The Para-techs of the South

These are the days of BPO, the hottest three-letter word in town. Amid the
buzz about Delhi, Bangalore, Mumbai and Hyderabad becoming the main hubs for the
business process outsourcing, Chennai is making rapid but silent strides in the
BPO space.

The surprising fact is that some of the earliest forms of BPO originated in
Chennai. For instance automotive major Ford transferred some of its Asia Pacific
accounting work to Chennai in the mid 1990’s, when Ford’s Indian subsidiary
was launched in the country.

What started of with just ten people doing payables processing operation from
Chennai, this facility today has emerged into a Ford Business Center with a
400-seat operation doing a range of back-end accounting work.

"Yes, maybe Chennai is conservative, but I do believe that discerning organizations do not see this as a deterrent" Ranjit Pisharoty, country head and V-P, Lason

Same is the case with Standard Chartered Bank, which launched Scope
International in Chennai two years back as an in-house BPO arm. Today, Scope
employs 3,300 people, has a 500,000 sq.ft of built up space with a capacity of
up to 5000 plus seats. Moreover, Scope services most countries, about 54
countries to be precise, in the Standard Chartered Group. The work is being done
in 23 different processing units. The operations range from banking, global HR,
financial services, software development, maintenance and IT help desk support.
The scale and magnitude of operations make Scope as one of the biggest BPO
operations in the country. These are few of the success stories that make
Chennai one of the happening BPO centers in India.

The Ground Realities

Despite the success stories, Chennai suffers from perception problems. As a
result, some of the bigger BPO initiatives went to Bangalore, Mumbai or the NCR
region. This is mainly because Chennai has had a mixed economic vision, unlike
its neighbors — Karnataka and Andhra Pradesh- which have IT savvy and highly
accessible leadership. To add to that, the intense political rivalry between the
ruling AIADMK and main opposition DMK largely sketched a specter of political
instability creating a negative mindset amongst investors.

The Highs and Lows
Abundant and highly skilled manpower 24/7 power supply and good bandwidth High literacy rate of 74% Affordable real estate Ideally suited for transactional processing work	Suffers from perception — ‘its conservative’ Government not very proactive The investor mindset: Not suited for voice based work Civic infrastructure issues Inability to sell its strengths in a big way

Says Romi Malhotra, ceo, Scope International, "Chennai has good
potential to become a number one preferred choice for BPOs, but it is grossly an
undersold destination. Its natural advantage lies in the skills of its
workforce. However, to capitalize on this, Chennai needs good government support
and improve the basic infrastructure. At the same it should also attract talent
from outside."

In spite of these handicaps, surprisingly Chennai was able to attract some
big names. So what makes Chennai tick without any aggressive selling—probably
the traditional strengths in the realm of manufacturing, financial services and
healthcare. The availability of abundant manpower, the 245 odd engineering and
400-degree colleges of the State churn out make it a knowledge capital of the
South.

"Chennai has an ample supply of graduates coming out from many colleges.
The medium of instruction in these colleges is English, thereby enabling the
work pool to successfully work across cultures. The work ethics of the people of
this city is very good", says Malhotra. This HR asset base is one major
selling point that Chennai scores over other places in the country.

Given the typical heavy south accent, obviously it is in the transactional
side one is seeing lots of action in Chennai. Hence, it is not the typical call
centers, rather critical back end processes that are happening here. Says Ranjit
Pisharoty, country head and vice president Lason, (formerly Vetri Software),
"Statistically Chennai would be third or fourth in the BPO space in the
country. But key point to be noted here is if we take away the voice based work,
then Chennai probably has more back office work, especially in the higher end of
the processing work.

Moreover, Chennai has more qualified technical people than anywhere else in
the country. Given that, it would be interesting to note that in Chennai one can
see "cottage BPO shops" in nooks, corners and outlying localities
servicing larger BPO players in the times to come." Lason has already
pioneered this sub outsourcing of BPO services. For instance, the company has
around 4,000 such third party agents who do a range of data processing work for
Lason. Today Lason has 50 customers, spread across US, China and Mexico. The
company calls this as a BPO jobs for the masses model.

"The success of the software industry in Chennai is testimony to the city’s qualitative and quantitative depth" Romi Malhotra. ceo, Scope International

The Market Movers

One of the biggest healthcare BPO is based out of Chennai. A company called
Vision Healthsource came into sharp focus when Perot Systems acquired it a few
months back. The company provides medical billing, coding, claims processing and
revenue cycle management services for US based healthcare service providers.
Says Vardhman Jain, president, Vision Healthsource, "Our decision to base
our BPO operations in Chennai has yielded spectacular results. Initially we
started in Bangalore and later moved to Chennai and today the city is the nerve
center for our operations catering to 37 clients and we employ around 700
people."

Vision Healthsource probably is one example that highlights the emergence of
vertical centric BPOs that add considerable value to the outsourcer. With the US
healthcare industry getting more regulatory by the day with HIPAA being
mandatory, healthcare entities have to operate on set processes that are putting
a severe strain on their MIS departments.

Heating Up

Mitsubishi and Caterpillar have started their engineering design and drawing back offices in Chennai and Hosur. Frost and Sullivan has recently put in place a captive base of 30 people to sell its research reports in the North American markets. Accel ICIM has taken a lead in the warranty outsourcing market, estimated to around $100 million in India and $2 billion worldwide. Ford’s Chennai facility started of with just ten people doing payables processing operation from Chennai and is now a Ford Business Center with a 400-seat operation doing a range of back-end accounting work.

A logical alternate for these entities is to outsource the work to a BPO with
good domain expertise; here Chennai naturally has the edge. For instance, in
Chennai there are around seven BPOs catering to the healthcare space with
Vision, Ajuba and Lason being the bigger ones.

Healthcare apart, Chennai companies are also pioneering new initiatives in
the BPO space. Accel ICIM, for instance, has launched an initiative some time
back called—Warranty Outsourcing BPO. Warranty outsourcing is outsourcing of
the after-sales service by the manufacturer to a third party player. Outsourcing
warranty service allows companies to be more efficient and reduce costs. Says
Accel ICIM’s president and coo, S V Sriram, "The warranty outsourcing
market in India is estimated to be around $100 million, while it is $2 billion
worldwide. This large and untapped opportunity offers us a lot of scope to grow
and this is the prime reason why we pioneered such a unique BPO venture.
Besides, with the zero duty regime setting in slowly in the country, we see a
lot of international companies looking for warranty outsourcing services, both
in IT and the consumer electronics space."

Accel has roped in clients like BenQ, Worldspace, Seagate, Siemens and
Ericsson for the warranty BPO services.

Jagadish Ramamoorthi, director and ceo, Allsec Technologies, says, "A
growing trend in the BPO space now is happening in the areas of
engineering."

"The commitment of the Chennai workforce to quality control is high and so is the loyalty. Attrition rate in Chennai BPOs is definitely lower" Vardhman Jain president, Vision Health source

Issues at Large

Chennai sure has its success stories, but if one takes a long-term approach some
pain areas becomes apparent. Heads of many BPO companies accept the fact that
growth in big numbers can only happen if the government plays a pro-active role.
The Scope International and the World Bank example will soon lose its sheen,
without any new names coming in. Also, the knowledge base will be drained out of
the state if new business initiatives fail to take off. Also, if one were to
look at the BPO companies operating here, they began operations here in small
numbers and grew in time and hence had developed a comfort level. Given that,
many agree that the biggest challenge for the state is to give a comfort level
for the new investors from day one. To do that the government has to address a
lot of infrastructure pain points relating to roads, an aging public
transportation system and lack of ready built space. These pain points becomes
very critical from a BPO perspective, since BPO facilities has huge workforce
predominantly from the middle class who largely depend on the civic
infrastructure.

A senior government official, while accepting that the government has to be
more aggressive, says that the State together with the IT Policy 2003-04, has
also announced an ITES policy whose primary agenda is to make Tamil Nadu a
destination of choice for BPO initiatives. Given that, one only hopes that the
Tamil Nadu Government will leverage its true strengths and makes the most out
the BPO wave.

Shrikanth G in Chennai