gsbd ppt
TRANSCRIPT
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Introduction to BPO
Introduction to BPO
Presented by:INAM UL HAQ
Presented by:INAM UL HAQ
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We will Cover…We will Cover…
What is Business Process Outsourcing? Importance of outsourcing Fundamentals of outsourcing Evolution Outsourcing in India Services being offered and Employment Attrition rate : A big Challenge Statistics Challenges Conclusion
What is Business Process Outsourcing? Importance of outsourcing Fundamentals of outsourcing Evolution Outsourcing in India Services being offered and Employment Attrition rate : A big Challenge Statistics Challenges Conclusion
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Outsourcing is often defined as the delegation of non-core operations/jobs from internal production within a business to an external entity that specializes in that operation.
BP- A collection of interrelated work tasks, initiated in response to an event, that achieves a specific result for the customer of the process.
Business process outsourcing (BPO) is the leveraging of technology vendors to provide and manage a company's critical and/or non-critical enterprise applications.
Outsourcing is often defined as the delegation of non-core operations/jobs from internal production within a business to an external entity that specializes in that operation.
BP- A collection of interrelated work tasks, initiated in response to an event, that achieves a specific result for the customer of the process.
Business process outsourcing (BPO) is the leveraging of technology vendors to provide and manage a company's critical and/or non-critical enterprise applications.
What is Business Process Outsourcing?
What is Business Process Outsourcing?
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BPOBPOOn the basis of Operations Back Office Outsourcing : Includes internal business
functions . Ex- billing, purchasing, management. Front Office Outsourcing : Includes customer-related
services. Ex-marketing, tech reports, claim processing
On the basis of Contracts Off-shore outsourcing : Contracted outside a
company's own country Near-shore outsourcing : Contracted to a company's
neighboring country On-shore outsourcing : Contracted within the
company's own country
On the basis of Operations Back Office Outsourcing : Includes internal business
functions . Ex- billing, purchasing, management. Front Office Outsourcing : Includes customer-related
services. Ex-marketing, tech reports, claim processing
On the basis of Contracts Off-shore outsourcing : Contracted outside a
company's own country Near-shore outsourcing : Contracted to a company's
neighboring country On-shore outsourcing : Contracted within the
company's own country
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Why do companies outsource?
Why do companies outsource?
Cost Reduction Factor Cost Reduction Factor being the main reason there are some other benefits :» Improve efficiency» Reduce operating costs» Offload non-core functions» Provide value-added services» Get access to specialized skills» Increase customer satisfaction» Save on manpower and training costs
Cost Reduction Factor Cost Reduction Factor being the main reason there are some other benefits :» Improve efficiency» Reduce operating costs» Offload non-core functions» Provide value-added services» Get access to specialized skills» Increase customer satisfaction» Save on manpower and training costs
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OutsourceOutsource Outsource if:
» Comparable or better service levels» Significant cost advantages from outsourcing» Skill competencies not available in organization» Function non-core and/or not a competitive
niche» Tasks which are Economically unviable for the
companies. » Tasks which are Economically unviable for the
companies. » Example: IT, HR, Sales & Marketing, Data Entry
Outsource if:» Comparable or better service levels» Significant cost advantages from outsourcing» Skill competencies not available in organization» Function non-core and/or not a competitive
niche» Tasks which are Economically unviable for the
companies. » Tasks which are Economically unviable for the
companies. » Example: IT, HR, Sales & Marketing, Data Entry
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InsourceInsource Insource if:
» No cost advantages from outsourcing» Critical to the business -Processes that
incorporate your core competencies.» Processes that are associated with the
reputation of your company.» High cost of monitoring/administering
outsourcing partner.» Service levels better within organization-
Processes that require access to intellectual property of your company.
Insource if:» No cost advantages from outsourcing» Critical to the business -Processes that
incorporate your core competencies.» Processes that are associated with the
reputation of your company.» High cost of monitoring/administering
outsourcing partner.» Service levels better within organization-
Processes that require access to intellectual property of your company.
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EvolutionEvolution 1970s to early 1990s
» Shortage of skills» Cost was the prime driver» Own skills were preferred
1994 to 1998» Post liberalization » Companies focused on acquiring diverse
skills » Achieving client delight
1970s to early 1990s» Shortage of skills» Cost was the prime driver» Own skills were preferred
1994 to 1998» Post liberalization » Companies focused on acquiring diverse
skills » Achieving client delight
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Evolution Contd…Evolution Contd… 1999 to 2001
» Customer relationship management» Achieve excellence in quality of output» Making investments in R&D» Expanding services to IT consulting
2002 to present» R&D, architecture and business
integration» Gaining more and more IT expertise» Focus on providing all problem’s
solutions
1999 to 2001» Customer relationship management» Achieve excellence in quality of output» Making investments in R&D» Expanding services to IT consulting
2002 to present» R&D, architecture and business
integration» Gaining more and more IT expertise» Focus on providing all problem’s
solutions
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HurdlesHurdles Idea of outsourcing (competitive advantage) was
propagated in 1776, ‘The Wealth of Nation’ by Adam Smith
Till 1994, the Indian Telecom sector was under direct governmental control.
In 1994, the government announced it liberalized and private participation was encouraged.
The New Telecom Policy (1999) introduced IP telephony and ended the state monopoly on international calling facilities.
American Express, GE Capital and British Airways
Idea of outsourcing (competitive advantage) was propagated in 1776, ‘The Wealth of Nation’ by Adam Smith
Till 1994, the Indian Telecom sector was under direct governmental control.
In 1994, the government announced it liberalized and private participation was encouraged.
The New Telecom Policy (1999) introduced IP telephony and ended the state monopoly on international calling facilities.
American Express, GE Capital and British Airways
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BPOs in IndiaBPOs in India India has become the hottest destination
for outsourcing because it has:» Head start in the global IT revolution» Availability of manpower» A friendly tax structure» Cheap Labour » Number of companies offering ITES services» Largest pool of English speaking scientific and
technical talent» Offering 24*7 services services based on
geographical location
India has become the hottest destination for outsourcing because it has:» Head start in the global IT revolution» Availability of manpower» A friendly tax structure» Cheap Labour » Number of companies offering ITES services» Largest pool of English speaking scientific and
technical talent» Offering 24*7 services services based on
geographical location
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Attractiveness IndexAttractiveness Index Depends on
» Talent pool» Govr. Support» English speaking
staff» Education level» Cost Factor» IT industry
Depends on» Talent pool» Govr. Support» English speaking
staff» Education level» Cost Factor» IT industry
Rank CountryAttractivene
ss Index
1 India 7.12
2 China 5.61
3 Malaysia 5.59
4Crzech
Republic5.58
5 Singapore 5.45
6 Philippines 5.45
7 Brazil 5.44
8 Poland 5.33
9 Hungary 5.29
10 Thailand 5.20
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Services Being OfferedServices Being Offered
Customer Support Services» Order status, Services, Products, Acc.
status, Reservation status Technical Support Services
» Home PC, Software and Hardware problems, About ISPs
Employee IT Help-desk Services» OS, Connectivity, Browser, Mail, IT
operational issues
Customer Support Services» Order status, Services, Products, Acc.
status, Reservation status Technical Support Services
» Home PC, Software and Hardware problems, About ISPs
Employee IT Help-desk Services» OS, Connectivity, Browser, Mail, IT
operational issues
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Services Being Offered Contd…
Services Being Offered Contd…
Telemarketing Services» Sale and purchase of products and
services, cross-sell or sell online Book Keeping and Accounting Services
» Managing accounts, General ledger and financial issues
Insurance Processing» Policy Insurance, Claim payments, Record
Managements Data processing services
Telemarketing Services» Sale and purchase of products and
services, cross-sell or sell online Book Keeping and Accounting Services
» Managing accounts, General ledger and financial issues
Insurance Processing» Policy Insurance, Claim payments, Record
Managements Data processing services
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US Jobs Moving Off-shoreUS Jobs Moving Off-shore
Job\Year 2000 2005 2010 2015
Management
0 37,477 117,835 88,281
Business 10,787 61,252 161,722 48,028
Computer 27,171 108,991 276,954 72,632
Architecture
3,498 32,302 83,237 84,347
Life Sciences
0 3,677 14,478 36,770
Legal 1,793 14,220 34,673 74,642
Art, Design 818 5,576 13,846 29,639
Sales 4,619 29,064 97,321 26,564
Office 53,987 295,034 791,034 1,659,310
Total 102,674 587,592 1,591,101 3,320,213Source: U.S Department of Labour and Forrester Research, Inc.
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EmploymentEmployment Education level doesn't matter Good work environment & Good Benefits Flexibility of time & Attractive life style
Education level doesn't matter Good work environment & Good Benefits Flexibility of time & Attractive life style
Employment: Indian Software and Services sectorSector FY 2004 FY 2005 FY 2006 FY 2007 E
IT Services 215000 297000 398000 562000ITES-BPO 216000 316000 415000 545000
Engineering Services and
R&D, Software Products
81000 93000 115000 144000
Domestic Market
(including user organizations)
318000 352000 365000 378000
Total 830,000 1,058,000 1,293,000 1,630,000
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Cost Per Full Time Employee
Cost Per Full Time Employee
US$ Cost per FTE(Full Time Employee)
United States India India as % of US costs
Personnel 42,927 6,179 14%
G&A Expense 8,571 1,000 12%
Telecom 1,500 2,328 155%
Property Rentals 2,600 847 33%
Depreciation 3,000 1,500 50%
TOTAL EXPENSES 58,598 11,854 20%
Source: Industry Sources, Merill Lynch 2003 (From the Nasscom Strategic Review 2003)
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Why people leave the BPO's?
Why people leave the BPO's?
No growth opportunity/lack of promotion For higher Salary For higher education Physical strains Uneasy relationship with peers or
managers Misguidance by the company Policies and procedures are not
conducive Got a better job in other area
No growth opportunity/lack of promotion For higher Salary For higher education Physical strains Uneasy relationship with peers or
managers Misguidance by the company Policies and procedures are not
conducive Got a better job in other area
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S. No
2004-05 2005-062006-2007
Exports in INR (crore)
1 WNS Genpact Genpact 2,220
2 Wipro BPO WNSTransworks(15th
)1,510
3 HCL BPO Services Wipro BPO IBM Daksh 1,260
4 IBM Daksh HCL BPO Services TCS BPO(14th) 1,107
5 Exl Services ICICI OneSourceCambridge Solutions
1,000
6MphasiS (Earlier
MSource)IBM Daksh
WNS Global Services
990
7 Intelenet Global Progeon Wipro BPO 935
8 ICICI OneSource Aegis BPO Services Convergys India 890
9 GTL EXL Service Holdings First source 809
10 Progeon 24/7 Customer (11th) HCL BPO 746
Source: Nasscom 2005 Survey Last updated on 21 Aug 2007
Top 10 BPOs in IndiaTop 10 BPOs in India
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Indian Market size estimatesIndian Market size estimates
Revenue \ Year 2002 2003 2004 2005 2006 2007 CAGR
Offshore BPO Revenue
1,322 1,825 3,017 6,439 12,563 24,230 78.91
Indian BPO Revenue
912 1,205 1,961 3,928 7,412 13,811 69.35
Total BPO Market110,16
7121,68
7131,17
1143,09
0157,03
3173,07
09.45
Figures in $ million CAGR(Compounded Annual Growth Rate) in % 2002-
07 Source: Gartner Dataquest
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Estimates For Year 2008Estimates For Year 2008
By Gartner DataQuest By Gartner DataQuest
India's BPO Market in 2008
Service Line First Estimate (1999) Second Estimate (2001)
HR 5.4 3.5-4.0
Customer Care 4.1 8.0-8.5
Payment Services 2.9 3.0-3.5
Content Development 2.6 2.5-3.0
Administration 1.3 1.5-2.0
Finance 0.7 2.5-3.0
Total 17.0 21.0-24.0
Figures in $ billion
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Indian IT SectorIndian IT SectorIndian IT Industry by Sector
USD billion FY 2004 FY 2005 FY 2006 FY 2007E
IT Services 10.4 13.5 17.8 23.7-Exports 7.3 10.0 13.3 18.1-Domestic 3.1 3.5 4.5 5.6ITES-BPO 3.4 5.2 7.2 9.5-Exports 3.1 4.6 6.3 8.3-Domestic 0.3 0.6 0.9 1.2Engineering Services and R&D, Software Products 2.9 3.9 5.3 6.5
-Exports 2.5 3.1 4.0 4.9-Domestic 0.4 0.8 1.3 1.6
Total Software and Services RevenuesOf which, exports
16.7 22.6 30.3 39.712.9 17.7 23.6 31.3
Hardware 5.0 5.9 7.0 8.2Total IT Industry (including Hardware) 21.6 28.4 37.4 47.8Source: NASSCOM STRATEGIC REVIEW 2007
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India’s GrowthIndia’s Growth
IT industry has grown its revenues ten fold in the past decade, from $4.8 billion in FY 1997-98 to $47.8 billion in FY 2006-07
contribution to GDP is estimated to have grown from 1.2% to 5.4%(4.8% last year) in the same period
BFSI, Telecom and Hi-Tech verticals continue to account for approximately 60% of the market for Indian IT
IT industry has grown its revenues ten fold in the past decade, from $4.8 billion in FY 1997-98 to $47.8 billion in FY 2006-07
contribution to GDP is estimated to have grown from 1.2% to 5.4%(4.8% last year) in the same period
BFSI, Telecom and Hi-Tech verticals continue to account for approximately 60% of the market for Indian IT
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BPO on RiseBPO on Rise
0.81.8
3.1 3.1
4.9
8.7
19.877%
38%
44%40%
29%
13%
45%
0
5
10
15
20
25
Mexico China Philippines Central &EasternEurope
Others Canada India
$ B
0%
15%
30%
45%
60%
75%
90%
% (CAGR)
2002 2005 2008 CAGR
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High Attrition Rate: A Challenge
High Attrition Rate: A Challenge
Attrition : Its basically reduction in the number of employees through retirement, resignation or death.
Attrition rate : The rate of shrinkage in size or number.
In terms of numbers, Attrition Rate means:
Total Number of Resigns per month (Whether voluntary or forced)
(Total Number of employees at the beginning of the month + total number of new joiners - total number of resignations)
Attrition : Its basically reduction in the number of employees through retirement, resignation or death.
Attrition rate : The rate of shrinkage in size or number.
In terms of numbers, Attrition Rate means:
Total Number of Resigns per month (Whether voluntary or forced)
(Total Number of employees at the beginning of the month + total number of new joiners - total number of resignations)
X 100
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Attrition Rate in INDIAAttrition Rate in INDIA
In India, the average attrition rate in the BPO sector is approximately 35-40 percent.
about 35% in nonvoice and 45% in voice call centers At an attrition rate of 40%, the cost of attrition in
the industry is 1.5 times the annual salary. The IT enabled services (BPO) industry is being
looked upon as the next big employment generator (Nasscom predicts 1.1 million job requirement by the year 2008). It is however no easy task for an company in this sector to bridge the ever increasing demand and supply gap of professionals
In India, the average attrition rate in the BPO sector is approximately 35-40 percent.
about 35% in nonvoice and 45% in voice call centers At an attrition rate of 40%, the cost of attrition in
the industry is 1.5 times the annual salary. The IT enabled services (BPO) industry is being
looked upon as the next big employment generator (Nasscom predicts 1.1 million job requirement by the year 2008). It is however no easy task for an company in this sector to bridge the ever increasing demand and supply gap of professionals
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CausesCauses
The much hyped "work for fun" tag normally associated with the industry has in fact backfired, as many individuals (mostly fresh graduates), take it as a pas-time job. Once they join the sector and understand its requirements, they are taken aback by the long working hours and later monotony of the job starts setting in. Many individuals are not able to take the pressures of work.
The toughness of the job and timings is not adequately conveyed.
Besides the induction and project training, not much investment has been done to evolve a "continuous training program" for the agents. Motivational training is still to evolve in this industry.
The much hyped "work for fun" tag normally associated with the industry has in fact backfired, as many individuals (mostly fresh graduates), take it as a pas-time job. Once they join the sector and understand its requirements, they are taken aback by the long working hours and later monotony of the job starts setting in. Many individuals are not able to take the pressures of work.
The toughness of the job and timings is not adequately conveyed.
Besides the induction and project training, not much investment has been done to evolve a "continuous training program" for the agents. Motivational training is still to evolve in this industry.
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Causes Continue…Causes Continue…
The high percentage of females in the workforce (constituting 30-35 percent of the total), adds to the high attrition rate. Most women leave their job either after marriage or because of social pressures caused by irregular working hours in the industry.
The industry has concentrated on hiring young, dynamic and these are looking for more than just a job.
If a person leaves after the training it costs the company about Rs 60,000. For a 300-seater call centre facing the normal 30 percent attrition, this translates into Rs 60 lac per annum.
The high percentage of females in the workforce (constituting 30-35 percent of the total), adds to the high attrition rate. Most women leave their job either after marriage or because of social pressures caused by irregular working hours in the industry.
The industry has concentrated on hiring young, dynamic and these are looking for more than just a job.
If a person leaves after the training it costs the company about Rs 60,000. For a 300-seater call centre facing the normal 30 percent attrition, this translates into Rs 60 lac per annum.
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RemediesRemedies By hiring mature talent i.e. people over 30 years in age. Employee retention must be the focus, which means that
talent must be recognized and suitably rewarded. Hire outstation candidates (from small towns) and
provided them with shared accommodation. BPO must concentrate on becoming an 'employer of
choice'. A comprehensive process framework and access to proper infrastructure in the work place goes a long way in retaining employees, as a congenial work environment is critical.
However, it is interesting to note that the attrition rates in India - and the costs associated - are so high that they can override the benefits of lower wage costs.
By hiring mature talent i.e. people over 30 years in age. Employee retention must be the focus, which means that
talent must be recognized and suitably rewarded. Hire outstation candidates (from small towns) and
provided them with shared accommodation. BPO must concentrate on becoming an 'employer of
choice'. A comprehensive process framework and access to proper infrastructure in the work place goes a long way in retaining employees, as a congenial work environment is critical.
However, it is interesting to note that the attrition rates in India - and the costs associated - are so high that they can override the benefits of lower wage costs.
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Other ChallengesOther Challenges
According to Gartner India is likely to lose market share in offshore business process outsourcing, from its current 80% to about 55% by 2008.
The BPO business requires English-speaking employees with a basic education - available in abundance in most countries where English is spoken.
According to Gartner India is likely to lose market share in offshore business process outsourcing, from its current 80% to about 55% by 2008.
The BPO business requires English-speaking employees with a basic education - available in abundance in most countries where English is spoken.
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Thank YouThank You
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