this and a lot more of such activities are a few examples of already outsourced activities and the list is getting endless. The process of outsourcing is not specifically concentrating on the so called ‘front and middle office’ tasks of an organisation – usually performed by the lower level management, but also on the back office tasks – performed by the middle level management.

Outsourcing has its place. It can be a cost-effective method of supplementing in-house capabilities, providing additional expertise, and allowing an organisation to concentrate its increasingly limited resources on those efforts, which most greatly support its strategic mission. Unanticipated problems can arise while developing a system internally, time and money can be lost, and the success of the project may be put in jeopardy. Even if you decide to hire in-house technical experts, you may not be buying the depth and diversity of expertise that is present within a team of engineers. While you will probably be working with one main person assigned by us, that person has access to the expertise of all of his/her colleagues when it comes to developing specialised functions, as well as solving problems that may arise.

An business organisation undertakes various activities for its purpose. Such activities are abundant in volume and require varying level of skills. Hence I have chosen outsourcing with specialisation in business process outsourcing as an area of my research.

1.2 Research Target:

The target of my research project would be to give an understanding of Outsourcing and its branches and then to evaluate Business Process Outsourcing specifically targeting Call Centres in India (Off Shore Outsourcing) as an area of research work. I gain to understand the reasons behind vast development of Call Centres in India in the last half decade and to assess the future of such development in the Field of Outsourcing.

1.3 Research Objective:

The objective of my research is to get an overview of outsourcing, which is sweeping across all the developing nations of the world. I wish to take a deep insight of Offshore Business Process Outsourcing, which has become and is expected to be, one of the major issues in the International Business and Trade. With the boundaries of the world getting dimmer and dimmer and more and more countries being open to International Trade and Commerce, the field or area of Outsourcing is ever expanding. I wish to explore the reasons, benefits, costs, causes, effects etc. that have so far led to the development of Call Centres and Off Shore Business Process Outsourcing as a whole. To serve the objective of my research I have chosen India as the base country on which my research would be based. I have chose India because, India is emerging as an epic centre for the Outsourcing industry. Over the last 5 years the Indian Business Process Outsourcing Industry has grown at a mind boggling pace of close to 70%, which is the highest all over the world. Hence, I seek to gain an insight of what changes
the Indian Economy derived from this Growth. To summarise, the objective of my research would be:

Objective:

- To study the significant growth of Business Process Outsourcing.

- To study the range of services provided to the business by Business Process Outsourcing.

- To study the reasons, benefits, costs, causes, effects, etc. that have led to the rapid development of Call Centres – Off Shore Business Process Outsourcing.

- To find out the barriers to outsourcing.

1.4 Research Methodology

The methodology that I have adopted to carry out my research is to collect data from various available sources, read through various articles and publications and to gather information through all the sources that can provide me information on Off Shore Business Process Outsourcing. I went on to understand the origin of outsourcing, which dates back to our ancient ages, and then to configure the new face of Modern Outsourcing. Having understood the meaning and branches of outsourcing, I concentrated on Business Process Outsourcing, specifically collecting data on Call Centres – a branch of Off Shore Business Process Outsourcing. I found that it was competitive advantage to a company that led to the rise of Business Process Outsourcing, which has resulted into Off Shore Business Process Outsourcing. Saving of Cost, Utilisation of Human Resources, Focus on the core activities, etc. are some of the forseen advantages of Business Process Outsourcing. During the course of my research, I tried to find the answers to the following Questions:

• What is the need for the company to Outsource?

• What benefit does the company forsee by Outsourcing?

• Has the company looked into any other alternative to Outsourcing?

• Does the application of Outsourcing go hand in hand with the Company’s overall business Objective?

• The Cost (Both Monetary and Non-monetary) incurred by the company to Outsource – Is it worth?

• What are the benefits of Business Process Outsourcing on the economy of an under developed or developing country?

Outsourcing – Business Process Outsourcing

2.1 Definition of Outsourcing:

A simple definition of Outsourcing, which I have already mentioned above, can be ”Outsourcing - Transferring a part or whole of a task out of a number of tasks to an independent unrelated professional body.”

However, this is a very simple definition to Outsourcing. Other definitions to outsourcing that I have come across during my research and which I preferred most are as under:

“Outsourcing - Work done for a company by people other than the company’s full-time employees”.

“Outsourcing is the transference to third-parties, the performance of functions once administered in-house. Outsourcing is really two types of service: ITO - IT Outsourcing, involves a third party who is contracted to manage a particular application, including all related servers, networks, and software upgrades. BPO - Business Process Outsourcing, features a third party who manages the entire business process, such as accounting, procurement, or human resources.(Aits.ulinois,1998)

“Outsourcing occurs when one company hires another company to manage, maintain and run some portion of its business. A catalog company, for example, might outsource the warehousing and delivery of the products it sells to another company.” (Bptrends,2000)

“Outsourcing refers to a company buying services from another firm. For example, if company X is outsourcing its e-commerce services, it means that it is relying on another company to do this job rather than doing it internally with its own employees and resources. Many companies, like IBM, outsource much of their production to Taiwanese firms.”(Bptrends,2000)

Ian Benn & Jill Percy, 2002, quoted that “Outsourcing – Allowing a Partner to Manage a Part of Your Business”

By reading the definitions of Outsourcing as stated above, we can understand that outsourcing means to allow an outside partner to manage one or the combinations of the company’s tasks. Outsourcing takes place when an organisation transfers the ownership of a business process to a supplier. The key to this definition is the aspect of business relationship in which the buyer retains the control of the process or in other words tells the supplier how to do the work. It is the transfer of the ownership that defines outsourcing. In outsourcing the buyer does not instruct the supplier how to perform the task but instead, focuses on the results it wants to buy. It leaves process of accomplishing those results to the supplier.

GR2, a leading outsourcing and information research firm has noted that while IT cost equals 1% to 3% of the revenues in most companies, a process like procurement management can cost companies 7% to 11% alone. Therefore the potential revenue that can be generated from outsourcing business process is significantly greater than that generated by more traditional forms of outsourcing. Analysts are looking at the potential revenues generated from Business Process Outsourcing transactions and are making astounding growth predictions for the Business Process Outsourcing market in the next few years. If the predictions prove to be correct, the Business Process Outsourcing market will dwarf the IT outsourcing market in the United States and Multinational Companies are investing in developing countries because of huge latent demand. (Global top decision makers study on Business Process Outsourcing, sponsored by PWC, August 1998.)

Overall, what I gather from all the above definitions to Outsourcing, is that Outsourcing is not a new concept of Business, it is only the refined name to Business Practices that have been followed long since. Businesses do take services of Banks, Financial Institutions, Government Bodies, etc. and all these services are covered through a Contract. Outsourcing goes beyond the normal contracts and covers a full and specific aspect of the whole business. Where Banks, Financial Institutions and such other bodies have lesser control and information about the company’s activities, an Outsource Contractor has a greater control and higher level of information to the Organisation work profile.

2.2 Attitude to outsourcing world-wide:

2.2.1 India:

Speak of Outsourcing and India does not figure out – That is Impossible. India is emerging as an epic centre for the Outsourcing industry. Over the last 5 years the Indian Business Process Outsourcing Industry has grown at a mind boggling pace of close to 70%. From an Industry size of US $ 565 million in 1999 - 2000 revenues have exploded to US $ 2.4 billion in 2003 - 04.

India as a Back Office to the World (Valuenotes,03/2004):

- India is only scratching the surface with a two per cent market share in the Global Business Process Outsourcing opportunity estimated to range between US $ 150 billion to US $ 700 billion.

- From a current workforce of 1,60,000, the ITES industry will be worth $21-24 billion and will employ over 1.1 million Indians by 2008.

- The Business Process Outsourcing Industry shall add more then 2 percentage points to India’s GDP in 2008.

- India’s IT and Business Process Outsourcing sectors will be the third largest in the world by 2008 after the US and Japan.

- India has the 12th largest telecom network in the world and the falling telecom rates both in the National long distance and International Private leased circuits lines is definitely a kicker.

- Massive wage differentials exist. A graduate is paid US $ 2,400 in India while a person with equivalent pool of skill sets draws US $ 30,000 there.

- The Country turns out 75,000 IT graduates and over two million English-speaking graduates every year.

Further details of Indian Outsourcing industry and its prospects are discussed below.

2.2.2 United States:

In the private sector, US business models tend to be driven by short-term imperatives. Currently, NYSE demands quarterly reporting of financials from its members – which is causing some resistance now that deregulation is opening them up to wider competitions from European and other us markets. Outsourcing contracts tend a result to be very focused on bottom line savings. It shows that in this environment, outsourcing will clearly regard savings money above all other considerations. In US, service providers are impelled to put together quick fix, cost-cutting packages rather than sophisticated way that Europeans prefer.

2.2.3 Europe - The UK (In Particular):

In Europe attitudes to outsourcing is strongly affected by the actions of the governments. First of all the concept of outsourcing was adopted by the UK Conservative Government of 1980s. From mid 1980s, the right-wing parties held power in most major European countries, whereas the left struggled to redefine its role. In 1997 Tony Blair won a victory in UK elections for the labour party. The introductions of private finance initiatives and Public-Private Partnership potrayed new labour’s position as an outsourcing friendly government. And suddenly left-wing administration was leading the way in innovative outsourcing deals. Thus outsourcing was politically accepted on both sides and long-term strategic outsourcing deals became more attractive to both, governments and suppliers.

UK is adopting outsourcing in public sector as well. Nowadays, outsourcing contracts at a government level are common all across Europe, yet there are still differences among the various countries.

After a difficult start to a public sector outsourcing, the UK has redesigned the process to enable public to get the best deal. UK is the only country in Europe which allow an outsourcer to lay people off and this extra flexibility has been a strong market driver. While in other countries outsourcers have found themselves paralysed be their inability to cut over-capacity, UK has turned out to be paradise for them.

Finance is considered as the streamline or bloodline for any business activity. A small impact on the financial position of any organisation could change its future – either-ways. Where a change of Interest rate by a mere 0.01% could have a huge impact on the Economy of any country – it is difficult to imagine what impact could Outsourcing by the Banking and Financial Institutions – on whom the Corporate World relies heavily - have on the Industry and Economy.

Deregulation in the UK Banking and Finance industry has rendered it an extremely enthusiastic adopter of most forms of outsourcing. Today most UK banks outsource their operations like cash handling, cheque processing and other processing that many would consider core to their business operation. Cheque processing outsourcing deal was first initiated by The Royal Bank of Scotland, followed by Lloyds TSB. The UK finance sector is the pioneer in varied new areas of outsourcing with its innovative thinking. Day in and Day out, we have new deals coming up in the field of Mortgages, Loans, Equity Finance, Factoring, etc. and the concept is ever changing.

2.2.4 France And Germany :

Late adoption of the concept of Outsourcing by the Governments resulted in a slower take off to the project. But now both governments are embracing outsourcing. Here for multinationals one of the big challenges is the complexity of social benefits system. Local companies such as Siemens and T-system in Germany have done well to capitalise on their knowledge to gain a strong lead in market. As against this, the German and French Banking Sector is still to pick up pace, and is very unlikely to gain a good speed in the area of Outsourcing, due to the strict relugations and unfeasible framework prevailing in the countries.

2.2.5 Spain:

Spain lags behind in this race of adoption to the concept of outsourcing. But the State of Catalonia is a notable exception amongst the other states of Spain. The state Government here, has been quite successful in the quick and rapid implementation of Outsourcing options. Other states are hopeful of coping up and adopting the concept of Outsourcing in the near future.

2.2.6 Italy:

Italian market is very flexible but is locally focused. Italian firms tend to do business with Italian companies only. As a result, an attempt of most of the outside suppliers looking to get break in to this market has not been very successful. They tried to enter via minority shareholding in the form of a joint ventures or Associations with a local companies and then move towards expansion. For example, Banco Ambrosiano Veneto entered into a joint venture with a local firm named T – system, to enter into the Italian Market.

2.2.7 Switzerland:

Switzerland’s system of regional government and its stringent privacy laws make outsourcing contracts extremely complex to enter. So a contract with a Swiss company having branches in different regions like Berne, Geneva and Basle may all have very different structure. Switzerland also has a very tight privacy control, which is a big barrier for outsourcing.

2.3 Branches of Outsourcing:

If there is a big tree, it must have branches and must also yeild fruits. Outsourcing is one such big tree, which is fast growing in the Garden of Business World and the branches are fast spreading to all the areas of Business. Outsourcers bring economies of both skill and scale, but the mix varies widely depending on the area being outsourced. Economies of scale rely on the outsourcer being able to share the service it provides among the multiple customers. Moving a team of 100 cleaners from a staff of hospital, onto that outsourcer may introduce process improvements and engage them in tidy-up the books, here there is a little opportunity for the outsourcer to capitalise on the pre-existing infrastructure to support various/different clients. Outsourcer can get a little economy of skill by defining test concerns well quantified and should be executed effectively by the existing staff. Therefore it is useful to break the outsourcing market into four parts based upon the types of benefits being applied.

1. ASP – Application Service Provider

“Application Service Provider – A company that offers organizations access over the Internet to applications and related services that would otherwise have to be located on site at the organization’s premises.”

In ASP, the company provides to a third-party or an entity that is located at a Central Data Centre of its own, access to the Company Software Applications and other Services over the internet, and such third party manages and distributes its services and solutions on behalf of the company to the company or its customer or suppliers or other related parties such as Government, Shareholders, Banks, Financial Institutions, etc. across a wide area network from such central data hub. In real sense, Application Service Providers is a medium for International or National Multi-State Corporate entities to outsource their Information Technology related needs to a third party and thereby route its distribution to the required sources. This shows that the amount of Skill required in such an Activity is not that large and despite the fact that such activity can be on a very large scale, yet the skill required by the outsource contractor is not of a very high scale. Only a common understanding of the company’s Software Applications and their use is sufficient enough for the Contractor to provide the service.

2. Information Technology and Facility Management

“The process whereby one firm (the contracting firm) enters into a fixed length contract with another (the contractor) where the contractor agrees to operate and maintain the contracting firm’s information systems.”(Dai-sho,2003)

In IT / FM Outsourcing, the contracting firm contracts for the supply and maintenance of all or a specific area of its Information System with a Contractor. The terms and conditions of contract may vary between each contracting firm and contractor. The most common example of IT / FM Outsourcing is the contract of Computer related peripherals of large organisations with Computer Giants like Hawlett-Packard Bell, Compaq, Dell, IBM, etc. These computer companies enter into contract with various other companies to provide services of Harware Maintenance, Software Maintenance, Backup and Restoration of Information Systems, etc. The skill required in providing these services is normal as it requires the service provider to be competent enough to handle all of the company’s present and future requirements. Sometimes, IT / FM Service providers do have to recruit and employ specific staff at the companies premises for full time, to adhere to the needs or requirements of the companies. Overall, a normal level of Skill and Normal Scale of work exists in this field of Outsourcing.

3. BSP – Business Service Provider:

Business Service Provider also known as MSP – Management Service Provider. As the term in itself states, this branch of Outsourcing provides management services. We all know the importance of Management in a Business and an MSP provides the Managerial services, so practically its like providing a business unit with Brains. “By definition, Management Service Provider is a company which provides one or more entire business processes for its clients.” The Citi Group, which provides such services to its clients. The amount of activities in BSP is not that very high, because, most often Management services are not outsourced and no company would prefer to outsource its Management. Such services are usually for specific Individual clients. The scale of work here may be high, but also is the amount of skill required, especially since its outsourcing of the Management of an entity and not of a particular activity or task. So, where a Management of any entity is required to control all the activities or tasks, the outsourcing of the Management in itself means outsourcing of all the activities or tasks, the decision making process is fully being outsourced. Hence, the quantum or scale of work is high and so is the skill required.

4. BPO - Business Process Outsourcing

The term in itself explains a lot, Business Process Outsourcing – Outsourcing of a Specific Business Process or Operation to an unrelated professional third party. This field of outsourcing has been very fast and rapid in its development as compared to any other field or branch of Outsourcing. The reason is the quick and fast development and rapid advancement of technology. Further more details on Business Process Outsourcing as detailed as under.

2.4 Offshore Outsourcing – Beyond The Boundaries

The very first idea that comes into ones mind on hearing Offshore Outsourcing is to go to outsource to some another country – Outsourcing beyond ones legal boundaries.

Outsourcing takes place when a company transfers the ownership of a business process to a third party and is different from contracting in which the company retains the control over the process. One of the fastest growing segments of outsourcing market is offshore – shifting development and support of IT systems to third party teams based in developing countries with strong graduate workforce. Over the years offshore outsourcing has increased at a major pace due to advancement in satellite and Internet technologies, better connectivity and a constant search for cheaper labour to cut costs and beat competition. In this kind of outsourcing the provider offer a managed service, but delivered it from India, Pakistan, The Philippines or other location with low-cost skill base. But the choice of location is inevitably driven by prioritisation of a set of factors and both client and service providers need to balance the following consideration:

- Time zone difference

- English speaking capability of staff

- Political stability of the host country

- Host government’s support for the industry

- Culture fit

- Wage cost

- Technical qualified talent base

St. Paul Pioneer Press, 1st Feb. 2004 Issue states, “The practice of using low cost workers in Countries such as India, China, Ireland and Philippines to do service related work such as Customer Service, Software Programming, Bill Processing, Legal Research and X-Ray reading…” is developing on a very large scale and most countries following such practice are expected to benefit in the future.

As we know that we can get cost effective and skillful labour in developing countries like India, China, Ireland, etc. and thus, by Off Shore Outsourcing to such Developing countries, we can get benefits in terms of Cost Advantage, Intellectual Asset, Time difference advantage, Foreign Exchange Rate Advantage, and many more of such advantages. These advantages are further discussed in detail in Chapter 3.

2.5 Business Process Outsourcing:

Business Process Outsourcing is one of the branches of outsourcing. Some companies refer this as Business Process Management because Business Process Outsourcing involves more than just application outsourcing. Business Process Outsourcing entails the handling over the whole process of business, IT or non – IT to a third party. The ultimate object of Business Process Outsourcing is the creation of a virtual company, whereby the primary in – house focus is the management of corporate brand. Availability of highly qualified skill pool and faster adoption of well defined business process leads to higher productivity gains without compromising on quality.

Customers across verticals like Insurance, Banking, Pharmaceuticals, Telecom, Automotive and Airlines are the early adopters of Business Process Outsourcing. Of the above listed sectors, Insurance and Banking are able to generate bulk of savings purely because of the large proportion of process they can outsource like Claims Processing, Loans processing and Client servicing through call Centres.

Choosing the Business Process Outsourcing supplier, we can outsource our process to the outsourcing contractor. A few examples of big outsourcing contractors are TPI, Morgan Chambers, Wipro Technologies, Infosys, etc. The reasons for outsourcing a part of business are many and varied - It can be for number of activities within the horizontal business process. A Business Process Outsourcing contract entails just one or a combination of the activities.

As IT outsourcing service is highly practised all over the world, customers and vendors are now looking at Business Process Outsourcing as a means to revitalise their organisation, reduce cost or both. Business needs are perpetually changing. The last two years has seen a quantum leap in the structure and function of a corporation.

As for an example: Virgin is a prime example of company that is at least someway along this route. The main corporate concern is maintaining and exploiting the virgin name, with many of company’s product and services supplied by third party, while Virgin’s brand focus is the exception becoming increasingly apparent in some areas of business.

2.6 Branches of Business Process Outsourcing

A detailed graphical presentation of the Business Process Outsourcing Spectrum is as under:

It can be seen that BPO is virtually in each and every field of the Business Activity. Be it Finance, Administration, Human Resources, Sales, Logistics, etc., Organisations and Corporate have outsourced practically every activity to Contractors around the world. The above chart, however, is an attempt to classify all such activities outsourced into three basic Branches namely Finance & Administration, Operations and Sales & Marketing. Each of such branch has a number of operations, some of which are shown above and each such operation has a number of activities to be outsourced. A small list of the such operations that are outsourced and the activities involved in such processes are as under:

Human Resource: HR Administration, Hiring and Recruiting, Payroll Administration, Benefits Administration, Claims Administration, Education & Training, Gratuity, Pensions & Other Retirement Benefits.

- Finance: Tax Processing, Credit & Collections, Accounts Receivable & Payable, General Ledger Accounting, Bank Loans, Mortgages, Leasing, Hypothicaiton.

- Administration: Asset Management, Procurement, Asset Recovery, Property Management, Wealth Creation, Others.

- Manufacturing: Contract Manufacturing, Quality Control / Testing, R&D, Product Development, Material Management.

- Logistics: Distribution Management, Direct Procurement, Warehousing Management.

- Customer Care: Customer Service & Support, Operator Service, Internal Support, Emergency Dispatch Service, Marketing Services, Tele Sales, It Helpdesk.

- Industry Specific Services: Insurance Claim Processing, Credit Card Processing, Mortgage Services, Document Management, Bank Loan Processing, Leasing Management, Asset Creation And Property Management.

- Payment Service: ATM Transactions, Credit Card Authorisation, Cheque Processing, Merchant Check Verification.

- Sales: Inbound Telesales, Outbound Telesales, Sales Forces Support / Management.

- Marketing: Telemarketing, Database mining & Marketing, Market / Customer Analysis, Web Marketing.

Business Process Outsourcing

3.1 Business Process Outsourcing – An Evaluation

A Data from the Gartner Group and IDC Consulting, Inc. states that Business process outsourcing is expected to grow from $38.9 billion US Dollars in 2003 to $1.2 trillion US Dollars by 2006. A similar report from Deloitte Consulting, The Offshoring Imperative, published in June 2003, predicted that two million financial services jobs, such as brokerage transaction processing clerks, etc. and $356 billion in core financial transaction operations will be outsourced by 2008. It is not that such outsourcing shall only take place or be undertaken by Large companies and also that the field of outsourcing shall be restricted to Information Technology (IT) and Payroll Accounting, but even Small or Medium Size Companies, in large numbers, are expected to join the Outsourcing Band Wagon. In fact, since the Mid 1990s, small and medium Sized companies have started showing keen interest in Outsourcing contracts due to low costs and easy affordability by the companies. Also the advancement of Internet and IT enabled services has led to a great deal of expansion of the field of Outsourcing. Where in the older version Companies could only outsource in the field of IT and Payroll, now, the companies are able to outsource entire business processes and professional staff that traditionally were internal. Internal auditors and financial reporting and tax professionals, for example, are now candidates for outsourcing. Also ripe for outsourcing are critical business processes, such as customer support, cash management, tax preparation, accounts receivable, and accounts payable. In fact, an analysis carried out by Mark Beasley, CPA, of public announcements of outsourcing decisions, by more than 300 U.S. companies in the period of 1997 to 2003 shows that all types of business processes are potential outsource candidates. A figure showing the extracts of their research is shown alongwith.

It can be observed from the above chart, there where Payroll was one of the main reasons for the origin of large scale Outsourcing, this has now been overtaken by Supply Chain Outsourcing. It is quite noteworthy to see that various other services like Financial Services, Claims Processing and Securities Transaction Processing have also begun to be outsourced, and their individual share in the Business Process Outsourcing is slightly higher than that of HR / Payroll

Outsourcing. Let us now understand the reasons that have led to such a spur in the Outsourcing field. The reasons as to what has led to such a spur in the Outsourcing field, as compiled by Mark Beasley,2004, show that, not the Saving of Cost, but to Tap the Expertise of the professional and other bodies, is what is the main reason for outsourcing. It is very difficult for companies and entities to gather andemploy a huge range of professionals or professional services, and under such circumstances Outsourcing Contractors do provide with a really good alternativeto the company. This in turn also saves Cost for the company, which is the second more convincing reasons for companies to Outsource. Collectively, BothTapping of the Expertise available with Outsourcing Contractors and the Saving of the Cost, both cover a major area in the requirements of Companies to Outsource. The need for certain companies to focus on their core activities, say production instead of Marketing or Sales, has also led to the development of Outsourcing of such Secondary activities. To improve the efficiencies of a particular segment of the business and to improve the Customer Service in – order to meet up with competitors, are also seen as some of the convincing reasons that drive the wheel of Outsourcing. Overall, all these reasons that lead companies or entities to Outsource, have one basic theme in common – they all are intended to help the Entity’s business gain a Competitive Advantage in the Market over its competitors.

3.2 Business Process Outsourcing : A Competitive Advantage

The origin of Business Process Outsourcing is not known and is very difficult to be known, yet the reasons that led to the origin of Business Process Outsourcing are quite known. The desire for corporate entities to outsource some or all of their business Process to a third party must have been driven by a strong and powerful source of Information that must have led them to believe it was beneficial. One of these strategy which is working in back of BPO is as under:

Competitive advantage

A firm’s relative position within its industry determines whether a firm’s profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. Competitive Advantage is one of the core areas where every business entity intends to gain. Every Business entity wishes to have an upper hand on its competitors. Michael Porter suggested in his book ‘Competitive Advantage’, published in 1980 that there were three main ways in which a company could achieve a competitive advantage that was long lasting. These three strategies that go in hand with Business Process Outsourcing are Cost Leadership, Differentiation and Focus Strategy.

Cost Leadership

One of the ways to have an upper hand in this wildly competitive world is to be cost effective i.e. to be a low cost producer. However, no industry would like to reduce costs at the cost of its product’s quality. Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. This strategy has its risks.. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leap frog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. Hence, when the cost reduction is not possible during production, Administration and Selling has to bear the burden of reduction.

In the case of Administration and Selling, Business Process Outsourcing plays a very important role. Competing firms may have same or similar products, but to market them and sell in the market is the work of Professional persons and the way in which an entity budgets and utilises its marketing options determines its market standing. This is where most business entities have begun to concentrate. The firms may be selling similar products, but their Marketing strategies are different and so are their means to market. Business Process Outsourcing of the Marketing Division helps firms to cover up larger market share within a short period of time, due to the professional services offered by Business Process Contractors. Services such as Tele – Marketing, Tele – Sales, Online Sales, Tele – Booking and Delivery of goods, Customer Care and Support etc. add value to the organisation and result in increased market share. For a business entity, it may be very difficult to employ and concentrate on a big marketing staff, but it is easier to concentrate on an Business Marketing Outsource Contractor and hence save costs and increase business efficiency and Market Share.

Differentiation – Differentiation means service differentiation. An entity may provide varying levels of services to different customers. As for an example, Call Centre queries are routed through a long journey of customers keying in information about their specific requirements, before they are routed to a Customer Care Representative, who has special knowledge about the Customers’ Query or who specifically deals with such queries from Different Customers. A classic example of such differential service would be services of Credit Card Companies, where a new customer is routed to a different Assistant as against an old customer, where Credit Card lost queries are specifically dealt with, etc.

Focus – The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy can be further classified into two variants.

(a) Cost focus – where a firm seeks a cost advantage in its target segment,

(b) Differentiation focus – where a firm seeks differentiation in its target segment.

Both variants of the focus strategy rest on differences between a focuser’s target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

Some companies attempts to focus all of its efforts on one market segment and become the ‘expert’ supplier for this sector whereas others attempt to focus on more than one market segment and become a Industrial Leader. The former is the territory of the niche retailers such as The Sock Shop and The Body Shop, both of which were highly successful retail chains. The examples of Latter could be Virgin Atlantic, Reliance (India), etc.

By specialising in a particular segment, companies can offer a wider range of core products and a closer relationship with their customers. Profits are derived from customer loyalty and a better understanding of the marketplace than competitors. By focusing on more than one market, companies are able to create a Brand Name and a Company Image, to achieve higher objectives. Brand Loyalty, Company Status and Reputation become the main source of Profits for the company. However, whatever the attempt of any company be, be it to offer services in a single market segment or in a variety of market segment, the Management of the company needs to focus on a large number of areas that shall impact the company’s goal and objective. With limited resources and the burden of ever increasing Costs, it becomes very essential for the companies to utilise the resources it has to the optimum.

The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.

Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist.

3.3 Benefits of Business Process Outsourcing.

1. Cost Saving:

Cost – cutting may not be the only reason to outsource, but it is certainly a major factor. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of business. Outsourcing can also make firm more attractive to investors, since the management is able to pump more capital directly into revenue – producing activities. Outsourcing your work to skilled service providers is an excellent way to stretch your budget. Companies that take a well-managed approach to outsourcing can gain cost savings upwards of 40% to 80%. One of the top Online buyer of IT services, Elance, says outsourcing “is an extremely cost – effective way to do development. It’s like always being able to find a specialist at great prices.”

2. Focus On Core Activities Of Business:

Every business has limited resources, and every manager has limited time and attention. Outsourcing can help business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.

Outsourced professionals allow in-house staff to focus on what matters most. Free up “rain – makers” and account managers to focus on generating new sales and avoid getting your staff bogged down with work which can be better fulfilled by experts outside your organisation. One frequent Elance Online buyer is the owner of a small consulting business. He uses outsourcing to complete 75% of his client projects. The flexibility of outsourcing business processes allows him to control his costs, offer a range of expertise with excellent turnaround times, and provide competitive pricing. His focus is therefore on getting along with clients, whereas his work is performed through Outsourced Contracts.

3. Achieve Flexible Staffing Levels:

Savvy companies have figured out ways to grow their businesses without increasing overhead. Outsourcing provides a pool of qualified professionals available for unique, niche, or overflow projects. If the skill – set you require is difficult to find or expensive to maintain in – house, outsourcing allows you to acquire the expertise when you really need it. It eliminates the need to turn away work or to give up a project. Rather, it assists in accepting custom requests from your clients on a regular or frequent basis, which gives you the opportunity to profitably deepen your customer relationships.

4. Gain Access To Global Resources:

The Outsourcing Institute asserts that the rules for successfully growing a business have changed. The new scenario says, “success is hinged to resources and talent you can access.” Using global expertise allows you to gain the advantage of skilled labour regardless of location, and to significantly increase the quality of your deliverables. These are opportunities for smaller businesses to expand with less investment, which are not otherwise possible.

5. Speed Your Time to Market :

Outsourcing extends traditional small business benefits of flexibility and responsiveness, allowing you to compete against bigger firms. Supplementing your own workforce with offshore support allows for productivity and availability 24 hours a day. Having access to resources able to work on your projects even while you are asleep accelerates your time to market, and provides your business with a key competitive advantage.

6. Increase efficiency:

Companies that do everything themselves have much higher research, development, marketing and distribution expenses, all of which must be passed on to customers. An outside Service provider’s cost structure and economy of scale can give your firm an important competitive advantage.

7. Reduce labour costs:

Sometimes you need employees for a specific period of time. That time you can outsource labour from an outside agency instead of employing them, because hiring and training staff for short – term or peripheral projects can be very expensive and temporary employees do not always live up to your expectations. Outsourcing lets you focus your human resources where you need them most. Also, the costs attached to avail such human resource are much less than the cost the aforesaid alternative.

8. Start New Project Quickly:

A good outsourcing firm has the resources to start a project right away. Handling the same project in – house might involve taking weeks or months to hire the right people, train them and provide the support they need. And if a project requires major capital investments (such as building a series of distribution centres), the start – up process can be even more difficult.

9.Reduce risk:

Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions and technologies all change very quickly. Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.

3.4 Risks Of Business Process Outsourcing:

- Strategic/ Market Risks:

If an entity that outsources overseas is prohibited from receiving a federal contract, that entity may face significant cuts in its existing customer base, which may threaten its strategic market position and related market share. For example, any company that works in the defense – related industry would be cut from any opportunities to enter into defense contracting relationships. That may put many defense contractors out of business.

- Operational Risks:

Any prohibitions for outsourcing an entity’s operations to overseas providers may threaten the entity’s ability to maintain core operations cost effectively. In some instances, companies choose to outsource to tap into professional expertise not available internally. If those options are prohibited, the companies may face challenges that threaten their ability to continue existing operational processes cost effectively.

- Finance Risk:

Some of the proposed federal legislation would prohibit any entity from receiving federal grants or other financial assistance. That would directly affect an entity’s cash flows and access to other financing alternatives, especially if federal loan guarantees are prohibited.

- Human Capital:

Some of the proposed legislation would provide federal assistance to displaced U.S. workers. Those provisions might actually reduce human capital risks because assistance to workers reduces some of the burden of the company (e.g., funds for retraining workers would be paid by the federal government rather than by the enterprise).

- Legal / Regulatory Risks:

Most of these provisions, if passed, increase the volume of legal provisions that would apply to enterprises that outsource, and some would prohibit certain types of outsourcing. Entities would have to ensure they comply with numerous new federal laws.

- Technology Risks:

Some of the proposed legislation would increase reporting burdens. For example, the Jobs for America Act of 2004 would require companies outsourcing overseas to report how many jobs are outsourced, where they are going, and why to the Department of Labour, state agencies that help laid-off employees, and local government officials. As a result, any enterprise that outsources overseas must have information systems capable of tracking required data.

- Reputation Risks:

If a company doesn’t comply with a federal law related to outsourcing, its reputation may be damaged. As outsourcing trends continue to catch the attention of the American public, negative perceptions can create huge reputation risks. Fear of job loss, particularly in slow economic times, can profoundly impact the local or national reputation of any enterprise considering offshore outsourcing. Negative publicity regarding outsourcing to overseas markets has led to protests and demonstrations across the country that have attacked the image of some companies.

3.5 Factors after the Dramatical Growth of Business Process Outsourcing:

In last half decade we have seen a dramatical growth in outsourcing. There are several factors, which have fuelled the explosion of BPO described as under:

- Awareness of outsourcing solution: Nowadays entities are increasingly relying on Business Process Outsourcing solution as a competitive tool rather than a financial life boat. Today both type of companies whether it is large or small, have commonly accepted outsourcing as a business concept.

- Technological and organisational imperatives: Company’s initiatives to continuously improve, coupled with the rise of the “Information Economy”, are prompting business to search for ways to enhance all business process, particularly with those with IT application.

- Acceleration of change: The acceleration of economic and technological change is forcing business to partner with third parties that are experts in technology and specific business process and that can handle rapid change.

- Global competition: There are few large, fast growing companies whose corporate mission statements do not include the word “global” or “world – wide”. As companies seek to expand into new markets, the last portion of their business to arrive online is commonly the infrastructure and their back office support, because of their core in – competencies. But this is certainly critical to their long-term success in the market. Business Process Outsourcing can help these kind of companies by filling this gap.

- Cost pressure across the industry: An ever – increasing competition is a great deal of pressure for the industries, especially in terms of costs incurred. Particularly in industry facing deregulation. For example, telecommunication companies are facing increasing competition as they are forced to migrate from a cost – centre model, which characterised protected industries, to a profit – centre mentality that will enable them to simultaneously serve customers superbly and manage cost.

- Focus on the customer: Now as industries and companies transform their core functions to the third party, they are increasingly attracting and retaining customers. The historical concept of owning and operating the complete supply chain and supporting infrastructure is no more so crucial as before without outsourcing.

- Increasing customer expectations: With more choice, global competition, and the growth of “service economies”, buyers of retail and commercial products and services have come to expect better products and services at better price. Suppliers who are unable to meet such demands will fall short of the mark.

Call Centres In India – An Offshore Approach

4.1 Call Centres:

Call centres combine the use of highly effective and empowered company representatives with a service framework that relies heavily on communications and information technologies. A call centre is sometimes defined as a telephone based shared service centre for specific customer activities and are used for number of customer related functions like marketing, selling, information dispensing, advice, technical support etc. Thus, a call centre is a service centre, which has adequate telecom facilities, trained consultants, access to wide database, Internet and other on – line information, On – line support, infrastructure to provide information and support to customers. It operates to provide round the clock and year round service i.e.24 x 365 service. It is the Call Centres that have made the concept of round – the – Clock Access very famous. The Maxim of 24 X 7 i.e. 24 hours a Day and Seven days a week, which most organisations claim to work to provide services to its customers, is possible especially due to Call Centres.

The use of call centre is undergoing enormous growth due to importance attached by companies to customer care, telemarketing for product offerings, tele – banking, concept of direct response television and home shopping, market liberalisation of utilities, growth of direct marketing etc. In addition, telemarketing is growing and information lines are forming part of many product service offerings. Telephone banking has led to call centre growth in the financial services sector, while in retail the increase in direct response television and home shopping has driven call centre growth greatly. Market liberalisation of utilities has also been a key driver of call centre growth. Finally, the growth of direct marketing has also contributed to the popularity of call centres as a means of reaching targeted customer bases. Call Centres provide large and small international enterprises with the unique ability to establish a presence in foreign markets without the expense and complexity of owning and managing their own infrastructure.

A call centre with good metrics and good data capture abilities represents a credible marketplace intelligence system. A call centre can be seen as a window to the market place and is also a window to the client organisation allowing call centre operators to see and explore the business opportunities with existing and prospective in client organisations, which could result into business opportunities in future.

Call centre originally conceived as a separate and individual distribution channel of customer care system has been transformed into integrated customer management system. With the enabling of integration of call centre and Internet technology, call centres of future will handle telephone, fax, web, Internet and interactive TV enquiries on 24 hours a day, 7 days a week, Round the year basis. These combined Internet Call Centres or ‘Customer Contact Centres’ will shape the future of call centre design.

4.1 What does a Call Centre do for an Organisation?

• It allows a wider customer base to do business with.

• It offers an economical means of reaching diverse and widely distributed customer group.

• It finely tunes the offerings to specific customer groups.

• It allows an easy access of experts to the customers.

• It facilitates business round the clock and in any geography.

• It allows a company to avoid the overheads of brick and mortar branches.

4.2 Types of Call Centres

Mainly types of call centres can be counted as ‘Captive In – House’ or an ‘Outsourcing bureau’.

Captive In – House: Captive Call Centres are typically used for various vertical segments like Insurance, Investments and Securities, Retail Banking, Other Financials, Telecommunications, Technology, Utilities, Manufacturing, Travel and Tourism, Transport, Entertainment, Healthcare, Government, Education etc.

Outsourcing Bureau / contractors: Outsourcing contractors have experience in running call centres, allow corporations to ‘Hit the Ground running’, help in dealing with a complex labour market, better capability to handle volatility, tend to use the latest technology, lowers the company’s operating expenses, offers a way of cost control and limits the client’s financial risks, are responsive to their clients needs and allow the client to focus on their core competencies.

Many companies find that outsourced bureau operators offer them the flexibility required in the following manner:

- Set-up outsourcing. This involves use of a bureau in the early stages of the call centre life cycle. Having used a bureau for set-up, some companies later bring the process in-house, while others continue to outsource on a longer term basis.

- Transitional Outsourcing. This involves use of a bureau during the period when internal infrastructure is being revamped or re – engineered.

- Overflow outsourcing. A bureau is often an attractive option for a company when the demand on the company’s own call centre is too high for its current capacity. The use of a bureau operator in such circumstances ensures that the company does not have to ramp up during peak demand periods. Companies may also use BPO providers for ‘out of hour’ demand. In this case, the ability of a call centre operator to mix time zones offers a competitive advantage.

- One-off. For applications such as direct response advertising, which requires a call centre on a one – off, short – term basis, bureau offers the best option. Many companies prefer to outsource the handling of direct marketing campaigns rather than invest in new technologies, especially for limited period campaigns. Examples of such requirements would be marketing campaigns, special issues such as recalls, or anything that generates spikes and large call volumes. Other examples could be where a company was testing a new business initiative, new product or a new marketplace.

- Long term outsourcing. This may entail the entire outsourcing of the operations.

Outsourced call centre may further be classified based on:

- The Delivery Channel: The delivery channel or mode of customer – call centre interaction e.g. Voice Call, E – Mail, Chat, Web Call Back, Web Call through, Web Collaboration, WAP, Touch Screen etc.

- Features and components: Components / features constituting the call centre e.g. Customer Relationship Managements (CRM), Workforce Management, Computer Telephony Integration (CTI), Integrated Call Management etc.

- Location of its target customer.

4.3 Potential Customers:

Potential Customer industries for call centre is essentially those industries, which require customer interface and their transaction success is based entirely on information availability. These industries include:

- Airlines

- Banks / Insurance / Financial Services boutiques to provide services to the customers / callers

- Telecom services

- Companies providing customised and high value services

- IT products companies

- Tourism & Hotels

- Other services industries

4.4 Market Size:

According to a survey, there are more than 100,000 call centres world – wide and this was expected to grow to 300,000 by 2002 employing approximately 18 million people. By the year 2003 a sum of US $ 60 billion was expected to be spent on call centre services, mainly driven by E – commerce.

As per a survey conducted by Nasscom, Customer Interaction Services including Call Centres in India employed about 10,000 people as on 30 July 2000 generating an annual revenue of INR 450.00 crores. It is estimated that during 2008, this segment will create employment for 270,000 people generating revenues of INR 20,000 crores. A chart Published by Data Monitor, 2003, showing the progress of Call Centres achieved by 2003, shows that developing countries like Japan and India have come up to a great level of competition in the Outsourcing World. It is not very far when India is expected to Overcome Japan, and is also expected to lead the group in the number of Call Centre operators around the world.

4.5 Industry Structure:

The potential market of immediate relevance to service providers in India is USA. During 1997, and continuing into 1998, USA, as an industry as well as trend setter in shifts in technologies and practices, has experienced significant changes that have been making substantial difference to conventional business logic and vendor – customer relationship.

Advancing technology has fuelled growth among several product segments; but resistance has been seen coming from the user sector — which is impeding more remarkable growth. This essentially is driven by increasingly felt need of customers to critically work out the cost benefit analysis, opportunity costs and other more viable options available.

Most of the recent trends in this industry pertain to the technology behind the call routing and distribution function. Some of these trends will continue, and include the following:

- Shift from proprietary to open architectural platforms is rapidly gaining acceptance as is exemplified by vendors’ frequent introductions of PC – based routing and call management software.

- A shift toward the “complete package” or “turnkey” solution is boosted by this trend to open platforms which allows for easier integration with existing systems. The growth in turnkey solutions is also driven by a high level of customer demand.

- In addition to the formal call centre set – up, demand for this industry – standards based, open architecture is seen by those types of call centers operating in more “non-traditional” environments. For example: SOHO, virtual call centres, telecommuting, etc.

- Price decline for products perceived as commodities (due to level of technology and knowledge sharing). Besides the above developments, call centre technologies are making a rapid shift from mere stringing together of boxes and wires to, more intelligent and manageable solution. For example, select companies in India have already developed extremely competitive and technologically advanced call centre solutions based entirely on PC technologies and platforms, and IP technologies. This helps to reduce the cost of the system and reduces changeover or upgradation costs for the new technologies as a major portion of technology is derived from software. These are highly automated call centres. Influences upon the call centre market structure have approached from various directions to such a degree as to create flux. These persuasions are steering the market through a shake-out phase, culminating in a leaner and more competitive market withinthe United States. This would also mean vendors as well as customers looking to reduce their costs and outsourcing their requirements /contracts to such call center service providers who can help to add and continually enhance competitive advantage.

4.6 Decision criteria.

Some key criteria to consider and define for your environment are listed below:

- Operations. What operational environment you want to use for call support? What media functions, applications, and hours of coverage are required?

- Technology. What infrastructure is needed to meet business goals? Are you in the process of procuring technology solutions like CRM, CTI that web integration
may be part of or need to integrate with?

- Resource. Consider Call Centre staff and management, technology, HR training etc.

- Workload. Volumes and variability of volumes. How are they likely to grow?

- Culture. Some companies need control of technology, staff or both in order to deliver the level and type of service and support they desire.

- Cost. What are the investment priorities? Consider the cost of technology, resources and ongoing maintenance and support.

- Core Competencies. Are call centres a core competency for your company, or will they be? Consider technology implementation, integration, development and management

4.7 Proven Success Factors:

Operation of a Call Centre revolves around serving an existing and potential customer base. This need translates into providing satisfying and well informed responses to a customer query, or in case of a potential customer, meeting his expectations with regard to quality and quantity of service. The difference in services can be made through a number of factors. Some of them are discussed as below:

- Process Integration: The call centre service flow should be closely integrated with the process of customer for whom this service is being rendered. This translates into easy access to and presentation of updated information.

- Customer Satisfaction: Defined as Direct – to – Quality (DTQ), this is akin to ability to satisfying the customer’s (caller’s) query the first time.

- Responses Time: Waiting period and responses time for a query should be minimised. The only way is by benchmarking against some of the best call centre operations in the world.

- Quality: Vendors should aim to achieve quality certification such as ISO 9000 or other certification applicable to this industry. This includes full COPC – 2000 Certification (COPC - Customer Outsourcing Performance Centre). This distinction means that the facility has met the requirements of all 32 areas described in the COPC – 2000 Standard. It thus helps to validate call centre’s quality and continuous improvement initiatives.

- Professional Service: The quality of service rendered by an outsourced call centre should be equal to or exceed service levels already achieved by the client’s in-house call centre.

- Employees: Call Centre staff should be trained on the client’s business, the role of the call centre, nature of potential callers, and service expectations of the client.

- Accent and Fluency: Call Centre staff needs to be constantly trained to help improve accent and diction capabilities, especially for region being served.

4.8 Call Centres in India:

The development of Call Centres in India during the recent half a decade has been quite noteworthy and India leads all other nations in the quick and rapid development of Call Centres. The impact of such a development of Call Centres in India could be seen from the rise in the GDP and Per Capita Income of India. A summary of the same is as under:

4.9 Country Information: India, 2003 :

GDP : $515 bn

Population : 1,056 bn

ICT spend : $19.7 bn [3.8% of GDP]

4.10 History Of Outsourcing In India:

Looking back at the rise of outsourcing, or the history of outsourcing, it can be observed that the idea of outsourcing has its roots in the ‘competitive advantage’ theory propagated by Adam Smith in his book ‘The Wealth of the Nations’ which was published in 1776. Over the years, the meaning of the term ‘outsourcing’ has undergone a sea deep change. What started off as the shifting of manufacturing to countries providing cheap labour during the Industrial Revolution, has taken on a new connotation in today’s scenario. In a world where IT has become the backbone of businesses worldwide, ‘outsourcing’ is the process through which one company hands over part of its work to another company, making it responsible for the design and implementation of the business process under strict guidelines regarding requirements and specifications from the outsourcing company. This process is beneficial to both the outsourcing company and the service provider, as enables the outsourcer to reduce costs and increase quality in non core areas of business and utilize his expertise and competencies to the maximum. And now we can see the benefit to the service companies in India as they mature, prosper and build core capabilities beyond what would generally be possible by the outsourcing company.

Since the onset of globalisation in India during the early 1990s, successive Indian governments have pursued programs of economic reform committed to liberalisation and privatisation. Till 1994, the Indian telecom sector was under direct control of the Government of India and the state owned units enjoyed a monopoly in the market. In 1994, the government announced a policy under which the sector was liberalised and private participation was encouraged. The New Telecom Policy of 1999 brought in further changes with the introduction of IP telephony and ended the state monopoly on international calling facilities. This brought about a drastic reduction and this heralded the golden era for the ITES / BPO industry and ushered in a slew of inbound / outbound call centres and data processing centres. Although the IT industry in India has existed since the early 1980s, it was the early and mid 1990s that saw the emergence of outsourcing. One of the first outsourced services was medical transcription, but outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when Multi – National Companies established wholly owned subsidiaries which catered to the process off-shoring requirements of their parent companies. Some of the earliest players in the Indian market were American Express, GE Capital and British Airways.

In the last couple of years, India has emerged as one of the most preferred countries for setting up of call centres. Many companies including GE, iDLX, Bechtel, British Airways, Dell Computers, Bharti Telecom have already chosen India as the base for their new global call centres. These are choices made for solid, practical reasons, which guarantee them competitive advantage in the global marketplace. Many banks such as ICICI, HDFC, Standard Chartered, Citicorp, American Express to name, a few telecom service providers and infotech companies such as Lotus, Hewlett Packard, 3Com etc. have deployed call centres in India for better customer support and care.

As we all know that India is an emerging base in list of offshore outsourcing destinations. Robust communication infrastructure, a large English – speaking work force, low labour cost, appropriate time zone difference with the west and the brand equity built by the software service sector are compiling reason for choosing India as the BPO destination.

4.11 The following factors as the major reasons behind India’s success in this industry :

- Offshore markets (labour arbitrage): India is a labour intensive country and both Skilled and unskilled labour is available in abundance. Abundant skilled labour, English – speaking manpower, Economy of scale and development, etc. are some of the reasons behind India as a great centre for such labour intensive industry. It is estimated that an Indian Call Centre agent earns an estimated US $ 2,700/- per annum, which is almost 10% – 15% of what an US Call Centre agent is expected to earn – resulting in a drastic saving of around 85% per Call Centre agent.

- Improved technology: India has never been far behind in the adoption and implementation of Technology. India has been one of the pioneer’s in the world in terms of implementation of Science and Technology. The Infrastucture facilities availabel in India are at par with those available in the Developed Countries.

- Quality: The availability of skilled labour force, and low costs associated with the training of Unskilled labour force to Skilled labour force has resulted in the achievement of high quality standards in terms of providing services to the clients. Indian Service Sector is now forminga major part of the Indian Economy – all due to the quality of service provided by the people employed in such sector.

- Time Zone difference: Fast turnaround times and the ability to offer 24 X 7 services based on the country’s unique geographic location, suitable atmosphere and temperatures and even more suitable timing difference to suit other countries requirements, makes India an even more compelling reasons to be the Outsourcing Centre.

- Friendly government policy: Proactive and positive policy environment of the Government of India encourages ITES / BPO investments and simplifies rules and procedures. A friendly tax structure, which places the ITES / BPO industry on par with IT services companies has also resulted in the quick pace development of this Industry in India.

Indian Call Centres: From the above information, a small chart showing the past, present and expected future growth in the Number of Call centres in India, as predicted by Data Monitor, 2003, is as under:

 

4.12 Swot Analysis Of Indian Call Centre Industry:

A SWOT (Strengths – Weakness – Opportunities – Threats) Analysis of the Indian Call Centre Industry is as under Taken from the first letters of the words Strengths, Weaknesses, Opportunities and Threats, a SWOT analysis is a process for identifying those areas where an organisation needs to pay special attention. The Strengths and Weaknesses concern what the entity offers in terms of its resources, staffing, history, reputation and the like. Opportunities and Threats refer to the positive and negative factors in the environment in which the entity functions. The past and the present development of the call centres help us identify the opportunities that exist in future. But there are certain weaknesses and risks associated to such development. A list of the strength and opportunities that overcome the weight of weaknesses, threats and risks that lie ahead is as under:

Strengths Of Indian Call Centre Industry :

• India has solid history in software development which helps call centres in providing several kinds of services.
• People with English proficiency makes call centres more efficient in service providing.
• Indian Government Support BPO industry and had made liberal tax regulation for BPO industry.
• As India is a leading player in cost advantage call centres can attract more and more offshore customers.
• Indian Educated workforce make Indian call centres more efficient.
• Educated work force and better technology led Indian Call centres as a quality service providers.
• Expertise in new technologies make call centres more efficient and better provider.
• Reasonable technical innovations

Weaknesses Of Indian Call Centre Industry :

• Lack of initiative to astablish a position in the market and promote brand name.
• Slow pace of infrastructure development in India.
• Varied number of cultures in India leading to cultural differences.
• Lack of understanding in general public.
• Leverage expertise for higher-value education.
• Lack of business process experience as this is still a new and emergiung concept
• Autocracy and delays in legal system.
• Poor globalisation skills.

Opportunities for Indian Call Centre Industry In Future:

• Large number of BPO & Call centre offerings from Indian as well as foreign countries.
• Potential to tap Chinese domestic & export market.
• Leverage relationships in West to access APAC/Middle East markets Creation of global brands.
• Fast pace and sky rising opportunities in Indian domestic-market growth.

Threats for Indian Call Centre Industry In Future:

• Internal competition for resources as there is still shortage of qualified professionals.
• Over-promise / Under-deliver
• Regional geopolitical uncertainty due to uncertain political environment.
• Rising labour costs due to existence of labour unions and unwanted labour laws.
• Competition from other countries such as Japan, China etc.
• Government blocking reform due to political uncertainties and wide spread corruption.

Conclusion

There can be no perfect Conclusion to the Call Centre Industry Research except that the prospects in the field are many and the scope is too high to measure. When people say, “The Sky is the limit” they still quantify it to the sky, which though difficult to reach or achieve, but can at least be seen. However, the Business Process Outsourcing industry is such where the limits cannot be seen as to where the scope of the industry will end. The SWOT analysis shows that there are inherent risk and Threats associated with the industry, and so is the case with any other Industry. But against the Strengths and Opportunities that exist and that can be forseen, the weaknesses and threats do not stand tall. Moreover, this industry is not like any other industry, that is either Labour intensive or Capital Intensive, it is a combination of both and the combination is such that one supports the another in its existence. The overall analysis of the above research is that Business Process Outsourcing has become one of the most effective ways for Business Entities to Employ the services of highly Skilled and Intellectual personnel and at a low cost – thereby resulting in cost Saving as well. But what is more important is to hire the Brain. This is a win – win situation for both parties. Individuals with superior knowledge and brain power can provide their services with complete freedom and entities requiring such services can avail them at a cheap cost. Hence, instead of employing an Individual and thereby restricting his freedom and skill, this proves to be a better option. Also, this leads to the development of Professionalism in the Market. Professional Services, which are now forming a major sector in the Industry, is Second to none. There was a time of Industrial Revolution, which lasted several years, but this is the time of Service Sector Revolution and it doesn’t seem to end at all. The way in which technology is developing, consumer / customer requirements and needs are increasing, the demand for Information on your hands at any time is increasing and the way the world is progressing, this just seems to be the beginning of an ever lasting Revolution in the Business Segment.

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