Skyline Business School

BPO |Update|

Issue 39

Is the BPO fort crumbling under attrition fire?
BPOs all over India are reeling under high attrition rates. According to Nishchae Suri, consulting leader, Hewitt Associates, attrition rates in the industry vary from 24 per cent to 40 per cent. HR managers are under intense pressure from international clients to increase and maintain the count on the floor. Says C K Taneja, managing director, Green Field Online, a market research BPO: "Sometimes the executive hired and trained for process A, is shifted to process X, Y or Z at the end of his training. It's highly unethical and unfair to the employees. But reality is cruel." 
Attrition has a tremendous impact on the DMoQs (Delivery Model of Quality) that require an agent to pick up a phone within three rings. DMoQs goes down sharply. The C-Sat (Customer Satisfaction) scores also deteriorate. The AHT (Average Handling Time) shoots up when an entirely new person is kept to handle calls. Says Ian Stern, co-promoter, Holistic Enterprises, a voice and accent training firm: "An executive starts becoming 100% productive only after six months of taking calls. And if he is replaced by a new trainee, the productivity levels depreciate suddenly." 
Employees leave due to monotony of the job and fear of stagnation. Social perceptions also matter. Most parents don't know what happens in a BPO. Some wrongly perceive it as a receptionist's job. Says Hewitt's Suri, "BPOs can curb attrition by offering a better work-life balance. They should concentrate on leadership and brand building as people prefer to be associated with a brand." Respect for the job should be created by BPOs. The youth should feel proud to be a part of the billion-dollar industry. Make the work challenging, provide opportunities for vertical and horizontal growth and hire right is the mantra. A strict 'No' to people with less than one-year experience should be the norm. Family members of employees should be involved in the induction process. They should be given a feel of what happens in a BPO. 
Source: Indiatimes News Network, February 10th

Now, work-from-home BPO jobs
People who reach Esther DeJesus when they call Office Depot Inc.'s customer service center have no idea that she's sitting at home in a room decorated with pictures of Garfield and Betty Boop. The Orlando, Florida, resident, who works on the retailer's account for call center contractor Willow CSN, is one of a new breed of customer service representative. After some unsuccessful attempts to move call centers abroad, U.S. companies are shifting some of that work back to this country -- and into people's homes.
Besides Office Depot, JetBlue Airways Corp., General Electric Co. and Staples Inc. are among the companies that have been using stay-at-home customer service representatives as an alternative to traditional call centers in the United States, India and the Philippines. 
The arrangement also allows employers to schedule people in small part-time slots when call volume is higher, rather than hiring regular call-center workers who get paid whether they are busy or not. 
To work at home, employees need a computer that meets certain specifications, such as high-speed Internet access. After taking a training course, they're ready to start answering calls that are routed to their home phone. 
Companies are passing on some of the savings they're realizing in rent and office equipment. Stay-at-home customer service representatives generally command $13 to $14 an hour, while the industry rate for call center workers is $8 to $9. Office Depot plans to close nine of its 11 call centers by the end of September and replace them with home-based workers. Office Depot said it halved its attrition rate to 30 per cent almost immediately after it started using home-based workers 3 1/2 years ago. Now attrition has fallen even more, to a low teen percentage rate, allowing the company to save training and recruiting expenses. 
Source: Reuters, February 9th

Cognizant to hire 7,200 in '05
Cognizant Technology Solutions has recorded a 59% growth in topline for the year ending December 31, 2004, at $586.7 million over $368.2 million recorded for the previous year. Cognizant has put out a revenue guidance of $845 million for calendar 2005, indicating a 44% year-on-year growth. It expects to add 7,200 employees in 2005, taking the total head count to over 22,500 by the end of 2005. Last year, the company added over 6,000 employees increasing the total count to 15,300.
“We are pleased with Cognizant’s strong results in the fourth quarter and full year of 2004, which outpaced the performance of the industry overall,” said Mr Lakshmi Narayanan, president and CEO of the company. “We attribute our growth to a number of factors, all of which reflect the success of our focus on providing customers with business-driven technology solutions through our onsite-offshore model,” he said.
Source: Times News Network, February 11th

Nipuna to hike staff to 2500
Besides adding 300 people a quarter, the company has plans to start centers in and outside India
Nipuna Services Ltd, the fully owned BPO subsidiary of Satyam Computer Services Ltd, is on an expansion mode. Started in June 2002, the company plans to double its headcount from the present 1,350 and also set up centers in Chennai and Pune. Equally, it intends to start up four more centers outside India. "Presently, we have two centers - one in Hyderabad and the other in Bangalore. While the 350-seater Bangalore center has around 180 associates, the Hyderabad center has 1,170. We intend to take this combined employee base to 2,500 by next year," said Nipuna CEO Dr Prakash Challa. "In order to reach this number, we need to hire at least 250 to 300 associates per quarter," he added. “Besides, we also intend to mark our presence outside India by setting up offices in Malaysia for the Asia-Pacific region, in Thailand, Hungary for European customers, and Brazil for South African clientele."
Nipuna manages and administers non-core yet vital business processes for verticals as diverse as insurance, healthcare, banking, telecom and manufacturing. Being on the verge of completing two full years of operations, the company has 20 clients. "It may be recalled that we have added 16 clients in just one year that only signifies the growth for Nipuna," said Challa.
Source: www.ciol.com, February 11th

India IT, BPO to lead Jan-Mar hiring
India's information technology and business process outsourcing (BPO) industries will be the biggest creators of new jobs in the January-March quarter, the Indian unit of Dutch staffing firm Vedior said. 
Job creation from outsourcing is in turn fuelling consumption in other parts of India's $600-billion economy and the IT industry estimates that it generated 3.5 percent of the country's gross domestic product in the last fiscal year. "Employment in the country's organized sector in the current quarter is set to grow at the fastest level ever and will be led by 10 percent growth in the knowledge sector," K. Pandia Rajan, managing director at Ma Foi Management Consultants Ltd, said. 
India's National Association of Software and Service Companies (NASSCOM) said this week BPO, in which companies contract out entire processes such as pension administration is projected to end March 2005 with 348,000 employees, up from 253,500 at the end of March 2004. 
Nasscom also said 10 percent of total automobile demand is coming from IT professionals and 15-20 percent of airline seats are being taken by them. 
Source: Reuters, February 11th

Pakistan aims for bigger slice of outsourcing pie
Spurred by India's giant steps in IT outsourcing, Pakistan is looking to strike it rich by using its English speaking manpower and cost arbitrage to provide tech services to global firms. Pakistan has launched an aggressive effort to woo global corporations to farm out technology tasks with a view to creating hundreds of thousands of new jobs and rake in billions of dollars in foreign exchange.
"We are not looking at competing with India but we definitely want to create our own space in the global outsourcing business," said Jehan Ara, president of Pakistan Software Houses Association, the premier IT industry umbrella group.
The country's IT industry leaders say it has all the strong fundamentals that have turned India into an electronics housekeeper to the world -- a large pool of qualified English speaking manpower and sharply lower cost of operations. Pakistan has nearly 60 companies operating in the BPO space, as compared to over 400 in India that handle a wide range of services for overseas clients such as customer care, finance, administration, content development and payment details. The IT industry in Pakistan employs some 35,000 professionals, while in India over one million people are directly employed in the sector.
"What we are trying to tell the global corporation is don't put all your eggs in one basket. They must look at Pakistan as an alternate outsourcing destination in Asia," said Ziad Bashir, director of Karachi-based Arwen Tech Ltd. 
According to Ara, while the Pakistan government has taken a series of initiatives in recent years to boost the attractiveness of the outsourcing sector, it needs to do a lot more.
"Improvement in physical infrastructure and the education sector are the two areas that need massive investments over the next few years. The government also has to create an environment for inflow of massive overseas investments."
Source: Indo-Asian News Service, February 12th

Indian IT firms bet big on knowledge process outsourcing
The Indian IT sector plans to strike it rich in a new breed of high-end knowledge-based outsourcing as global corporations move process like data and intellectual property researches to offshore locations.
This new breed of knowledge process outsourcing (KPO) comprises companies providing higher-end research and analytical based services to overseas clients in a wide spectrum of business areas.
These include basic data research, integration and management, market research, equity research, engineering design, animation and simulation, medical content and services, remote education and publishing.
Other areas with significant latent potential for KPO include pharmaceuticals, biotechnology, legal support, intellectual property research, and design and development for automotive and aerospace industries. According to the National Association of Software and Service Companies (Nasscom), the total market size of KPO business in India may rise to a staggering $15.5 billion, up from $1.2 billion now. "India can emerge as a major KPO player in the global arena by leveraging the intellectual capital and the power of the Internet to offer quality research at value prices," said R. Sivadas, director and CEO of Scope e-Knowledge Centre.
Sivadas says India can emerge as a global KPO hub as the business require specialized knowledge in respective verticals and the country's large number of engineering and technical institutes are geared to address the manpower demand.
Source: Indo-Asian News Service, February 13th

'Technology investment a must for BPO cos'
Contact centers to need to invest in technology for continued market leadership and greater success
Genesys Telecommunications Laboratories, Inc. chairman Ad Nederlof encouraged India's booming contact center industry to look outside of low cost labor as the key to increasing their competitiveness, while speaking at the Customer Contact World Event. He added, "The India-based outsourced contact center industry has traditionally held a low cost labor advantage over other industry players, which has helped them win the competitive edge. However, with the emergence of other low-cost labor alternatives in the market, these organizations need to look towards investing in technology as the key to continued market leadership and greater success." According to him, Genesys open software contact center solutions provide the widest choice of integration enabling these providers to quickly and cost-effectively integrate with enterprise infrastructure for real-time communications. This will help outsource service providers to move towards building customer interaction centers to bridge the information and communication gaps throughout the enterprise helping cut costs, while enabling faster, better service. 
Source: www.ciol.com, February 23rd

BPO firm Allsec files red herring prospectus with SEBI
BPO service provider Allsec Technologies Ltd has filed a draft red herring prospectus for its forthcoming public issue with the Securities and Exchange Board of India. The company proposes to issue 3,141,200 equity shares of Rs 10 each for cash at a premium to be decided through a book-building process, it said in a release here. It has reserved 1,49,600 equity shares to be allotted to the employees and of the balance equity shares on offer, 50 per cent have been reserved for allotment to qualified institutional buyers on a discretionary basis and 25 per cent for non-institutional investors. The balance 25 per cent would be allotted to the retail investors on proportionate basis. The book-running lead managers for the issue are IL&FS Investmart Ltd and Kotak Mahindra Capital Company Ltd. 
Source: Press Trust of India, February 12th

Mphasis acquires British consulting firm
Mphasis BFL group, a leading provider of IT and outsourcing services, Monday announced the acquisition of Princeton Consulting, a London-based specialist-consulting firm, in a deal for 7.73 million pounds. Mphasis chairman and CEO Jerry Rao told reporters here the deal included a cash component of 3.23 million pounds, while the net value adjusted for surplus cash with Princeton was 4.5 million pounds. "This latest acquisition will offer us access to business process improvement consulting skills as well as an established client base. Princeton will broaden our service offering in the IT and BPO segments in the UK and other European markets," Rao said. With a revenue run-rate of six million pounds, Princeton provides customer relationship management solutions and process improvement services to blue chip and high growth firms in Britain and Europe. The seven-year-old firm has domain expertise in multi-channel customer service and support, sales force management, content management and business intelligence. 
This was the second acquisition made by Mphasis during fiscal 2004-05, with the first one coming in April last year when Bangalore-based Kshema Technologies was bought out in a cash-cum-stock deal for $21 million. 
The Princeton acquisition, to be completed in a week, will bring about 100 employees on board for Mphasis, including 33 techies from its Indian subsidiary in Bangalore. Its German subsidiary, however, has been wound up.
Source: www.webindia123.com, February 14th

Job quotas to snub India's BPO boom
The government’s idea of introducing job reservations in private sector can prick the offshore contracts for IT and IT enabled Services (ITeS) putting question mark over the future of BPO sector in India. The industry has flagged the government that job reservation in the private sector domain could result in ‘caste quotas’ against Indian companies as a non-tariff barrier in a sector that is already sensitive to loss of jobs abroad. In a strategy paper prepared by Confederation of Indian Industries (CII), the industry body has stated that allocation of jobs on the basis of caste or community directly violates many of the work contracts that India’s IT and ITeS companies have entered into with the US and European clients. The industry has been vociferous on the issue that they are not ready to accept forced reservation. According to CII, many US and European Fortune 500 companies, who outsource their backoffice and research work to India, provide contracts on the pre-condition that the vendors will be non-discriminatory in their recruitment. The view is that if reservations are forced, multi national clients of Indian IT companies could come under pressure from their shareholders to cancel offshoring contracts. The industry has stated that the western governments might even use ‘caste quotas’ as a non-trade barrier against the IT industry as they have against the carpet industry. 
Source: The Economic Times, February 15th

Data security crucial issue for BPO
Data security could become a crucial issue for companies outsourcing their operations to India, said Ian Marriott, Vice-President and Research Director, Gartner. He warned that data security was a sensitive issue in the West, and could become as volatile as the anti BPO backlash in the run-up to the US elections, in the future. Marriot, however, added, "India is pretty good in data security." He, said, India's leadership in business process outsourcing was clear and will continue in the foreseeable future. 
Sounding an optimistic note about the industry's future he said, "Most countries, like the Philippines, won't have the scale or scalability, which India offers," he said, commenting on the industry's future. 
Also commenting on technological changes in the industry he said, "Technology will strip away the need to train 90 per cent people." 
Source: www.sify.com/finance, February 15th

Dubai Outsource Zone opens for registration
Dubai Outsource Zone (DOZ) today announced that it has officially opened for registration to companies across the spectrum of the outsourcing sector
Announcing this, Ismail Al Naqi, Director of DOZ said today that the new initiative's key focus is on the mid and high-end Business Process Outsourcing (BPO) sector. 'Dubai Outsource Zone is keen to attract companies in the higher-value skill-intensive outsourcing sectors in areas such as finance, accounting, IT, payroll processing, engineering, R&D, and design. Because of its infrastructural strengths, DOZ also serves as an ideal centre for disaster recovery facilities for outsourcing operations located offshore elsewhere in the world,' he said. 
Dubai Outsource Zone offers the same financial benefits offered by the free zones including 100% tax exemption, 100 % ownership and 100 % repatriation. Support services offered by DOZ are aimed at reducing operational hassles for outsourcing service providers and helping them concentrate on their core business.
Source: www.ameinfo.com, February 15th

Wake up big boys, BPO ads are hot
When you open the appointment section in a newspaper or surf any job website, chances are you will be bombarded with a plethora of ads for openings in BPO companies. No wonder, the advertising by BPO firms is growing six to ten times faster than the ad industry average. The BPO-led advertising is estimated to be expanding at 60%-100% rate though the overall ad industry is growing at a normal 10%-12%. As per Nasscom, there are more than 425 ITeS-BPO companies in India. From $2.5 billion in 2002-03 to $3.6 billion in 2003-04, the ITeS-BPO bandwagon is expected to cross $5.1-billion revenue mark this year. With extremely high growth rate and equally high employee attrition rate, BPO firms are constantly required to keep looking for quality bulk manpower. The BPO market is dominated by big players including WNS Group, Wipro Spectramind, IBM Daksh e-services, Convergys India, HCL Technologies BPO Services, etc. Each of them invests Rs 3 crore-Rs 5 crore on an average annually in communication activities. Even smaller players like Global Vantedge, Vanguard Info-Solutions and Vertex spend anything between Rs 1 crore-Rs 2 crore in advertising. Between 85% and 95% of the ad budget goes in recruitment ads in the print media alone. The collective spend of BPO firms in advertising is estimated to be between Rs 40 crore and Rs 50 crore currently, as per market estimates. And this year it is expected to reach the Rs 100-crore mark.
Source: The Economic Times, February 21st

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

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