A PROJECT REPORT

ON

Submitted by

ROLL NO. : B.COM (H) FINAL YEAR

The matter contained in the project is authenticated and purely based on the understanding of the subject matter of the project and copied from the any published source or media or website.

A lot of effort has gone into this project and my thanks are due to many people with whom I have been closely associated. First of all, I gratefully acknowledge the continuous assistance and inspiration given to me by College Faculty. Finally, I would like to thank my family for providing me monetary and non monetary support, as and when required, without which this project would not have completed on time.

TOPIC INTRODUCTION : BUSINESS PROCESS RE-ENGINEEERING RESEARCH METHODOLOGY FACTORS FAVOURING INDIAN \BPO INDUSTRY PROBLEMS OF BPO INDUSTRY LIMITATIONS SUGGESTIONS AND CONCLUSION BIBLIOGRAPHY

PAGE NO. 5 12 13 28 31 32 35

INTROUDCTION: BUSINESS PROCESS OUTSOURCING

Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). Most recently, it has come to mean the elimination of native staff to staff overseas, where salaries are markedly lower The concept started with Ross Perot when he

founded Electronic Data Systems in 1962 Offshore outsourcing more and more takes the shape of Business processes outsourced. Process (such The Outsourcing, as client support is where and whole business are who

development) to choose

usually

free

provides the outsourced business processes, while stock markets press the company to do more for less. This requires that managers search out the cheapest sources they can find. In countries like India and China (primarily Bangalore in India), companies like IBM, Microsoft, Hewlett Packard, and Novell choose to get BPO business services from sub-contractors in these countries or move many development and support jobs there. Smaller businesses 5

can also take advantage of freelancing on the Internet to get smaller projects done by offshore developers at

minimum cost. In the corporate environment, the term outsourcing often refers to a particular type of outsourcing, business process outsourcing (BPO). BPO occurs when an organization turns over the management of a particular business process (such as accounting or payroll) to a third party that

specializes in that process. The underlying theory is that the BPO firm can complete the process more efficiently, leaving the original firm free to concentrate on its core competency. HR Processing Solutions Finance and Administration Solutions Procurement Solutions Customer Services Telemarketing Services IT Help Desk Services Technical Support Services Knowledge Services Insurance Processing 6

Mortgage Processing

Through the right mix of business process improvement, labor arbitrage and technology enhancements, BPO is

aimed at reducing cost, increasing service levels and thus improving the enterprise value of the business processes. Blending qualified workforce with and faster adoption of well-defined business processes leads to higher

productivity gains without compromising on quality. BENEFITS OF BPO The driving is force cost behind the outsourcing The of business of in

processes abundant,

effectiveness. skilled English

availability labor

technically

speaking

India is what attracts most companies to outsource their business processes. In the past decade or so telecom and other infrastructure has also improved up to global

standards. The quality of services provided is also meeting international outsourcing is standards. the income Another tax major incentive by for the

policy

followed

government. Another important advantage is the ability of BPOs to provide 24/7 services.

By

engaging

Search

engine

genies

Business

Process

Outsourcing services, the clients can be assured of the following benefits. Reduce costsOur efficient BPO services reduce your

payroll and other overhead expense thereby increasing your profits. Our business processing outsourcing services even enable you to make fewer capital investments. Allow organizations to focus on their core businessBPO allows organizations to outsource their non-core processes. This enables them to focus on the more strategic,

programs that generate revenue and ensure the success of the other business processes. Make the clients more competitiveIf an organization is able to formulate a successful business outsourcing

strategy, it will be able to outdo its competitors. This is because BPOs provide efficient services, access to

resources that may be beyond the organizations ability and increased cash flow. Access to operations and on-demand resourcesBPO provides a very flexible market environment. They are able

to upgrade or stop operations as per market requirements. In a BPO engagement, we enable you to access global staff, processes, resources, and technology as and when you require them. Improve productivity and operational efficiencies

Human Resources and Finance and Accounting, are critical to any organization but also resource-intensive, timeconsuming, and costly. Outsourcing these non-core

business processes reduces costs and improves efficiency. WHY BPO When more IT-intensive business processes are delegated to Business Process Outsourcing (BPO), it administers and manages the selected business process based on defined and measurable performance criteria. Though the main motivation behind business process

outsourcing is the cost effectiveness there are several other reasons behind it. Some of them are: Factor Cost Advantage Utilization Improvement Economy of Scale 9

Superior Competency Business Risk Mitigation

Insurance and banking are the two sectors that benefit most from BPOs. This is because they have large

proportion of business processes they can outsource like claims processing, loans processing and client servicing. Other sectors that have adopted BPO services include

Pharmaceuticals, Telecom, Automotive and Airlines. When BPO first emerged several years ago, the term

meant contracting of one company by another to execute a business process end-to-end. As the world has now

become a global village and competition increases, it has become essential for the companies to focus on core

competencies. This can easily be achieved by outsourcing to BPO. Hence BPO offers enormous opportunities for

change in the current business scenario. ROLE OF INDIAN BPO India is a country rich in skilled human resources. The availability of cost effective labor, that is well educated and able to converse in English 10 well, well-developed

communication infrastructure and software sector as well as an appropriate time difference with other countries all help in making India a favorite destination for the BPO industry. Search engine genies BPO services are available at a very affordable rate. Our staff is extremely skilled both

linguistically and technically. We also have infrastructure that can match your expectations. Our experience in this field in the past years has gained us a lot of satisfied customers. service quality. to Our aim is to our customers provide with a the best processing total commitment to

11

RESEARCH METHODOLOGY

Primary Data : Collected information by interviews Secondary Data : Sources through which the secondary data was collected are: Information from Internet Information from Journals Information from Magazines sand Newspapers

12

FACTORS FAVOURING INDIAN BPO INDUSTRY

There

are

various

factors,

which

have

contributed

to

Indias remarkable success in BPO and forms the basis for the bullish prediction regarding the BPO growth in India. These factors can be broadly divided into following categories: Cost Competitiveness Knowledge Pool Productivity and quality Government Initiatives/Reforms Telecom Infrastructure Role of Lobbies Such As NASSCOM.

All these factors are discussed in detail in the following section. COST COMPETIVENESS Cost competitiveness of India is one of the major factors governing Indias success in BPO. The main reason for India being cost competitive is the wage differential. Indias per capita income was $460 in 2001. However there is a wide disparity in salaries and wages depending on the 13

work that is being done. For the educated workforce, at the lower and entry levels, salaries in the industry range from $150 for a secretary to $350 per month for a field services engineer. In comparison entry-level software

developers and system engineers get an average salary of $650 and above. Even with the rapid growth of the last few years, an Indian software engineer still costs one-half to one-fourth that of an American software engineer,

although at higher ends wage differentials have reduced now (Table). In the IT Enabled Services industry the wage differential between agents from India and other countries such as Australia, the US, Ireland, and UK is almost 80-90 %. According to the International Customer Service

Association USA, typically the average salary of customer service delivery agents in India is about US $2000 to $3000 per annum, while the comparable salary in the US or Australia is between US $23000 and $35000 per annum. The Indian salaries compare favorably with the average salary figures across Indian industries . This is the reason why jobs in the IT Enabled Services sector are considered to be relatively prestigious in India as compared to the western countries. The cost comparison clearly shows 14

that

wage

differential

between

India and

US

will

continue to be over 65 % in the coming years. Salaries paid to software professionals internationally in 2005, (US $)
SW I TZERL A ND 7 4 ,0 0 0 USA CA N A DA UK I REL A N D GREECE I N DI A

Pr o je ct

5 4 ,0 0 0

3 9 ,0 0 0

3 9 ,0 0 0

4 3 ,0 0 0

2 4 ,0 0 0

2 3 ,0 0 0

B usine ss analyst Syste ms

7 4 ,0 0 0

3 8 ,0 0 0

3 6 ,0 0 0

3 7 ,0 0 0

3 6 ,0 0 0

2 8 ,0 0 0

2 1 ,0 0 0

7 4 ,0 0 0

4 8 ,0 0 0

3 2 ,0 0 0

3 4 ,0 0 0

3 6 ,0 0 0

1 5 ,0 0 0

1 4 ,0 0 0

Syste ms de signe r De ve lo pme nt Pr o gr amme r Suppo r t Pr o gr amme r

6 7 ,0 0 0

5 5 ,0 0 0

3 6 ,0 0 0

3 4 ,0 0 0

3 1 ,0 0 0

1 5 ,0 0 0

1 1 ,0 0 0

5 6 ,0 0 0

4 1 ,0 0 0

2 9 ,0 0 0

2 9 ,0 0 0

2 1 ,0 0 0

1 3 ,0 0 0

8 ,00 0

5 6 ,0 0 0

3 7 ,0 0 0

2 6 ,0 0 0

2 5 ,0 0 0

2 1 ,0 0 0

1 5 ,0 0 0

8 ,00 0

15

N e tw or k analyst Q uality spe cialist Database analyst Pr o ce ss spe cialist Do cume ntati o n staff T e st e ngine e r

6 7 ,0 0 0

4 9 ,0 0 0

3 2 ,0 0 0

3 1 ,0 0 0

2 6 ,0 0 0

1 5 ,0 0 0

1 4 ,0 0 0

7 1 ,0 0 0

5 0 ,0 0 0

2 8 ,0 0 0

3 3 ,0 0 0

2 9 ,0 0 0

1 5 ,0 0 0

1 4 ,0 0 0

6 7 ,0 0 0

5 0 ,0 0 0

3 2 ,0 0 0

2 2 ,0 0 0

2 9 ,0 0 0

2 4 ,0 0 0

1 7 ,0 0 0

7 4 ,0 0 0

4 8 ,0 0 0

2 9 ,0 0 0

3 1 ,0 0 0

1 5 ,0 0 0

1 7 ,0 0 0

5 9 ,0 0 0

3 6 ,0 0 0

2 6 ,0 0 0

2 1 ,0 0 0

1 5 ,0 0 0

8 ,00 0

5 9 ,0 0 0

4 7 ,0 0 0

5 ,00 0

2 4 ,0 0 0

1 3 ,0 0 0

8 ,00 0

Table Source:www.man.ac.uk/idpm/isicost.htm

16

Figure: Source: NASSCOM-McKinsey study

According

to

McKinsey

40-60%

cost

savings

can

be

achieved for process off shored to India. Figure:6 process wise cost savings, which can be

Gives by

achieved

outsourcing specific process to India.

Figure

17

KNOWLEDGE POOL Overall literacy levels have been improving steadily in India from 43.6% in 1981 to 64 % in 2001. For the female population it has improved from 39.3% in 1991 to 54.16% by 2001. The state of Kerala in South India for example, has managed to achieve a literacy rate of 92%. In spite of the low percentage of literate population, the sheer size of the Indias population ensures the availability of cheap, good quality labor. high percentage of Educated job seekers constitute a the unemployed population. This

combined with the rise in literacy is responsible for the situation avenues which where of may the educated Hence to do IT be not have sufficient Services low

employment. be

Enabled

considered

undesirable,

income jobs in the west have become attractive and relatively India. prestigious avenues for employment in

HIGHER EDUCATION India has about 3 million students graduating every year in different streams (excluding medicine and engineering). Currently over 1,60,000 engineers from all disciplines

18

graduate every year. There are 400,000 teachers in and around 13000 colleges and 294 universities all over the country. The Indian higher education system has witnessed a 13-fold increase in the number of universities, 25-fold increase in the no of colleges and 30-fold increase in the no of enrollment of students in the last five decades. It is believed that about 60% of Indian graduates can speak English, as with this percentage of also steadily is now

increasing,

knowledge

English

recognized as necessary in the job market. A special emphasis has come to be laid on womens education. Number of womens colleges has recorded a substantial increase, and India has 1195 womens colleges today. The government has set a target of 10% for access to higher education, which is of course way below the 59% access in US, 54% in Canada, 22% in UK and 30% in Israel. With a view to increasing accessibility to higher education the Indian government has increasingly been granting deemed university status to private educational institutions. The number of deemed universities in the country today is 70 with 100 more applications pending. By virtue of being self-financed institutions these deemed 19

universities

enjoy

considerable

autonomy

compared

to

state funded universities and colleges. India has a large pool the of technically qualified eighth highest in the English world,

speaking

manpower,

available at a comparatively lower cost. Over 1,60,000 engineers from all disciplines graduate every year from more than 650 engineering colleges. The four hot

specializations in any engineering college are IT, Computer Science, Electronics More and Communication 900 colleges and Electrical computer

Engineering.

than

provide

education at the degree/diploma level. MCA (Master of Computer Applications) courses were set up across India in 1984 and have contributed to the talent pool in the

country. Thanks to economic liberalization, private schools are augmenting the governments efforts to expand the supply of students to meet the anticipated needs of the software industry. Private institutes, such as NIIT and Aptech, together produce nearly 100,000 IT professionals annually, a figure that is projected to increase to halfmillion by 2006. The Indian Institutes of Technology (IITs), Indian

Institutes of Management (IIMs) and the Indian Institute 20

of

Science

are

world-class

centers

of

technology

and

management education. Between

25000 and 30000 IIT

engineers are now settled in the US alone and in the late 1990s some of the worlds finest companies discovered the IIMs. In the 1980s there were few Indians in the senior management corps of global corporations. Today there are a few hundred, some of them in the highest positions. Multinational such as GE, Unilever and Pepsico vouch that their Indian operations boast some of their finest

managers in their global network. One important initiative undertaken to increase the

information technology workforce in India was the setting up of four Indian Institutes of Information Technology (IIIT) in 2004. The IIITs aim to provide software

engineering degrees as well as conduct short-term courses for skill building. To capitalize on bioinformatics and the biotechnology sector opportunities, a Biotech City and an Institute of Bioinformatics and Applied Biotechnology is being set up in South India. Another biotechnology

research center in collaboration with Cornell University has been announced.

21

BRAIN DRAIN-ESTABLISHED INDIAN BRAND The outflow of Indias technical talent to other countries may impact the outsourcing of remote services and eWork to the country. Success of the offshore IT service industry has led to establishment of India as a credible source /destination of for talent pool for global requirements that could deliver globally acceptable quality at substantially lower cost. Made in India today has become a signal of quality in software, just as Made in Japan is a signal of quality in consumer electronics. As a result, more countries have begun to court Indian IT talent . More than 20% of the H1B visas issued by the US are to Indian IT professionals, though not all of it is brain drain since Indian software exporters use H1B visa extensively for body shopping and client support. Indian IT experts accounted for 20% of the green cards issued by

Germany for non-EU computer specialists in 2005. Singapore has set a goal of attracting 250,000 Indian IT professionals over a five-year period. The list also includes other countries like UK, Finland, France, Germany, Ireland, Japan, New Zealand, and South Korea. 22

It must be acknowledged however that brain drain however has ceased to be a one-way flow outside the country. Many Indian technology professionals working outside India have also started returning to India, while others circulate

between the two countries, thereby diffusing technology and skills. The Indo-US Entrepreneur (TIE), for instance is a network of Indian entrepreneurs and professionals with 25 chapters, 10 including five in India, several in the U.S., and one each in countries like Singapore, Switzerland, and the United Kingdom. While most of their wealth goes to U.S. companies, they are also funneling funds into a new generation of start-ups in India as well as hybrid

companies and that operate in both India and the U.S. QUALITY OF EDUCATION A government report on education observes that it is a matter of serious concern that expansion in quantity

growth in education has been accompanied by a decline in quality. For instance, year the but country only produces 3,000 of 1,60,000 engineers

engineers produced

every by

about are

premier

institutions

international

quality. An autonomous body, National Accreditation and Assessment Council, has been established to assess the 23

quality

of

higher

educational

Institutions

on

regular

basis. There is also an absence of formal institutions in India for ranking higher educational institutions on a

regular basis. Of late, India Today, a publication, along with Gallup, a market research Firm, has been conducting an annual ranking of higher educational institutions. Some state governments have taken noteworthy steps to ensure quality of IT education. The state of Karnataka has established a Board for IT Education Standards. This is a forum that brings together key stakeholders, i.e. industry academia and government to devise standards for IT

education in the state. The board is actively involved in curriculum development, teacher training and imparting training programs. COMPARISON WITH OTHER BPO DESTINATION If we compare the kind of manpower provided by India in terms of qualification with other BPO destination India definitely has an edge. Cumulative supply of new through e-learning and distance education

graduates available will be around 16.8 million and out of which 5-6% percent will be available for ITES industry by 2008. This is contrast with other BPO destination where 24

high school graduates in other countries generally do such work.

Figure: Source: McKinsey Analysis Comparing India in terms of wage per English speaking graduate available, and quantity comes of out English to be speaking clear graduates among

India

leader

offshore BPO destinations.

Manpower Scenario Summary Abundant supply of graduate level workers Massive low-cost, English speaking labor pool

25

Wage differentials expected to continue for a few decades.

Significantly lower employee attrition rates compared to other countries

Low training costs Relatively short learning curve

QUALITY AND PRODUCTIVITY Along with availability of large English speaking graduates at comparatively low cost, what is important is the quality of work provided and productivity of the worker. This is because both quality and productivity ha important bearing on the cost and goodwill of the company. India fairly satisfies these criteria also. A recent Mckinsey study found that an operation, which takes 20 seconds to process in a US facility, is handled in just 8 seconds in India. Indians also had much higher rate of error free transactions.

26

TELECOMMUNICATIONS INFRASRUCTURE
Improvement in telecommunication infrastructure one

other important factor which has given impetus to business process outsourcing in India Technology infrastructure is a strong theme of the 21st century in India. There is a telecom revolution in the air and on the ground. Fiber crisscrosses Indias cities and countryside. Cities are being connected by terrestrial

networks. A group of private players is pushing national and international phone call costs down sharply. Cheap bandwidth and always-on Internet access for homes in cities and most towns will start off in 2004. Yet

infrastructure has been the Achilles heel of India in the last century.

27

PROBLEMS OF BPO INDUSTRY

o o o

Expensive specialist skill in host countries. Compliance and legal restrictions. Unavailability of skilled manpower due to market

stagnation.
o

Requires

considerable

effort

in

terms

of

management's time and attention to establish

o

Loss of managerial control, because it is more difficult to manage outside service providers than managing ones own employees working possibly in the same building.

Often the hidden costs are difficult to calculate or prepare for. These include legal costs related to putting together a contract between two companies and the time spent to coordinating the contract.

Another problems of outsourcing can be a threat to security and confidentiality. If your company is

outsourcing processes like payroll, medical transcriptions or other confidential information, a company must be very careful in choosing which process it wants to outsource and to which provider.

28

possible

loss

of

flexibility

in

reacting

to

changing business conditions, lack of internal and external customer focus and sharing cost savings may also be a disadvantage of outsourcing.

Other

problems

of

outsourcing

may

include

unfavorable contract lengths, loss of competitive edge, problems in contract renewal, and contractual

misunderstandings. OTHER PROBLEMS OF OUTSOURCING Some of the major potential disadvantages to outsourcing include poor quality control, decreased company loyalty, a lengthy bid process, and a loss of strategic alignment. All of these concerns by can be who addressed go about and the minimized, outsourcing

however,

companies

process in an informed and deliberate fashion. Info World's Maggie Biggs counsels businesses to define "exactly what business processes and/or functions it makes sense to maintain via a service relationship. Unless you have a lot of resources to expend, it may make sense to prioritize outsourcing projects based on the number of benefits you 29

expect to gain from the arrangement." There may also be inherent advantages of maintaining certain functions

internally. For example, company employees may have a better understanding of the industry, and their vested interests may mean they are more likely to make decisions in accordance with the company's goals. Indeed, most analysts discourage companies from outsourcing core

functions that directly affect the products or services that the business offers.

30

LIMITATIONS

The

secondary

data

collected

might

consist

of

manipulations, which might have given bias in the result. The lack of experience in preparing the project report.

31

RECOMMENDATIONS AND CONCLUSION

STEPS IN SUCCESSFUL OUTSOURCING Once a company has made the decision to outsource, there are still a number of factors it must consider in making a successful transition and forming a partner relationship with the vendor. First, the company should determine what sort of outsourcing relationship will best meet its needs. "Decide what's "If important," a function urged is not the Journal to of your

Accountancy.

strategic

businessfor instance, payroll services or health insurance needs in a recruiting agency with only ten employees consider outsourcing share it to an expert provider." with Some their

businesses

strategic

decision-making

vendors, while others only outsource on a limited, as needed basis. As Ethel Scully noted in National Underwriter, the company needs to obtain the support of key personnel during this time. Many companies encounter resistance from

employees who feel that their jobs are threatened by 32

outsourcing. Scully suggested forming a team consisting of an outsourcing expert, representatives from senior

management and human resources, and the managers of all affected areas of the company to help address

employee concerns about the decision. Once your business has decided which functions to

outsource, it should initiate a search process that utilizes referrals from You other can companies then begin and service-provider potential

directories.

contacting

vendors and ask specific questions about the services they provide and their abilities to meet your company's unique and specific needs. Ideally, the vendor you select will have experience in handling similar business and will be able to give all of its clients' needs the priority they deserve. "Consider the service company's knowledge of the entirety of your business, its willingness to customize service, and its compatibility with your firm's business culture, as well as the long-run cost of its services and its financial

strength," said service provider Carl Schwenker in Money. During this period, you should also reexamine your own company culture and business needs to make sure that the outsourcing arrangement under consideration is a good fit. 33

Many

outsourcing

experts

counsel

businesses

to

select

vendors that can effectively integrate all their outsourced business functions so that they do not have to find

individual vendors for each function. Finally, you should select a vendor you trust in order to develop a mutually beneficial partner relationship. It is important to develop tangible measures of job performance before entering into an agreement, as well as financial incentives to encourage the vendor to meet deadlines and control costs. The and contract should clearly define outline

responsibilities

performance

criteria,

confidentiality rules and ownership rights to new ideas or technology. It should also include a means of severing the relationship if the service does not meet your

expectations. Since the vendor is likely to have more experience in preparing outsourcing agreements than a small client company, it may also be helpful to consult with an attorney during contract negotiations.

34

BIBLIOGRAPHY

www.man.ac.uk/idpm/isicost.htm www.google.com

35