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The sellout annual BPO conference organized by Nasscom in
Bangalore in August provided a unique set of perspectives on the trailblazing
success of Indias fastest growing knowledge industry segment. It also exposed
some of the cracks that are beginning to appear in its shining faade.
The positives are there for all to see, as Neeraj Bhargava, the
Mckinsey consultant turned venture capitalist turned CEO of WNS remarked, an
industry which was created a few years ago should be proud that three of its
firms have listed on American stock exchanges and have a few billion dollars in
market capitalization. And the fact that the employment in this sector may well
overtake the older IT services industry is a matter of satisfaction and joy for
all of us.
So what are the challenges? The abrupt rise of the rupee against
the dollar and pound has left many young BPO firms gasping. Also, the inherently
lower profitability of this segment compared to industry majors in IT services
puts most players at risk, with the dollar likely to seek lower levels against
the rupee in the next 18 months or so.
| Single
process outsourcing successes have morphed into comprehensive end-to-end
services with more process optimization |
Business transformation consulting, which seemed to be the
logical next wave as more and more KPO wannabe firms emerged, has dipped into
the trough of disillusionment that follows the peak of inflated expectations.
Thus, if the industry has to maintain a profitability level north of 20%, a
study by Mckinsey suggests that many critical parameters of operational
excellenceshift utilization, productivity, support costs, span of control,
and the ever present Damocles sword of attritionhave to be put under the
microscope.
Another interesting nugget that Noshir Kaka of Mckinsey revealed
was that industry leaders who are setting best practices in HR management and
retention actually pay less and are leveraging effective people management
practices rather than higher compensation to keep their teams intact. And
finally, a reaffirmation of a feeling that most industry watchers have hadcaptive
BPO units average a cost level which is 37% more than third party processors
(even though the best in class turn in cost data which is less than the figures
of the best third parties).
Single process outsourcing successes have morphed into
comprehensive end-to-end services with more and more process optimization
resulting in higher value addition. Platform BPO solutions have also begun to
substantially improve the quality and speed of new process migration offshore,
and multi-function BPOs as well as comprehensive HR outsourcing have moved to
the very apex of the "hype cycle".
The CEO panel, which had five of the key players of the industry
deliberating ideas and issues, threw up some key ideas. Kris Gopalakrishnan of
Infosys argued for a focus on discipline in implementation and then need for a
culture that enabled quick changes to happen while Vikram Talwar of EXL brought
out an interesting nugget that the aging populations in the West have resulted
in zero net additions to the population, and there would soon be fewer people to
perform processing jobs, thereby necessitating the growth of the offshore
industry.
Parmod Bhasin of Genpact, just back from his grueling IPO in the
US talked about attrition being the disease of all developing economies. He
cautioned that India still needed a lot of focus on infrastructure and manpower
quality and quantity improvement to keep away the competition.
And finally one amusing accident that could almost be prophetic
was a PowerPoint slide used by the speaker from one of the global advisory
firms. In a heading that was meant to be "Sourcing Strategies", the C
went missing and we all read "Souring Strategies". Excessive reliance
on spell checks? Quite likely!
The author is deputy chairman & MD of Zensar Technologies
and an Executive Council member of NASSCOM for 2007-09.
He can be reached at ganesh@cybermedia.co.in
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