Will India Play the BPO Game Right?

Clubbing the terms BPOs and call centers as being synonymous is misguided. It

is a perception that must change to reap the benefits of BPO revolution

When call centers and help desks first started to mushroom, there was

tremendous excitement. For the first time, jobs in the information technology

space became available to non-engineers and a whole new avenue of opportunities

opened up under the umbrella of ITeS. Remote managed services no longer meant

just software development or hardware infrastructure management. College

graduates from traditional disciplines suddenly found a niche where their lack

of ‘professional’ qualifications or experience did not stand in the way of

lucrative employment.

Today, the buzz has shifted to BPOs, and major changes are already happening

in this space. Contrary to common belief that Business Process Outsourcing (BPO)

means only answering calls and processing transactions of global customers,

India’s BPOs are now setting their sights on high-end areas like equity

research, report writing and analytics as part of lucrative knowledge services.

This trend will result in more job opportunities now coming the way of

professionals like CAs, MBAs and PhDs in contrast to call centers and their

employee pool of high school graduates and BAs.

Indian companies must curb the inclination to cut prices down to a fraction of what can reasonably be charged, in exchange for quick short-term gains Pawan Kumar

This is why Indian companies need to make the all-important distinction

between call centers and high-end BPOs and set up appropriate costing

mechanisms. By positioning themselves as full service providers and tapping into

the rich availability of domain expertise, they provide a service that is a

superset of IT.

Equity research offshoring is happening at a rapid pace as global investment

banks are under pressure to cut costs, with big names such as JP Morgan, HSBC,

Stanchart, and Morgan Stanley commencing operations in India. And it won’t

just be global investment banks that make a beeline for India to leverage the

high value skills in a number of domains. Financial information giant, Reuters

are planning to set up centers in India for conducting equity research. Reuters,

which will commence its operations with 400 professionals here early next year,

has zeroed in on Bangalore as an ideal location.

Besides equity research, there are a number of opportunities like Market

Research — Mackenzies for instance has recently set up a center at Gurgaon

with over 150 MBAs servicing their global customer base.

Litigation Support too has vast potential which can be a boon to our

qualified but underutilized lawyers. Much of the back-end work on cases can be

offshored with huge cost savings. In all of these instances, the leverage is

very high.

However, my point is that Indian companies must curb the inclination to cut

prices down to a fraction of what can reasonably be charged, in exchange for

quick short-term gains. This kind of undercutting overlooks the value creation

the service provides to the customer and in turn shortchanges the domain

knowledge.

We are in danger of repeating the mistakes made by the software industry

where pricing methodologies applied are effort-based rather than value-based. A

Texas Instruments may come up with a state-of-the-art DSP paying the equivalent

of a year’s wages to the Indian team. Its value to them, however, is at least

20 times greater. Or a Motorola ships a million cell phones a month for which

the software is developed in India by paying 50 engineers a year’s wages.

The value to the customer is exponentially higher than the prices we are

charging them. It may be too late for the IT industry per se to do anything

about it. But it’s the right time for the BPO sector to get their house in

order.

A few companies have decided to test the waters by extending the BPO service

to existing customers thereby getting trapped into lowering prices. However, the

smart thing to do is to tie up with a banking, investment or insurance major by

offering overall business process and move up the value chain using IT as a

tool.

The author is chairman & CEO of vKoksha

Technologies