Will Bharti be able to usher in the winds of change again? The telecom major's decision to outsource its call center operations, has given a thumbs up for the cohorts of outsourcing. But the debate still continues: Are Indian enterprises better off doing their call center work themselves or would they rather outsource the operations to a third party provider.

Opportunities Aplenty
The opportunity in the domestic market is limitless. Despite all the legal hassles and the problem with duties, the domestic market in India is maturing. Despite the inherent growth potential, the domestic BPO market has continued to be small due to the common perception held by vendors that it is relatively unattractive compared to the global BPO market. And as enough global business was coming India's way, not many companies looked at the domestic option seriously.

According to Dataquest estimates, 85% growth was registered in the domestic BPO industry, which reached Rs 2,640 crore in 2004-05, up from Rs 1,425 crore in 2003-04, thanks to the increase in domestic telemarketing and tele-support activities. Of course, the BPO export market during the same period was a leviathan Rs 22,440 crore.

The decision to holding a captive or outsourcing work to a third party is really the management's, depending on the enterprises current need and capability propelled by a futuristic vision. Though both have grown in the past years, trends suggest an inclination towards third party outsourcing, as is the movement globally.

Quite a few enterprises are following a hybrid model, outsourcing a part of their work, while retaining certain processes in-house. Hero Honda and LG are few of these. According to SR Balasubramanian, VP, Information Systems, Hero Honda: "It has been a few months since we outsourced a part of our call center operations. We are still experimenting with the idea of outsourcing. The reasons which have driven our decision to outsource the marketing division are-ease for the customer, and the fact that it was increasingly getting difficult to handle the retail calls in-house."

Arindam Bose, head, LG's IT Division says: "The customer service division is outsourced, but we have held the IT support division captive, to maintain more effective control and to use LG's networks which are spread all over the country.

Alok Shende, director, ICT practice, Frost and Sullivan explains the above as a life cycle: "There is tremendous growth in the domestic call center business-both captive and outsourced. Most companies start with a small contact center, and as the customer gets more dependent they find it more difficult to invest in people and to manage them, only to realize that it is a non-core area, and finally outsource."

Sunil Mehta, VP, Nasscom emphasizes: "While both captives and third party outsourcing would burgeon, the latter would be a bigger driver in the domestic BPO industry." Captives are basically cost centers, but as in the case of GECIS, most would need to start proving their mettle as profit centers. Maruti, like few others, has outsourced its BPO work to GECIS, which, customers' claim, is a world-class service in itself.

According to Sunil, "Enterprises that have their own captives, are today realizing that call center work is not their core-competence. So they are better off outsourcing to a third party".

Punjab National Bank agrees with this philosophy. As Arvind Mathur, chief of back office at PNB says, "We have outsourced all relationship management work to our outsourcing partner, Spanco, where we have 48 agents. They are led by six of PNB's staff who attend to certain escalated calls and create dockets. It would have been difficult to employ and manage so many people and also invest in the entire software, systems, and soft training."

Franchised retail food chains such as Domino's and Pizza Hut have switched from separate numbers for each outlet to a common hunger helpline number-thereby enabling the company to consolidate all incoming orders. Since the staff providing this service is no longer distributed and the function is not core to the food business, it makes them a classic case for outsourcing to an independent third party provider.

Will Big Eat Small?
Competition is driving the domestic market. According to experts, in due course of time bigger BPOs (1000-2000 seater) would oust smaller domestic BPOs (100-200 seater) from the scene unless they innovate and provide enterprises, services, which go beyond call center work and act as strategic partners by handling high-end business processes. As from the Bharti deal, the bigger ones, HTMT, MphasiS, IBM Daksh have started widening their base in the domestic market.

E2E, Progeon, SlashSupport, and MphasiS are active providers to domestic companies for BPO services. Part of the reason why the bigger BPOs are more likely to prosper is the fact that they have handled international work and have requisite quality checks in place, thereby being in a position to offer more reliable service.

As per Shende, Frost and Sullivan: "The drivers for setting up call centers are-increased customer interaction, and justifying costs by starting contact centers instead of setting more branches and offices. As the domestic BPO industry is relatively nascent, the restrainers are that the cost of technology is higher; and even in the case of captives most of the centers are less than 50 seats. In due course, CIOs realize that low costs and economies of scale only come in with a 500 seater." Hutch and Max New York Life, which hold captives, are examples of enterprises big enough to cost-effectively support their operations.

Also, the smaller sized captive centers would face pressure by outsourcing companies to get talent. Although they can initially resort to the strategy of paying more, that will find it difficult to retain talent in the absence of a growth path for their employees.

While BFSI, Telecom and Healthcare show immense opportunity, the government, according to analysts, has the potential of becoming the biggest client for BPO service providers. Hospitality, public services, transportation are other big enterprises which should consider outsourcing more seriously.

A successful strategic partner management demands an extensive planning and selection process, and then a level of attention to governance and alignment of interests that go well beyond the usual procurement approach. The route involves selecting a partner, reaching a formal agreement, planning for transition of work, developing a right relationship structure and deciding on metrics to ensure consistent performance.

Perhaps it is time for India Inc to tell itself what it has been telling the world-outsourcing reduces cost, increases capacity and enhances capability.

Jasmine Kaur, New Delhi

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