THE HOT VERTICALS: A Hot New Find... Here for Keeps?

They are the new buzzwords that entered IT industry folklore–business

process outsourcing (BPO) and information technology enabled services. Even as

the software services segment went through one of its roughest patches due to

the global economic slowdown, it was the success of the Indian IT-enabled

segment that captured global imagination. Leading companies such as GE, American

Express, HSBC, Royal and Sun Alliance, Le Meridian, Air Infotech, British

Airways and eFunds have set up their call centres in India. However, call

centers account for just one aspect of the opportunity. BPO encompasses a host

of activities from accounting and payroll to more niche and vertical specific

opportunities such as clinical trials’ support for pharmaceutical companies,

claims processing for the insurance sector and account opening support for the

banking sector

India’s

call center success is based on its large pool of skilled, English-speaking

workers, tax breaks and low operating costs. According to research conducted by

the international management consultancy major, Jones Lang LaSalle, India has

the lowest average wage rates of US$ 33.75 per week in the call centre industry

compared to the US$ 400 per week in USA and US$ 470 per week in Australia.

However, a Frost & Sullivan report notes some shortcomings as well,

including the need for a better telecoms infrastructure and the fact that many

people speak in accented English.

Another compelling reason for outsourcing IT Enabled Services is that it

allows companies to capitalize on time zone differences and to provide services

24/7/365. For example, a US hospital can have medical records transcribed on to

their databases at night, eliminating any downtime at the start of the workday.

Over the last two years, the Indian ITeS industry grew at 70% per annum with

customer care, HR and payment services being the top three service lines.

According to a Nasscom-Mckinsey report, the revenues from ITeS have increased by

70% to Rs 4.1 billion in 2000-2001 as compared to Rs 2.4 billion in 1999-2000,

providing employment to over 70,000 people.

The Report also states that the ITeS industry will account for 19% of

incremental GDP growth from 2001 to 2008. The report predicts that more than 30%

foreign exchange earned will be from IT and IT-enabled services exports. It

expects 4 million jobs to be created–2 million directly and 2 million by way

of support services.

Bhaskar Pramanik MD, Sun Microsystems India The first machine I ever sold was an 8-digit calculator with Nixie tubes (there were no LCDs at the time) at Nelco. These used to be foreign desktop calculators–about 2 feet x 2 feet x 12 inches deep. All they did were the four basic functions (add, multiply, divide & subtract) and used to cost Rs 50,000! I remember when I went to this textile market where I’d sold one such computer, there was one guy feeding data into the calculator and another sitting next to him and doing the same thing on paper. So I asked the second one what he was doing and he said, "cross-checking the calculator." Those were different days. Then of course things changed. Nelco started selling 8-bit sytems for 8-16 users and home grown operating systems. We sold about 8-10 in a whole year. Then came the minis era etc. But it wasn’t an easy job. IT salesmen were not very respectable then. People would spot an IT guy easily — he was the guy who wore a suite and a tie every day. In a sense software and companies like Infosys gave IT some respectability. That was when people actually wanted to invite you to talk to them. It was a funny kind of experience to begin with. Then came the MNCs and I joined Digital. And one of the things I really remember–I’ve never been able to sell to Britannia!

The most significant aspect of the success of this segment is the amazing

rate at which players have ramped up operations. GE’s original target for its

IteS operations in India was 10,000 people by 2005. It has now revised its

target to 20,000 people by 2003. Even the HSBC center has grow to over 1000

people in less than two years of operation. Spurred by these success stories,

venture capitalists are expressing keen interest in backing new players in the

segment. Also in the fray are established IT companies who want to leverage on

their years of experience on the off-shoring front. Infosys’ BPO spin-off

Progeon is one such example. Besides, there are other players with domain

expertise who are launching call centers as well.

There is no denying that the ITeS wave has swept across India, creating new

hot spots like Gurgaon, Noida and Kolkata apart from the metros. Key criticism

of the success of this segment involves the "low intellectual value"

that the contact center jobs command and that "India is moving down the

value chain."

As capabilities develop and Indian companies demonstrate maturity, the

industry is expected to mature and graduate from the contact center space to

offer more comprehensive services.

TEAM DQ