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Executive summary

This study is about the globalization and its effect on the Indian economy. Its gives a brief review of what is globalization actually means and what are its effects i.e. its advantages and disadvantages on India. The topic the effects of globalization on Indian economy with reference to BPO and KPO gives you a brief review of how globalization came to India its history and different practices practiced in India after the globalization came into existing in India. It also states the entry of BPOs in India and its different reforms or features and how it changed the scenario of the Indian economy. Is gives a small review of KPOs as well and the difference between these two (BPO and KPO). The change from only government business to privatization and liberalization changed the perspective of the way people looked at India.

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index

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1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Introduction to globalization Historical development Trade in goods and services Movement of capital The important reform measures The impact of globalization on Indian economy The dark side of globalization Introduction to business process outsourcing (BPOs) History of BPOs Importance of outsourcing Recruitment BPOs security Process Impact of globalization on developing countries (with ref. to India) Outsourcing Introduction to KPOs What is KPO Scope and future of KPO Why KPO Accenture case study

1-3 3-4 4 4-5 6-20 21 21-27 28-29 29-30 30-33 34-39 40-44 45-50 51-64 64-69 70-72 73-74 74-77 77-83 89-90

The objective of this study:-

Is to show how India was before the globalization and what was its position and when India went into globalization and the BPOs and the KPOs entrance in the Indian changed the perspective of people and the businesses.

Introduction:-

Globalization has become an expression of common usage. While to some, it represents a brave new world with no barriers, for some others, it spells doom and destruction. It is, therefore, necessary to have a clear understanding of what globalization means and what it stands for, if we have to deal with a phenomenon that is willy-nilly gathering momentum. Broadly speaking, the term globalization means integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people. Cross border integration can have several dimensions cultural, social, political and economic. Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. With the onset of reforms to globalization the Indian economy in July of 1991, a new chapter has dawned for India and her billion plus population. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly be overlooked. Besides, it also marks the advent of the real integration of the Indian economy into the global economy. This era of reforms has also ushered in a remarkable change in the Indian mindset, as it deviates from the traditional values held since Independence in 1947, such as self reliance and socialistic policies of economic development, which mainly due to the inward looking restrictive form of governance, resulted in the isolation, overall backwardness and inefficiency of the economy, amongst a host of other problems. This, despite the fact that India has always had the potential to be on the fast track to prosperity. Now that India is in the process of restructuring her economy, with aspirations of elevating herself from her present desolate position in the world, the need to speed up her economic development is even more imperative. And having witnessed the positive role that Foreign Direct Investment (FDI) has played in the rapid economic growth of most of the Southeast Asian countries and most notably China, India has embarked on an ambitious plan to emulate the successes of her neighbors to the east and is trying to sell herself as a safe and profitable destination for FDI. Globalization has many meanings depending on the context and on the person who is talking about. Though the precise definition of globalization is still unavailable a

few definitions are worth viewing, Guy Brainbant: says that the process of globalization not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labor. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India. As a new participant in the globalization wave, India went through several structural and policy changes only in early 1990s, even if the awareness of need for opening up countrys borders was started in late 1980s, when Mr. Rajiv Gandhi was at the helm of policy design. With almost 20% devaluation of the Indian rupee in 1991, the process began that for a

while slowed down a little but rarely anyone was in doubt about its existence. The recent reports show that Indian economy grew at the record breaking and astonishing pace of 8% growth in real GDP in 2003-2004. The real question is how did the economy that was an almost autarky from 1950 to 1985 period, reached to such a realization that gains from trade are there to reap and the economic transition necessary for globalization is a pre-condition for wider economic growth? if globalization is a cause of Indias economic growth and if the new culture of trade policy change in India is there permanently or temporarily.

Historical Development:Globalization has been a historical process with ebbs and flows. During the PreWorld War I period of 1870 to 1914, there was rapid integration of the economies in terms of trade flows, movement of capital and migration of people. The growth of globalization was mainly led by the technological forces in the fields of transport and communication. There were less barriers to flow of trade and people across the geographical boundaries. Indeed there were no passports and visa requirements and very few non-tariff barriers and restrictions on fund flows. The pace of globalization, however, decelerated between the First and the Second World War. The inter-war period witnessed the erection of various barriers to restrict free movement of goods and services. Most economies thought that they could thrive better under high protective walls. After World War II, all the leading countries resolved not to repeat the mistakes they had committed previously by opting for isolation. Although after 1945, there was a drive to increased integration; it took a long time to reach the Pre-World War I level. In terms of percentage of exports and imports to total output, the US could reach the preWorld War level of 11 per cent only around 1970. Most of the developing countries which gained Independence from the colonial rule in the immediate PostWorld War II period followed an import substitution industrialization regime. The Soviet bloc countries were also shielded from the process of global economic integration. However, times have changed. In the last two decades, the process of

globalization has proceeded with greater vigor. The former Soviet bloc countries are getting integrated with the global economy. More and more developing countries are turning towards outward oriented policy of growth. Yet, studies point out that trade and capital markets are no more globalized today than they were at the end of the 19th century. Nevertheless, there are more concerns about globalization now than before because of the nature and speed of transformation. What is striking in the current episode is not only the rapid pace but also the enormous impact of new information technologies on market integration, efficiency and industrial organization.

Trade in Goods and Services:According to the standard theory, international trade leads to allocation of resources that is consistent with comparative advantage. This results in specialization which enhances productivity. It is accepted that international trade, in general, is beneficial and that restrictive trade practices impede growth. That is the reason why many of the emerging economies, which originally depended on a growth model of import substitution, have moved over to a policy of outward orientation. However, in relation to trade in goods and services, there is one major concern. Emerging economies will reap the benefits of international trade only if they reach the full potential of their resource availability. This will probably require time. That is why international trade agreements make exceptions by allowing longer time to developing economies in terms of reduction in tariff and non-tariff barriers. Special and differentiated treatment, as it is very often called has become an accepted principle.

Movement of Capital:Capital flows across countries have played an important role in enhancing the production base. This was very much true in 19th and 20th centuries. Capital mobility enables the total savings of the world to be distributed among countries which have the highest investment potential. Under these circumstances, one countrys growth is not constrained by its own domestic savings. The inflow of foreign capital has played a significant role in the development in the recent period of the East Asian countries. The current account deficit of some of these countries had exceeded 5 per cent of the GDP in most of the period when growth was rapid. Capital flows can take either the form of foreign direct investment or portfolio investment. For developing countries the preferred alternative is foreign direct investment. Portfolio investment does not directly lead to expansion of productive

capacity. It may do so, however, at one step removed. Portfolio investment can be volatile particularly in times of loss of confidence. That is why countries want to put restrictions on portfolio investment. However, in an open system such restrictions cannot work easily.

The Important Reform Measures (Step Towards liberalization privatization and Globalization)
Indian economy was in deep crisis in July 1991, when foreign currency reserves had plummeted to almost $1 billion; Inflation had roared to an annual rate of 17 percent; fiscal deficit was very high and had become unsustainable; foreign investors and NRIs had lost confidence in Indian Economy. Capital was flying out of the country and we were close to defaulting on loans. Along with these bottlenecks at home, many unforeseeable changes swept the economies of nations in Western and Eastern Europe, South East Asia, Latin America and elsewhere, around the same time. These were the economic compulsions at home and abroad that called for a complete overhauling of our economic policies and programs. Major measures initiated as a part of the liberalization and globalization strategy in the early nineties included the following:

Devaluation: The first step towards globalization was taken with the
announcement of the devaluation of Indian currency by 18-19 percent against major currencies in the international foreign exchange market. In fact, this measure was taken in order to resolve the BOP crisis

Disinvestment: In order to make the process of globalization smooth,


privatization and liberalization policies are moving along as well. Under the privatization scheme, most of the public sector undertakings have been/ are being sold to private sector.

Allowing Foreign Direct Investment (FDI) across a wide spectrum of


industries and encouraging non-debt flows. The Department has put in place a liberal and transparent foreign investment regime where most activities are opened to foreign investment on automatic route without any limit on the extent of foreign ownership. Some of the recent initiatives taken to further globalize the FDI regime, inter alias, include opening up of sectors such as Insurance (upto 26%); development of integrated townships (upto 100%); defense industry (upto 26%); tea plantation (upto 100% subject to divestment of 26% within five years to FDI); enhancement of FDI limits in private sector banking, allowing FDI up to 100%

under the automatic route for most manufacturing activities in SEZs; opening up B2B e-commerce; Internet Service Providers (ISPs) without Gateways; electronic mail and voice mail to 100% foreign investment subject to 26% divestment condition; etc. The Department has also strengthened investment facilitation measures through Foreign Investment Implementation Authority (FIIA).

Non Resident Indian Scheme the general policy and facilities for foreign
direct investment as available to foreign investors/ Companies are fully applicable to NRIs as well. In addition, Government has extended some concessions especially for NRIs and overseas corporate bodies having more than 60% stake by NRIs. Throwing Open Industries Reserved For The Public Sector to Private Participation. Now there are only three industries reserved for the public sector Abolition of the (MRTP) Act, which necessitated prior approval for capacity expansion the removal of quantitative restrictions on imports. The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that applies now.Wide-ranging financial sector reforms in the banking, capital markets, and insurance sectors, including the deregulation of interest rates, strong regulation and supervisory systems, and the introduction of foreign/private sector competition.

Financial Flows:The rapid development of the capital market has been one of the important features of the current process of globalization. While the growth in capital and foreign exchange markets have facilitated the transfer of resources across borders, the gross turnover in foreign exchange markets has been extremely large. It is estimated that the gross turnover is around $ 1.5 trillion per day worldwide (Frankel, 2000). This is of the order of hundred times greater than the volume of trade in goods and services. Currency trade has become an end in itself. The expansion in foreign exchange markets and capital markets is a necessary prerequisite for international transfer of capital. However, the volatility in the foreign exchange market and the ease with which funds can be withdrawn from countries have created often times panic situations. The most recent example of this was the East Asian crisis. Contagion of financial crises is a worrying phenomenon. When one country faces a crisis, it affects others. It is not as if financial crises are solely caused by foreign exchange traders. What the financial markets tend to do is to exaggerate weaknesses.Herd instinct is not uncommon in financial markets. When an economy becomes more open to capital and financial flows, there is even greater compulsion to ensure that factors relating to macro-economic stability are not ignored. This is a lesson all developing countries have to learn from East

Asian crisis. As one commentator aptly said The trigger was sentiment, but vulnerability was due to fundamentals.

There are different sections made for effect of globalization on on trade policies they are as follows:Section 1 makes the survey of trade policy in period 1950 to 1985, Section 2 summarizes the economic changes in period 1985 to 2005 with special focus on the liberalization attempt in 1991 and its aftereffects. Section 3 summarizes results and makes a conclusion. In general it is not very hard to prove that even a limited attempt of globalization has benefited Indian economy in the best possible way.

Table 1
Merchandise Exports Services Merchandise Services Exports Imports Trade Balance

Imports

1965

129.

62.1

125.3

57.5

4.9

1966

139.3

69.1

146.5

66.2

-8.6

1967 1968

98.9 82.5

74.8 67.0

152.1 130.6

73.2 63.0

-57.3 -51.2

1969

107.1

69.3

107.0

56.8

.9

1970

146.2

85.1

143.5

71.3

2.1

1971

150.8

97.2

200.6

85.0

-49.0

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

191.7 291.0 329.4 306.5 402.0 512.6 640.3 779.6 919.8 896.4 685.5 742.0 743.2

99.8 118.9 140.7 182.5 172.5 212.1 262.0 2 92.8 279.8 302.8 340.6 342.5 347.1

215.5 326.0 476.7 441.9 427.9 564.7 618.4 754.1 899.9 925.5 837.6 721.6 756.6

84.0 93.2 125.3 118.3 117.2 149.8 192.1 253.5 262.8 282.0 308.5 280.7 310.9

-25.8 -16.2 -160.4 -102.7 -22.8 -48.3 18.9 -21.2 -79.1 -147.9 -263.2 -56.9 -131.3

One of the reasons for this retarded growth in Indian trade was the disoriented trade policy. There was even a problem of assigning priority to industries for importing necessary parts and raw materials.

Section 1: The Big Move Toward Protectionist Posture:-

The Indian independence movement in 1940s, led by Mahatma Gandhi, was based on the general dislike of anything and everything foreign, especially the one originating from Britain. The public rallies to burn imported goods were famous. There was a strong belief that India can produce everything at home, can be self reliant and self dependent (popularly called Swadeshi movement).

Moreover, it was believed by strong nationalist movement that the import of any good was there to bring the foreign dominance. As a result foreign direct investment was seen to be a curse rather than blessing or a means of attracting higher investment. As a consequence, multi-national corporations were seen as the exploitative entities that merely benefit from cheap labor in the country, and were believed to be the ones that take the profits back home to better their lavish living and conspicuous standard of living. Naturally, it was hard to convince the policy makers that import substitution was an expensive policy action in economic sense, even if politically it seemed to be a patriotic thing to do. This extreme nationalism was evident in blindly carried out economic planning process of early days. an influence on each economic plan which increased tariffs on almost all imports, and economy resulted into almost autarky stage. Table 1 makes the point clear. The export and import were so low that they formed less than one percent of the total world trade. These low figures of trade were by the country that has had roughly 15% of world population. The highest merchandise export figure

was reached in 1980 (of $919.8 million) and they declined significantly in 1981 and 1982. For 6 years in a row (from 1979 to 1985) the merchandise exports were stagnant at roughly $700 to $800 million. The services sector did not fair any better. While the services exports were steadily increasing in this period the figures were less that $400.00 million. This was a period when computer

technology services were unheard of and services sector in India was poorly developed so exports were not that attractive. Merchandise imports were highest in 1981 (at $925.5 million) and with that exceptional year they were steadily increasing. One can see the giant jump in imports of merchandise in year 1974, thanks to the first oil price increase by the OPEC. India had not found any indigenous source of oil then and was primarily dependent upon the foreign oil. Nonetheless the total merchandise import bill never crossed $1 billion, one of the primary reasons for that was the tremendous tariff rates and strict quotas on major imports. In 1974, the policy makers, when they were pointed out the tremendous increase in trade (im) balance from $16.2 million (1973) to $160.4 million (1974), efficiently blamed the oil price rise. In general 1965 to 1985 was a turbulent time period. It witnessed the stagnation of the economy as well as that of Indian trade. The hardship experienced by this virtual closed economy was no more evident than in early 1970s when the economy went through numerous shocks. The poor monsoons created agricultural production short-fall leading to severe droughts in

some parts of the country. This put pressure on the industrial production which was not progressing very well in the first place. Due to the additional burden exerted by the Indo-Pakistan War of 1971, the economy started suffering miserably. Rationing of necessities was common and criminal elements made a heyday by hoarding. The political opposition parties made life miserable for Indira Gandhi government which had a little choice but to blame all starvation on foreign elements. In 1973, came the OPEC oil price shock and the things really went out of control. While country had no reserves to pay for imported oil, the import bill was growing very fast and export earnings were sluggish. In 1973 when imports increased from $191.7 million to $291 million and again in 1976 went up to $402 million. Political parties were extremely active. But economically there was no way out. The protectionism was to the highest level. Consider the 350% import tariff rate on automobiles and average tariff rate of 152%. Domestic industries were well protected that they loved being monopolists and had no inclination for technological innovation. The maturity stage, that was supposed to have taken place according to the famous (?) Infant Industry Argument has never arrived. Strict foreign exchange controls were not only required but were very necessary to stop illegal foreign currency and gold smuggling transactions. It was an administrative nightmare where rent seeker made merry and black market constituted half of the official economy. Academicians learned several lessons of

how protectionism can ruin the economy and policy makers watched economy reaching to a real low point while they searched for the solutions. To top the political chaos, the ruling party (Indira Congress) declared emergency restricting many a freedoms and ruthlessly putting anyone in jail, who gave even a hint of anti-governmental activity. The country definitely needed a magic for rapid economic growth which could have silenced the political trouble makers. In early 1980s the monsoon god was nice to India. While agricultural sector that was in desperate need to prosper, received a big boost, the industrial sector invented few new technological advances and grew much more rapidly than before. India also realized that she can do much better in service sector. All in all, the economy started prospering at a slow rate but definitely much better than in 1970s. The need for opening up the economy was felt more keenly by Rajiv Gandhis government and some reductions in tariff rates were activated in early 1980s. But the real support for globalization, liberalization and reduction in protectionism came in late 1980s.

Section 2: The Wave of Globalization Arrived


In 1980s there were some signs of policy change in Rajiv Gandhis Prime Minister ship, but the Macro-economy was already damaged by earlier faults. The Macroeconomic crisis reached its peak in 1990 with combined fiscal deficit of Centre and State governments standing at 10% as percentage of GDP, current account balance at 3.3% of GDP backed by a rate of inflation 9.9% despite Indias record economic performance measured in terms of rate of growth of GDP, 6.0 percent, due to high rates of industrial growth of 5.9% and domestic saving ratio of 21.9% of the GDP. Nonetheless this growth was accompanied by strange macroimbalances that resulted into tremendous external borrowing, leading to heavy external debt of 28.7%. For the first time in her history, India was nearly forced to the prospect of defaulting on her international financial commi tment. Added burden of oil price shock due to Gulf War of 1991 put the country in such a precarious condition that foreign reserves of worth only 3 weeks of imports were left in the treasury. In June of 1991, when the current Prime Minister Dr. Manmohan Singh was the Finance Minister (and Mr. Narasinha Rao was the Prime Minister), country received first significant shock of globalization and liberalization. This was also the product of strong demand by some well known economists and policy planners for significantly changing the policy structure. While the declared plan reduced the Rupee value significantly by devaluating it by

21% in one day, it also made it abundantly clear that the old ways of high tariff rates were almost completely over. The tariff rates were slashed, more foreign direct investment (FDI) was invited and import quotas were demolished. There were essentially 2 parts of the liberalization program: Structural and Stabilization. Stabilization measures were supposed to be of short-term nature, including such policies as the austerity in governmental budgets, which was supposed to bring about the decline in aggregate demand and therefore lower the inflation rate. The structural adjustment was to be of a long-term nature with such measures as the convertibility on current account of the balance of payment, lower restrictions on domestic business and export promotion. These steps not only made a complete switch in the policy moves heretofore, but also showed policy makers inclination to move to market oriented economy as the blunders of governmental controls were becoming more and more visible. All in all, these reforms aimed to achieve stability, curb the inflationary pressure and release the breaks on production and productivity. The post reform years showed quick and efficient recovery from the acute macroeconomic crisis of 1991. The real GDP in 1990s increased at an annual rate of 6% which is even more impressive because the rest of the world was going through a minor recession. The highest increase in real GDP was

experienced in 1996-1997 with 7.8% (expected to be surpassed in 2004) Increased production had its effect on the prices. Inflation rate of 13.6 percent in 1991 was

reduced to 1.3 percent in 2001-2002, a remarkable achievement by any standard. The monetary policy was carried out responsibly and the fiscal pressures were negative but much more manageable than earlier years. However the fiscal policy austerity program was not totally effective, thanks to the crisis created by Iraq war as well as political troubles all over the country. In first 3 years of 1990s the economic hardships continued partly due to the increased oil price and overall recessionary forces, coupled with political instability, lack of technological innovation, and poor monsoon. The recessionary trend did not last for along time however. The increased international trade freer economy technological

improvements prompted by tremendous growth in information technology combined to show the positive effects from 1994. Liberalization at least partially has become effective in attracting foreign direct investment, positive outlook for the Indian economy and overall excitement amongst producers and investors. Indian economy was on the move in a serious way. As Table 2 shows, in 1994 while the real GDP increased by 5.9%, the inflation rate declined from 13.7% in 1992 to 8.4%. While the interest was still very high, it had some downward pressure. The official unemployment number was very high (36.69 million) but it remained steady, a mild achievement in an increasing population. But as it is evident for several years, the Indian unemployment is beyond the reported figures of unemployed labor. It consists of heavy under-employment, it is marred by

extreme poverty partly due to illiteracy. The so called full -time employment in India is concentrated mainly in urban sector with very limited industrialization in rural or semi-rural areas of extreme backwardness. Added to those problems are the imperfections of labor market, the complications in collecting the data, the Indian labor employment (or unemployment) is as hard to report as its population survey results.

Table 2
Macroeconomic Performance in Post 1991 Years Year Real GDP Growth 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 .96 2.3 1.5 5.9 7.3 7.3 7.8 6.5 6.5 6.1 Inflation Interest Rate 8.9 13.7 10.1 8.4 10.9 7.7 6.4 4.8 6.9 3.3 Rate 17.88 18.92 16.25 14.75 15.46 15.96 13.83 13.54 12.54 12.29 Unemployment Money Supply No. in Millions 36.3 36.75 36.27 36.69 36.74 37.43 39.14 40.01 40.37 40.34 Billions of Rs 1046.1 1120.9 1330.2 1695.0 1883.5 2148.9 2419.3 2703.5 3161.2 3495.9

2001 2002 2003 2004

4.0 6.2 5.5 8.0

7.1 4.7 5.1 4.5

12.08 11.92 11.50 10.60

41.99 42.36 43.10 42.50

3846.0 4318.6 4822.3 5402.3

It appeared that policy makers by 1995 were convinced that globalization is what is needed for faster economic growth. Success sometimes breeds upon itself, and policy makers usually are fast learners especially when political benefits are high. However the growth of 1994-1997 was not perfectly matched by accelerated growth in 1997-2000 periods. As Chitre (2003) points out, this sluggishness was due to the slow growth in agricultural sector, not because of industrial slowdown. The international trade as witnessed in Table 3 did not perform poorly either. Better monsoons of years 2000 to 2004 helped not only the agricultural sector grow faster but also the manufacturing, trade and services sectors moved admirably. In 2004 it became official that Indian economy was second fastest growing in the world, second only to the Chinese economy. In fact, the Chinese economys growth is also primarily explained by her newly found affection for openness. The Indian economy, much like the world economy, went through

technological change. While the computer mega cities such as Bangalore (that now has 1500 foreign company offices), Hyderabad and Pune grew at a unprecedented rates, the repercussions of this industrial growth was felt in many of the adjacent rural areas. In fact in April 2005, it was confirmed that India officially achieved 8 percent growth in 2004 (Times of India, April 28, 2005)

Table 3
International Trade Performance Post 1991 Years Exports Imports BOT Exchange rate Rs/SDR 36.95 36.02 43.10 45.81 52.29 51.66 52.99 59.81 59.69 60.91

In billions of US dollars for 3 columns 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 18.09 20.01 22.01 25.52 31.23 33.73 35.20 34.07 36.87 43.13 21.08 22.93 24.1 29.67 37.95 43.78 45.73 44.82 45.55 55.32 4.01 4.71 3.48 6.31 10.21 13.98 13.36 13.60 11.44 13.77

2001 2002 2003 2004

43.82 52.71 63.45 65.09

50.53 51.41 61.42 77.03

5.97 7.58 8.69 13.37

60.54 65.29 67.27 68.88

Table 3 shows the drastic turn around of the economy in 1990s in terms of international trade patterns. While the exports increased drastically, the opening of the borders and reduction in tariff rates also allowed the imports to go up. The balance of trade figures were in a manageable amount (almost always less that $14 billion). What is interesting to point out is that the non -oil imports and exports showed a positive balance of trade for the Indian economy since year 2000. Hence oil imports formed the major drain on the foreign reserves and constituted the main reason for balance of trade deficit. While the Services sector picked the exports considerably, important raw material imports have also grown significantly. One of the major developments

reported in April 2005 was that software exports from Indias hi-tech hub, Bangalore rose more than 52 percent to $6 billion. (Times of India, April 28, 2005). However any economic spurt is not without a political controversy and Indian economic growth is not an exception. Political skeptics have pointed out the increased inequality of

income as an unwanted result of the globalization. Some politicians (especially leftists and socialists) have also complained about the increased salaries of computer scientists and information technologists. The great digital divide has become somewhat of a worry for some researchers. However, it has recently shown the globalization process has more benefits than costs and therefore needs to be supported to the fullest extent. In fact the free trade for the whole world scenario is based on the validity of globalization by all policy makers. Indias economic growth has received a strong impetus in post 1991 era. This increased economic growth is mainly and directly is a result of countrys better monsoons and the free trade movement that started in that year. Clearly the lethargic economic development was associated with greater

protectionism and policy makers seemed to have learned an important lesson from 1950 to 1990 era. The data show that the free trade movement of 1990s has shown positive results in economic terms. The future economic growth therefore depends heavily on the speed of privatization and globalization. As pointed out, the country is ready to have a firm plan to get ready for the second wave of free-trade and liberalization movement.

Impact of Globalization of Indian Economy:The novel Tale of Two Cities of Charles Dickens begins with a piquant description of the contradictions of the times: It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; we had everything before us, we had nothing before us At the present, we can also say about the tale of two Indians: We have the best of times; we have the worst of times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by side with darkened ill-starred hovels. We have everything by globalization, we have nothing by globalization. Though some economic reforms were introduced by the Rajiv Gandhi government (1985-89), it was the Narasimha Rao Government that gave a definite shape and start to the new economic reforms of globalization in India. Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said: After four decades of planning for industrialization, we have now reached a stage where we should welcome, rather fear, foreign investment. Direct foreign investment would provide access to capital, technology and market. In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Minister submitted in the concluding paragraph: The Government of India believes that the policies set forth in the Memorandum are adequate to achieve the objectives of the program, but will take any additional measures appropriate for this purpose. In addition, the Government will consult with the Fund on the adoption of any measures that may be appropriate in accordance with the policies of the Fund on such consultations. The Government of India affirmed to implement the economic reforms in consultation with the international bank and in accordance of its policies. Successive coalition governments from 1996 to 2004, led by the Janata Dal and BJP, adopted faithfully the economic policy of liberalization. With Manmohan Singh returned to power as the Prime Minister in 2004, the economic policy initiated by him has become the lodestar of the fiscal outlook of the government.

The Dark Side of Globalization:On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being the agriculture sector. Agriculture has been and still remains the backbone of the Indian economy. It plays a vital role not only in providing food and nutrition to the people, but also in the supply of raw material to industries and to export trade. In 1951, agriculture provided employment to 72 per cent of the population and contributed 59 per cent of the gross domestic product. However, by 2001 the population depending upon agriculture came to 58 per cent

whereas the share of agriculture in the GDP went down drastically to 24 per cent and further to 22 per cent in 2006-07. This has resulted in a lowering the per capita income of the farmers and increasing the rural indebtedness. The agricultural growth of 3.2 per cent observed from 1980 to 1997 decelerated to two per cent subsequently. The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate of agricultural GDP including forestry and fishing is likely to be below two per cent in the Tenth Plan period. The reasons for the deceleration of the growth of agriculture are given in the Economic Survey 200607: Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and lo post-harvest value addition continued to be a drag on the sectors performance. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the inclusiveness of growth. The number of rural landless families increased from 35 per cent in 1987 to 45 per cent in 1999, further to 55 per cent in 2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussion on Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1, 00,000 farmers committed suicide during the period 1993-2003 mainly due to indebtedness. In his interview to The Indian Express on November 15, 2005, Sharad Pawar said: The farming community has been ignored in this country and especially so over the last eight to ten years. The total investment in the agriculture sector is going down. In the last few years, the average budgetary provision from the Indian Government for irrigation is less than 0.35 percent. During the postreform period, India has been shining brilliantly with a growing number of billionaires. Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand farmers. Further, the proportion of people depending in India on agriculture is about 60 % whereas the same for the UK is 2 %, USA 2 %and Japan 3 %. The developed countries, having a low proportion of population in agriculture, have readily adopted globalization which favors more the growth of the manufacturing and service sectors. About the plight of agriculture in developing countries, Nobel Prize-winning economist Joseph Stiglitz said: Trade agreements now forbid most subsidies excepted for agricultural goods. This depresses incomes of those farmers in the developing countries who do not get subsidies. And since 70 per cent of those in the developing countries depend directly or indirectly on agriculture, this means that the incomes of the developing countries are depressed. But by whatever standard one uses, todays international trading regime is unfair to developing countries. He also pointed out: The average European cow gets a subsidy of $ 2 a day (the World Bank measure of poverty); more than half the people in the

developing world live on less than that. It appears that it is better to be a cow in Europe than to be a poor person in a developing country.

Demoting Agriculture:In the Economic Survey 1991-92, Finance Minister Manmohan Singh recast the Chapters in the following order: (1) Introduction, (2) Public Finance, (3) Money and Credit, (4) Prices and Distribution, (5) Balance of Payments, (6) Industry, (7) Agriculture, (8) Infrastructure and (9) Social Sectors. It is not known as to why the Finance Minister demoted the importance of agriculture that has about 90 per cent population from the second place to the seventh in the annual Economic Survey of the country. In a way does it symbolize the low importance deliberately given to the growth of the agriculture sector in the scheme of globalization?

Strategy of Globalization:In the Report (2006) East Asian Renaissance, World Bank Advisor Dr Indermit Gill stated: Cities are at the core of a development strategy based on international integration, investment and innovation. East Asia is witnessing the largest rural-tourban shift of population in history. Two million new urban dwellers are expected in East Asian cities every month for the next 20 years. This will mean planning for and building dynamic, connected cities that are linked both domestically and to the outside world so that economic growth continues and social cohesion is strengthened. The market economy seems to be more concerned with the growth of consumerism to attract the high income groups who are mostly in the cities in the developing countries. Rural economy and the agricultural sector were out of focus in the strategy of globalization.

Growth of Unemployment Poverty:The proportion of the unemployed to the total labor force has been increasing from 2.62 per cent (1993-94) to 2.78 per cent (1999-2000) and 3.06 per cent (2004-05). In absolute figures, the number of unemployed had been in those years 9.02 million, 10.51 million and 13.10 million respectively. (Economic Survey 200607,.In reply to a question, the Minister for Labor and Employment informed the Lok Sabha on March 19, 2007, that the enrolment of the unemployed in the Employment Exchanges in 2006-07 was 79 lakhs against the average of 58 lakhs in the past ten years. About the impact of globalization, in particular on the development of India, the ILO Report (2004) stated: In India, there had been

winners and losers. The lives of the educated and the rich had been enriched by globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not yet reached the majority, and new risks had cropped up for the losers the socially deprived and the rural poor. Significant numbers of nonperennial poor, who had worked hard to escape poverty, were finding their gains reversed. Power was shifting from elected local institutions to unaccountable transnational bodies. Western perceptions, which dominated the globe media, were not aligned with local perspectives; they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural and linguistic diversity.

Social Services:About the quality of education given to children, the Approach to the Eleventh Five Year Plan stated: A recent study has found that 38 per cent of the children who have completed four years of schooling cannot read a small paragraph with short sentences meant to be read by a student of Class II. About 55 per cent of such children cannot divide a three digit number by a one digit number. These are indicators of serious learning problems which must be addressed. The Approach paper added further: Universalization of education will not suffice in the knowledge economy. A person with a mere eight years of schooling will be as disadvantaged in a knowledge economy by ICT as an illiterate person in modern industry an services. The less said about the achievements in health the better. The Approach to the Eleventh Plan concedes that progress implementing the objectives of health have been slow. The Report gave the particulars of the rates of infant mortality (per 1000 live births) for India as 60 against Sri Lanka (13), China (30) and Vietnam (19). The rate of maternal mortality (per 1, 00,000 deliveries) of India is 407 against Sri Lanka (92), China (56) and Vietnam (130).

Growth of Slum Capitals:In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth a proposal to promote Mumbai as a world class financial centre and to make financial services the next growth engine of India Of its 13 million population, Mumbai city has 54 per cent in slums. It is estimated that 100 to 300 new families come to Mumbai every day and most land up in a slum colony. Prof R. N. Sharma of the Tata Institute of Social Science says that Mumbai is disintegrating into slums. From being known as the slum capital of India and the biggest slum of Asia, Mumbai is all set to become the slum capital of the world. The population of Delhi is about 14 million of which nearly 45 per cent population lives in slums, unauthorized colonies, JJ clusters and undeveloped rural parts. During dry weather

these slum dwellers use open areas around their units for defecation and the entire human waste generated from the slums along with the additional wastewater from their households is discharged untreated into the river Yamuna. The cumulative FDI inflow (until September 2006) to the New Delhi region was of Rs. 27,369 crores and to Mumbai Rs. 24,545 crores. The two spots of New Delhi and Mumbai received 46 per cent of the total FDI inflows into India. The FDI inflows have in no way assisted in improving the health and environment conditions of the people. On the other hand, the financial capital of India and the political capital of India are set to become the topmost slum cities of the world.

Victims of Globalization:IN his Making Globalization Work, Nobel Laureate Stieglitz wrote: Trade liberalization opening up markets to the free flow of goods and services was supposed to lead to growth. The evidence is at best mixed. Part of the reason that international trade agreements have been so unsuccessful in promoting growth in poor countries is that they were often unbalanced. The advanced industrial countries were allowed to levy tariffs on goods produced by developing countries that were, on average, four times higher than those on goods produced by other advanced industrial countries. In his foreword to The Dynamics and Impact of Globalization by Dr. M. V. Louis Anthuvan, Justice V. R. Krishna Iyer pointed out pithily: The New World Order is the product of what is now familiarly described as globalization, liberalization and privatization. The weaker sectors like the Asian and African countries are victims, whose economic welfare is slavery, at the disposal of the White world. When World War II came to a close, commercial conquest and trade triumph became the major goal of the United States and the other giant trade powers. Indeed, these mighty countries and companies even made world hunger as Big Business. The poorer countries with natural resources have been made banana republics and cucumber vassals. The Human Development Report 2006 recorded: Globalization has given rise to a protracted debate over the precise direction of trends in global income distribution. What is sometimes lost sight of is the sheer depth of inequality and the associated potential for greater equity to accelerate poverty reduction. Measured in the 2000 purchasing power parity (PPP) terms, the gap between the incomes of the poorest 20 per cent of the worlds population and the $ 1 a day poverty line amounts to about $ 300 billion. That figure appears large, but it is less than two per cent of the income of the worlds wealthiest 10 per cent.

To make Globalization Work:Under the phenomenal growth of information technology which has shrunk space and time and reduced the cost of moving information, goods and capital across the globe, the globalization has brought unprecedented opportunities for human development for all, in developing as well as developed countries. Under the commercial marketing forces, globalization has been used more to promote economic growth to yield profits to some countries and to some groups within a country. India should pay immediate attention to ensure rapid development in education, health, water and sanitation, labor and employment so that under timebound programmers the targets are completed without delay. A strong foundation of human development of all people is essential for the social, political and economic development of the country. Though at present India appears to be dominant in some fields of development as in IT-ITES, this prosperity may be challenged by other competing countries which are equipping themselves with better standards of higher education. As detailed earlier, our progress in education has been slow and superficial, without depth and quality, to compete the international standards .The government should take immediate steps to increase agricultural production and create additional employment opportunities in the rural parts, to reduce the growing inequality between urban and rural areas and to decentralize powers and resources to the panchayati raj institutions for implementing all works of rural development. Steps should be taken for early linking of the rivers, especially in the south-bound ones, for supply of the muchneeded water for irrigation.

It should be remembered that without a sustainable and productive growth of the agricultural sector, the other types of development in any sphere will be unstable and illusory. Despite the concerted development in manufacturing and service sectors, despite the remarkable inflow and overflow of foreign reserves, agriculture is still the largest industry providing employment to about 60 per cent of the workforce in the country. Mere growth of the GDP and others at the macro level in billions does not solve the chronic poverty and backward level of living norms of the people at the micro level. The growth should be sustainable with human development and decent employment potential. The welfare of a country does not percolate from the top, but should be built upon development from the bottom.

Definition and introduction:BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact centre services.BPO that is contracted outside a company's country, is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near shore outsourcing. Often the business processes are information technology-based, and are referred to as ITES-BPO, where ITES stands for Information Technology Enabled Service. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the subsegments of business process outsourcing industry. Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing in-house services with labor from an outside firm. India has enormous opportunities emerging from globalization and consequent lowering of tariff barriers. Information Technology has given India formidable brand equity in the global markets. Indian BPO companies have a unique distinction of providing efficient business solutions with cost and quality as an advantage by using state of art technology. Through joint efforts of Government and the Industry, software development and IT enabled services have emerged as niche opportunities for India in the global context. The Government has been making continuous efforts to make India a front-runner in the age of Information revolution. India today has the advantages of skilled manpower base, active and healthy competition amongst states in attracting investment in infrastructure as well as framing IT applications in areas such as e-governance, e-learning, ecommerce, entrepreneurship, software exports growth and a large potential in the domestic market. Information Technology Act dealing with Cyber Security, Cyber Crime and other information security related legal aspects is in place. As a result of technological convergence at the infrastructure, services and industry level; there has been a tremendous up-surge in new product / service industries.

Definition BPO:Business process outsourcing (BPO) is the leveraging of technology vendors to provide and manage a company's critical and/or non-critical enterprise applications. Through the business transformation process of service-oriented transformation, which leverages the technologies and standards of service-oriented architecture, companies can increasingly leverage third party companies that act as business service providers. Business process outsourcing can use off-shore resources, but is not required. Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service.

History:While temporary, contingency and executive search firms have provided staffing services for many decades, the concept of an employer outsourcing the management and ownership of part or all of their recruiting process was not first realized on a consistent basis until the 1970s, in Silicon Valley's highly competitive high-tech labor market. Fast-growing high-tech companies were hard-pressed to locate and hire the technical specialists they required, and so had little choice but to pay large fees to highly specialized external recruiters in order to staff their projects. Over time, companies began to examine how they might reduce the growing expenses of recruitment fees while still hiring hard-to-find technical specialists. Toward this end, companies began to examine the various steps in the recruiting process with an eye toward outsourcing only those portions that they had the greatest difficulty with and that added the greatest value to them. Initial BPO programs typically consisted of companies purchasing lists of potential candidates from BPO vendors. This "search/research" function, as it was called, generated

names of competitors' employees for a company and served to augment the pool of potential candidates from which that company could hire. Over time, as business in general embraced the concept of outsourcing more and more, BPO gained favor among Human Resource management: not only did BPO reduce overhead costs from their budgets, but it also helped improve the company's competitive advantage in the labor market. As labor markets became more and more competitive, BPO became more of an acceptable option. Furthermore, through the advent in the 1980s and 1990s of human resources outsourcing (HRO) companies that began taking on the processes associated with benefits, taxes and payroll, companies began recognizing that recruitinga significant cost of HRshould also be considered for outsourcing. In the early 2000s, more companies began considering the outsourcing of recruitment for major portions of their recruiting need. There have been fundamental changes in the US labor market that serve to reinforce the use of BPO as well. The labor market has become increasingly dynamic: workers today change employers more often than in previous generations. De-regulated labor markets have also created a shift towards contract and part-time labor and shorter work tenures. These trends increase recruitment activity and may encourage the use of BPO. It should also be noted that even in slower economic times or higher unemployment, BPO is still considered by companies to assist in an increasing need to screen through a larger candidate pool. Its also speculated that Prosquare LLC, a Nevada based recruitment company, first started a recruitment process in their facility in Bangalore in early 2006. Mr. Hemant Nair their global sales manager signed a monthly contract with American based recruitment group 4T technologies and called it BPO (Riming with the then famous RPO).

Importance of Outsourcing:Outsourcing system allows companies to contract for services that are not within the scope of their expertise, so that they can focus their time, money and energy on their core competencies instead of wasting valuable resources trying to gain Understanding of areas that are somebody else's expertise". 1. Strategy. 2. SWOT analysis on Indian ITES sector 3. Strengths

4. Highly skilled, English-speaking workforce 5. Abundant manpower 6. Cheaper workforce than their Western counterparts According to Nasscom, The wage difference is as high as 70-80 percent when compared to their Western parts. 7. Lower attrition rates than in the West. 8. Dedicated workforce aiming at making a long-term career in the field 9. Round-the-clock advantage for Western companies due to the huge time difference. 10.Lower response time with efficient and effective service 11.Operational excellence 12.Conducive business environment

Weaknesses
Recent months have seen a rise in the level of attrition rates among outsourcing workers who are quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to pursue BPO as a full-time career. The cost of telecom and network infrastructure is much higher in India than in the US.

Opportunities
1) To work closely with associations like Nasscom to portray India as the most favoured BPO destination in the world. 2) India can be branded as a quality outsourcing destination. 3) $69 billion ITES business by 2010 4) $97.5 billion IT (consulting, software solutions) market by 2010

Threats
1. The anti-outsourcing legislation in the US state of New Jersey. Three more states in the United States are planning legislation against outsourcing Connecticut, Missouri and Wisconsin. 2. Workers in British Telecom have protested against outsourcing of work to Indian BPO companies. 3. Other BPO destinations such as China, Philippines and South Africa could have an edge on the cost factor.

Revenue CAGR Offshore Total BPO Market \ Year 2002 2003 2004 2005 2006 2007 2008 BPO Revenue 1,322 1,825 3,017 6,439 12,563 24,230 78.91 110,167 121,687 131,171 143,090 157,033 173,070 9.45

CAGR in % 2002-07 Figures in $ million Source: Gartner Dataquest

Gartner: $173 billion in 2007, of which $24.23 billion would be outsourced to offshore contractors

Industry size:India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year, other locations like Philippines, and South Africa have emerged to take a share of the market, China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune, Patna and New Delhi. The top five Indian BPO exporters for 2009-2010 according to NASSCOM are Genpact, TCS BPO, WNS Global Services, Wipro BPO, and Aegis Ltd.

Banking business process outsourcing or banking BPO


Is a highly specialized sourcing strategy used by banks and lending institutions to support the business acquisition and account servicing activities associated with the customer lending lifecycle? These specific BPO services are usually offered through multi-year service-level agreements for all or portions of the credit card lending, consumer lending or commercial lending segments of the financial services market. Some larger financial services organizations choose to extend their sourcing strategy to include other outsourced services such as ITO systems and software, human resources outsourcing and benefits services, finance and accounting outsourcing (FAO) services, procurement BPOsor training outsourcing. New customer acquisition services include telemarketing activities, application processing, underwriting, customer or merchant credit evaluation and verification, credit approval, document processing, account opening and customer care and onboarding. Account servicing processes for credit cards or consumer loans. These most commonly include payment processing systems and services, customer service or call center support operations (voice, digital, email and mail services), product renewals, and loan disbursement; document management services such as printing and mailing of statements, networked printing and storage solutions; collections, recoveries processing, default management, risk management and foreclosure. Consumer and commercial lending post origination transaction processing services, such as check processing, clearance and settlement services, remittance, and records management .Back office transaction process management for loans or credit card portfolios, including custody services, fraud mitigation and detection, regulatory and program compliance, portfolio analytics, reporting, conversions, management of technology platforms, interface for customer data and custom development.

Recruitment:Refers to the process of attracting, screening, and selecting qualified people for a job. For some components of the recruitment process, mid- and large-size organizations often retain professional recruiters or outsource some of the process to recruitment agencies. The recruitment industry has four main types of agencies: employment agencies, recruitment websites and job search engines, "headhunters" for executive and professional recruitment, and niche agencies which specialize in a particular area of staffing. Some organizations use employer branding strategy and in-house recruitment instead of agencies. Recruitment-related functions are generally carried out by an organization's human resources staff. The stages in recruitment include sourcing candidates by advertising or other methods, screening potential candidates using tests and/or interviews, selecting candidates based on the results of the tests and/or interviews, and on-boarding to ensure the candidate is able to fulfill their new role effectively.

Traditional agency:Also known as employment agencies, recruitment agencies have historically had a physical location. A candidate visits a local branch for a short interview and an assessment before being taken onto the agencys books. Recruitment consultants then work to match their pool of candidates to their clients' open positions. Suitable candidates are short-listed and put forward for an interview with potential employers on a contract or direct basis. Compensation to agencies takes several forms, the most popular are: A contingency fee paid by the company when a recommended candidate accepts a job with the client company (typically 20%-30% based and calculated on the candidates first-year base salary (though fees as low as 12.5% can be found online, and which usually has some form of guarantee (3090 days standard), should the candidate fail to perform and is terminated within a set period of time (refundable fully or prorated). An advance payment that serves as a retainer, also paid by the company, nonrefundable paid in full depending on outcome and success (e.g. 40% up front, 30% in 90 days and the remainder once a search is completed). This form of compensation is generally reserved for high level executive search/headhunters

Hourly Compensation for temporary workers and projects. A pre-negotiated hourly fee, in which the agency is paid and pays the applicant as a consultant for services as a third party. Many contracts allow a consultant to transition to a full-time status upon completion of a certain number of hours with or without a conversion fee.

Headhunters:A "headhunter" is an industry term for a third-party recruiter who seeks out candidates often when normal recruitment efforts have failed. Headhunters are generally considered more aggressive than in-house recruiters or may have preexisting industry experience and contacts. They may use advanced sales techniques such as initially posing as clients to gather employee contacts as well as visiting candidate offices. They may also purchase expensive lists of names and job titles but more often will generate their own lists. They may arrange a meeting or a formal interview between their client and the candidate and will usually prepare the candidate for the interview, help negotiate the salary and conduct closure to the search. They are frequently members in good standing of industry trade groups and associations. Headhunters will often attend trade shows and other meetings nationally or even internationally that may be attended by potential candidates and hiring managers. Headhunters are typically small operations that make high margins on candidate placements (sometimes more than 30% of the candidates annual compensation). Due to their higher costs, headhunters are usually employed to fill senior

management and executive level roles. Headhunters are also used to recruit very specialized individuals; for example, in some fields, such as emerging scientific research areas, there may only be a handful of top-level professionals who are active in the field. In this case, since there are so few qualified candidates, it makes more sense to directly recruit them one-by-one, rather than advertise internationally for candidates. While in-house recruiters tend to attract candidates for specific jobs, headhunters will attract both candidates and actively seek them out as well. To do so, they may network, cultivate relationships with various companies, and maintain large databases, purchase company directories or candidate lists and cold call prospective recruits. Headhunters are increasingly using social media to find and research candidates. This approach is often called social recruiting.

Niche recruiters:Specialized recruiters exist to seek staff with a very narrow specialty. Because of their focus, these firms can very often produce superior results due to their ability to channel all of their resources into networking for a very specific skill set. This specialization in staffing allows them to offer more jobs for their specific demographic which in turn attracts more specialized candidates from that specific demographic over time building large proprietary databases. These niche firms tend to be more focused on building ongoing relationships with their candidates as is very common the same candidates are placed many times throughout their careers. Niche firms also develop knowledge on specific employment trends within their industry of focus (e.g. The energy industry) and are able to identify demographic shifts such as aging and its impact on the industry.

In-house recruitment:Under pressure to reduce costs, both large- and medium-sized employers tend to undertake their own in-house recruitment, using their human resources department, front-line hiring managers and recruitment personnel who handle targeted functions and populations. In addition to coordinating with the agencies mentioned above, in-house recruiters may advertise job vacancies on their own websites, coordinate internal employee referrals, work with external associations, trade groups and/or focus on campus graduate recruitment. Some large employers

choose to outsource all or some of their recruitment process (recruitment process outsourcing) however a much more common approach is for employers to introduce referral schemes where employees are encouraged to source new staff from within their own network.

Benefits and limitations:An advantage of BPO is the way in which it helps to increase a companys flexibility. However, several sources which have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways. Most services provided by BPO vendors are offered on a fee-for-service basis. This can help a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes. Another way in which BPO contributes to a companys flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints. Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firms core businesses. The key lies in knowing which of the

main value drivers to focus on customer intimacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge. A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company. Finally, flexibility is seen as a stage in the organizational life cycle: A company can maintain growth goals while avoiding standard business bottlenecks BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation. A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time .Although the above-mentioned arguments favor the view that BPO increases the flexibility of organizations, management needs to be careful with the implementation of it as there are issues, which work against these advantages. Among problems, which arise in practice are: A failure to meet service levels, unclear contractual issues, changing requirements and unforeseen charges, and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to be considered before a company decides to engage in business process outsourcing A further issue is that in many cases there is little that differentiates the BPO providers other than size. They often provide similar services, have similar geographic footprints, leverage similar technology stacks, and have similar Quality Improvement approaches.

Risks:BPO can only succeed in the context of a well-defined co BPO rate and staffing strategy. As with any program, a company must manage its BPO activities, providing initial direction and continued monitoring to assure the desired results. Loose Definition of BPO - As BPO is a commercial concept rather than a specific definition, there is little regulation to BPO providers. As such, a recruitment agency may brand their services as BPO without actually structuring them in a way

that will provide the most benefit to their clients. Cost - The cost of engaging an BPO provider may be more than the cost of the internal recruitment department, as an BPO provider is likely to have higher business overheads. Effectiveness Improperly implemented BPO could reduce the effectiveness of recruitment, should an BPO provider not understand or seek to understand the recruitment solution that they will be providing. Failure to Deliver - BPO service providers may fail to provide the quality or volume of staff required by their clients, especially when finding candidates in industry sectors where there are staff shortages. Lack of Competition - Placing all recruitment in the hands of a single outside provider may discourage the competition that would arise if multiple recruitment providers were used. Pre-Existing Issues - An BPO solution may not work if the company's existing recruitment processes are performing poorly, or if the service provider lacks appropriate recruitment processes or procedures to work with the client. In this situation, it is better for the company to undergo a recruitment optimization programmer.

BPO security:Information security has emerged as a significant concern for banks, mobile phone companies and other businesses that use call centers or business process outsourcing, or BPO. There have been instances of theft of personal data reported from call centers. Britain's Financial Service Authority examined standards in India in April 2005 and the Banking Code Standards Board audited eight Indian call centres in 2006, handling more than a million calls per month from the UK. The BCSB report stated that "Customer data is subject to the same level of security as in the UK. High risk and more complex processes are subject to higher levels of scrutiny than similar activities onshore." India's NASSCOM has said that they take breach in security extremely seriously and will assist the police in their probe. Employer Branding - BPO providers do not necessarily act as custodians of their clients' employer brand in the way that a strongly aligned retained search firm or internal recruiting resource would. Engagement - Many BPO organizations perform their staffing functions and service offsite or offshore, disconnecting the provider from the client company's growth and recruiting strategy. While this effect can be mitigated through strong relationship management, some of the momentum and energy associated with the rapid up scaling of a workforce through recruitment may dissipate.

Third party BPO's:Until G.E most of the work was being done by "captives"- a term used for in house work being done for the parent organization. In 2000 Raman Roy and some team members from GECIS quit, and with VC funding from Chrysalis Capital started Spectra mind. At the same time an organization called EFunds started in Mumbai and Gurgaon, and Daksh in Gurgaon. However, recently most of the Indian BPO's even smaller and mid-sized ones are actually setting-up their onshore presence. Most of the serious players are actually improving the outsourced business processes by leveraging on years of experience and now some of them are directly competing with their own old Client base by marking this transition to KPO's.

Entry of IT majors:In 2002 Spectra mind was bought by software major Wipro, and BPO by then had become mainstream like the IT Industry in India. The team that had set up Spectra mind went on to start Quattro in 2006, a BPO specializing in high end BPO/KPO services. By 2002 all major Indian software organizations were into BPO, including Infosys (Progeon), Inforlinx, HCL, Satyam (Nipuna) and Patni. By 2003 Daksh was bought out by IBM, and later in 2006 MphasiS was acquired by EDS. Even international 3rd party BPO players like Convergys and SITEL had set up shop in India, swelling the BPO movement to India. Then service arms of organizations like Accenture, IBM, Hewlett Packard, Dell also set up shop in India.

Emergence of Rural BPOs:Booming India Inc has led to skyrocketing real estate and infrastructure costs in Tier-1 cities. BPO industry has thrived all these years because of its ability to deliver services at a low cost. Increasing infrastructure costs, real estate costs, and salaries have raised BPO costs significantly and as a result Indian BPOs in Tier-1 cities are looking at Tier-2 and Tier-3 cities for operation. Few entrepreneurs who had a vision of bringing the rural India into the mainstream of knowledge economy have found an opportunity here - setting Rural BPOs. The transformation of rural India started with the emergence of these Rural BPOs.

Future of outsourcing services to India:Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8-10% for the next decade. In addition, outsourcing efforts to India are held up as an effective remedy for concerns about both Chinese government policy and labor force issues, such as increasing costs and shortages.

Size of industry:The industry has been growing rapidly. It grew at a rate of 38% over 2005. For the FY06 financial year the projections is of US$7.2 billion worth of services provided by this industry. The base in terms of headcount being roughly 400,000 people directly employed in this Industry. The global BPO Industry is estimated to be worth 120-150 billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India thus has some 5-6% share of the total Industry, but a commanding 63% share of the offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO Industry which is in total expected to have revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of the approximate one million workers estimated to be directly employees in the IT and BPO Sector. The related Industry dependent on this are Catering, BPO training and recruitment, transport vendors, (home pick up and drops for night shifts being the norm in the industry). Security agencies, Facilities management companies. Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years. Additionally, 71% of European companies and 78% US companies plan to use these services in the next 1224 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels. Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

The following is a list of notable call centre companies: 1. Accenture. 2. Access Worldwide Communications Inc. 3. Aditya Birla Minacs. 4. Affiliated Computer Services. 5. APAC Customer Services. 6. Answernet 7. APAC Customer Services 8. Buw Holding 9. Convergys CoBPOration. 10.Cognizant Technology Solutions 11.Computer Sciences CoBPOration 12.Convergys 13.Etech, Inc. 14.Firstsource 15.Global Email Company 16.Headstrong (company). 17.Home Shopping Network. 18.Headstrong (company) 19.Home Shopping Network 20.InfoCision Management CoBPOration. 21.Inktel Direct. 22.Innodata Isogen. 23.IQor. 24.IDT Global Israel 25.InfoCision Management CoBPOration 26. Mindpearl. 27.Maximus Inc. 28.NCO Group. 29.NuComm International 30.Offshoring Inc. 31.One World Direct 32.Response Handling Call Centre Ibrox 33.SITEL.

34.StarTek. 35.Sellbytel Group 36.SmartAction 37.Sykes Enterprises 38.Stream Global Services. 39.Teleperformance. 40.TeleTech. 41.TELUS. 42.Transcom Worldwide. 43.TeleTech 44.User:Nathan.harman/ZettaServe 45. VADS (IT company)

Executive research firms and sourcing firms:These firms are the new hybrid firms in the recruitment world able to combine the research aspects (discovering passive candidates) of recruiting and combine them with the ability to make hires for their clients. These firms provide competitive passive candidate intelligence to support companies' recruiting efforts. Normally they will generate varying degrees of candidate information from those people currently engaged in the position a company is looking to fill. These firms usually charge a daily rate or fixed rate. Many times this uncovers names that cannot be found with other methods and will allow internal recruiters the ability to focus their efforts solely on recruiting. Executive Research began as an extension of headhunting or executive search businesses. Initially used to support advertising strategies, executive research quickly overshadowed advertisements as a much more focused and successful alternative. The ability of researchers to pinpoint top talent passive or otherwise gave the headhunting businesses a much higher success rate and quicker turnaround time, especially with the harder to fill vacancies. Soon the gap in the market became apparent, and executive research moved away from in-house to a more main stream market, although still remaining behind the scenes in the recruitment industry. More recently, the economic downturn has forced businesses to review their recruitment practices that have resulted in them

working directly with the research firms. By removing the middleman businesses have direct access to much more cost-effective solutions, and have been able to retain a firmer grasp on their recruitment drives and processes. Business also have access to full disclosure on market intelligence which has proven to be vital for more forward thinking businesses, especially with regards to succession planning.

Process:Job analysis:The proper start to a recruitment effort is to perform a job analysis, to document the actual or intended requirement of the job to be performed. This information is captured in a job description and provides the recruitment effort with the boundaries and objectives of the search. Oftentimes a company will have job descriptions that represent a historical collection of tasks performed in the past. These job descriptions need to be reviewed or updated prior to a recruitment effort to reflect present day requirements. Starting a recruitment with an accurate job analysis and job description ensures the recruitment effort starts off on a proper track for success.

Sourcing:Sourcing involves 1) advertising, a common part of the recruiting process, often encompassing multiple media, such as the Internet, general newspapers, job ad newspapers, professional publications, window advertisements, job centers, and campus graduate recruitment programs; and 2) recruiting research, which is the proactive identification of relevant talent who may not respond to job postings and other recruitment advertising methods done in #1. This initial research for so-called passive prospects, also called name-generation, results in a list of prospects who can then be contacted to solicit interest, obtain a resume/CV, and be screened.

Screening and selection:Suitability for a job is typically assessed by looking for skills, e.g. communication, typing, and computer skills. Qualifications may be shown through rsums, job applications, interviews, educational or professional experience, the testimony of references, or in-house testing, such as for software knowledge, typing skills, numeracy, and literacy, through psychological tests or employment testing. Other resume screening criteria may include length of service, job titles and length of time at a job. In some countries, employers are legally mandated to provide equal opportunity in hiring. Business management software is used by many recruitment agencies to automate the testing process. Many recruiters and agencies are using an applicant tracking system to perform many of the filtering tasks, along with software tools for psychometric testing.

On boarding:"On boarding" is a term which describes the process of helping new employees become productive members of an organization. A well-planned introduction helps new employees become fully operational quickly and is often integrated with a new company and environment. On boarding is included in the recruitment process for retention purposes. Many companies have on boarding campaigns in hopes to retain top talent that is new to the company; campaigns may last anywhere from 1 week to 6 months.

Internet recruitment and websites:Such sites have two main features: job boards and a rsum/curriculum vitae (CV) database. Job boards allow member companies to post job vacancies. Alternatively, candidates can upload a rsum to be included in searches by member companies. Fees are charged for job postings and access to search resumes. Since the late 1990s, the recruitment website has evolved to encompass end-to-end recruitment. Websites capture candidate details and then pool them in client accessed candidate management interfaces (also online). Key players in this sector provide e-recruitment software and services to organizations of all sizes and within numerous industry sectors, who want to e-enable entirely or partly their recruitment process in order to improve business performance. The online software provided by those who specialize in online recruitment helps

organizations attract, test, recruit, employ and retain quality staff with a minimal amount of administration. Online recruitment websites can be very helpful to find candidates that are very actively looking for work and post their resumes online, but they will not attract the "passive" candidates who might respond favorably to an opportunity that is presented to them through other means. Also, some candidates who are actively looking to change jobs are hesitant to put their resumes on the job boards, for fear that their companies, co-workers, customers or others might see their resumes.

Job search engines:The emergence of meta-search engines allows job-seekers to search across multiple websites. Some of these new search engines index and list the advertisements of traditional job boards. These sites tend to aim for providing a "one-stop shop" for job-seekers. However, there are many other job search engines which index solely from employers' websites, choosing to bypass traditional job boards entirely. These vertical search engines allow job-seekers to find new positions that may not be advertised on traditional job boards, and online recruitment websites.

Impact of Globalization on Developing Countries:(With Special Reference To India) A Comparison with Other Developing Countries
Consider global trade Indias share of world merchandise exports increased from

.05% to .07% 2. over the past 20 years. Over the same period Chinas share has tripled to almost 4%. Indias share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China and 5.5% for Brazil. FDI inflows to China now exceed US $ 50 billion annually. It is only US $ 4billion in the case of India.

How Globalization Affects Developed Countries:The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in the recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.

The Economic Impact on Developed Nations:Globalization compels businesses to adapt to different strategies based on new ideological trends that try to balance rights and interests of both the individual and the community as a whole. This change enables businesses to compete worldwide and also signifies a dramatic change for business leaders, labor and management by legitimately accepting the participation of workers and government in developing and implementing company policies and strategies. Risk reduction via diversification can be accomplished through company involvement with international financial institutions and partnering with both local and multinational businesses. (Investing overseas begins with a determination of the risk of the country's investment climate, read Evaluating Country Risk For International Investing.) Globalization brings reorganization at the international, national and sub-national levels. Specifically, it brings the reorganization of production, international trade and the integration of financial markets, thus affecting capitalist economic and social relations via multilateralism and microeconomic phenomena, such as business competitiveness, at the global level. The transformation of the production systems affects the class structure, the labor process, the application of technology and the structure and organization of capital. Globalization is now seen as marginalizing the less educated and low-skilled workers. Business expansion will no longer automatically imply increased employment. Additionally, it can cause high remuneration of capital due to its higher mobility compared to labor.

Developed countries:The phenomenon seems to be driven by three major forces: globalization of all product and financial markets, technology and deregulation. Globalization of product and financial markets refers to an increased economic integration in specialization and economies of scale, which will result in greater trade in financial services through both capital flows and cross-border entry activity. The technology factor, specifically telecommunication and information availability, have facilitated remote delivery and provided new access and distribution channels while revamping industrial structures for financial services by allowing entry of nonbank entities such as telecoms and utilities. Deregulation pertains to the liberalization of capital account and financial services in products, markets and geographic locations. It integrated banks by offering a broad array of services, allowed entry of new providers and increased multinational presence in many markets and more cross-border activities. In a global economy, power is the ability of a company to command both tangible and intangible assets that create customer loyalty, regardless of location. Independent of size or geographic location, a company can meet global standards and tap into global networks, thrive and act as a world class thinker, maker and trader, by using its greatest assets: its concepts, competence and connections.

Beneficial Effects:Some economists have a positive outlook regarding the net effects of globalization on economic growth. These effects have been analyzed over the years by several studies attempting to measure the impact of globalization on various nations' economies using variables such as trade, capital flows and their openness, GDP per capita, foreign direct investment (FDI) and more. These studies examined the effects of several components of globalization on growth using time series cross sectional data on trade, FDI and portfolio investment. Although they provide an analysis of individual components of globalization on economic growth, some of the results are inconclusive or even contradictory. However, overall, the findings of those studies seem to be supportive of the economists' positive position instead of the one held by the public and non-economist view.

Trade among nations via the use of comparative advantage promotes growth, which is attributed to a strong correlation between the openness to trade flows and the affect on economic growth and economic performance. Additionally there is a strong positive relation between capital flows and their impact on economic growth. Foreign Direct Investment's impact on economic growth has had a positive growth effect in wealthy countries and an increase in trade and FDI resulted in higher growth rates. Empirical research examining the effects of several components of globalization on growth using time series and cross sectional data on trade, FDI and portfolio investment found that a country tends to have a lower degree of globalization if it generates higher revenues from trade taxes. Further evidence indicates that there is a positive growth-effect in countries which are sufficiently rich as are most of the developed nations. The World Bank reports that integration with global capital markets can lead to disastrous effects without sound domestic financial systems in place. Furthermore globalized countries have lower increases in government outlays, as well as taxes, and lower levels of corruption in their governments. One of the potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk.

Harmful Effects:Non-economists and the wide public expect the costs associated with globalization to outweigh the benefits, especially in the short-run. Less wealthy countries from those among the industrialized nations may not have the same highly-accentuated beneficial effect from globalization as more wealthy countries measured by GDP per capita etc. Free trade, although increases opportunities for international trade, it also increases the risk of failure for smaller companies that cannot compete globally. Additionally it may drive up production and labor costs including higher wages for more skilled workforce. Domestic industries in some countries may be endangered due to comparative or absolute advantage of other countries in specific industries.

Another possible danger and harmful effect is the overuse and abuse of natural resources to meet the new higher demand in the production of goods.

The Bottom Line:One of the major potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk. The overall evidence of the globalization effect on macroeconomic volatility of output indicates that, although in theoretical models the direct effects are ambiguous, financial integration helps in a nation's production base diversification, leads to an increase in specialization of production. However, the specialization of production based on the concept of comparative advantage can also lead to higher volatility in specific industries within an economy and society of a nation. As time passes, successful companies, independent of size, will be the ones that are part of the global economy. The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in the recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.

Importance of BPO in present era:India is fourteenth in the world in factory output. Manufacturing sector in addition to mining, quarrying, electricity and gas together account for 27.6% of the GDP and employ 17% of the total workforce. Economic reforms introduced after 1991 brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.[14] In recent years, Indian cities have continued to liberalize, but excessive and burdensome business regulations remain a problem in some cities, like Kochi and Kolkata. Post-liberalization, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since

handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labor costs and technology.

Services:India is fifteenth in services output. Service industry employ English-speaking workers on the supply side and on the demand side, has increased demand from foreign consumers interested in India's service exports or those looking to outsource their operations. India's IT industry, despite contributing significantly to its balance of payments, accounts for only about 1% of the total GDP or 1/50th of the total services. The ITES-BPO sector has become a big employment generator especially amongst young college graduates. The number of professionals employed by IT and ITES sectors is estimated at around 1.3 million as on March 2006. Also, Indian IT-ITES is estimated to have helped create an additional 3 million job opportunities through indirect and induced employment.

Sector organization:Indias oil sector is dominated by state-owned enterprises, although the government has taken steps in past recent years to deregulate the hydrocarbons industry and support greater foreign involvement. Indias state-owned Oil and Natural Gas Corporation (ONGC) is the largest oil company, and also the countrys largest company overall by market capitalization. ONGC is the leading player in Indias upstream sector, accounting for roughly 75% of the countrys oil output during 2006, as per Indian government estimates. As a net importer of oil, the Government of India has introduced policies aimed at growing domestic oil production and oil exploration activities. As part of the effort, the Ministry of Petroleum and Natural Gas crafted the New Exploration License Policy (NELP) in 2000, which permits foreign companies to hold 100% equity possession in oil and natural gas projects. However, to date, only a handful of oil fields are controlled by foreign firms. Indias downstream sector is also dominated by state-owned entities, though private companies have enlarged their market share in past recent years.

Sector Organization
As in the oil sector, Indias state-owned companies account for the bulk of natural gas production. ONGC and Oil India Ltd. (OIL) are the leading companies with respect to production volume, while some foreign companies take part in upstream developments in joint-ventures and production sharing contracts (PSCs). Reliance Industries, a privately-owned Indian company, will also have a bigger role in the natural gas sector as a result of a large natural gas find in 2002 in the Krishna Godavari basin.[24] The Gas Authority of India Ltd. (GAIL) holds an effective control on natural gas transmission and allocation activities. In December 2006, the Minister of Petroleum and Natural Gas issued a new policy that allows foreign investors, private domestic companies, and national oil companies to hold up to 100% equity stakes in pipeline projects. While GAILs domination in natural gas transmission and allocation is not ensured by statute, it will continue to be the leading player in the sector because of its existing natural gas infrastructure.

BPO Role in India's Economic Growth:The role played by BPOs in boosting Indias economy shows that the IT and ITeS sector have been contributing largely to the economic growth of India. The growth in the contribution of BPOs to Gross Domestic Product has shown a steady rise from 1.2% to 5.4%. It is hence evident that the BPO industry is making an impact on the Indian economy. BPOs are aiming at contributing towards bringing in more earnings to the country and IP creation. Currently, BPOs in India are focused on the domestic segments and off shoring. The benefit to the local economy is subject to judicious exploitation of resources existing in these areas. The following are some useful statistics with regard to the growth of the IT-BPO sector during the past 10 years: Emphasis on quality services Skilled sets and workers Cost effectiveness

Quality products English speaking manpower These features of the Indian BPO industry attract long-term contracts and as a result, there are high earnings which in turn result in major contribution to economic growth. As a matter of fact, the Indian BPO industry is leading in the market and is improving in the area of training professionals in learning foreign languages and increasing the number of skilled workers. This will give India the ability to sustain its global leadership and probably generate export revenues of USD 10 billion by 2010. The setting up of more BPOs is also bringing in more job opportunities for the Indian youth. BPO role in India's economic growth will even facilitate great maneuvering in the countrys balance of payments. BPO role in India's economic growth is definitely at the growth stage but is all set for a major contribution to the Indian economy, especially if the government supports the sector in terms of financial growth, openness to trade, rural-urban migration, and education.

Current BPO Industry Trends 2010:The years that have gone by have been defining moments in many ways for the economies in general and the BPO services in particular. They have made us realign our thinking, question some convictions and relook at some issues. In all, we see some paradigm shifts which have enabled us to align to these realities. The times ahead are going to be even more challenging, capital scarce and we will need to modulate our strategies to account for that environment. Trends point towards a greater IT adoption in retail, healthcare, telecom and BFSI (the banking, financial services and insurance vertical) and 80 percent of growth to come from new areas. BFSI contributes almost 41 percent to the industrys revenues. With BPOs moving up the value chain to provide such high-end services as business analytics and knowledge-based services through a mix of reengineering skills, technology-enabled platforms, new operating models and increased depth of services, BPO exports are estimated to grow 6 percent to $12.4 billion (over Rs. 57,000 crore).

Why off- shoring makes more sense now?


Traditionally, cost rationalization was a compelling reason for corporate to consider outsourcing/off-shoring in the first place. Post the economic downturn, it came back to being an important reason for corporate to revisit their strategy for off-shoring and push it more aggressively. With green shoots appearing in the economic scenario, proliferation of technology in various sectors and an increasing number of companies going global, Asia is witnessing a marked rise in IT spend. While Asia-Pacific constitutes about 10percent share of the total global IT services market, IT spend in the region is growing at a much faster rate compared to the mature markets. IT spending is a precursor to IT and BPO outsourcing and Asia-Pacific will attract increased competition, being the fastest growing geography with an estimated growth of 10 percent, according to a NASSCOM* report.

This year 2010, the key trends that will impact the industry going forward, are: Markets in newer geographies:The U.S. and the UK have been a major revenue source for the BPO industry since the genesis of this industry. But now service providers are exploring markets in other global regions such as Europe, Australia, the Middle East and Asia Pacific. WNS on its part has channelized its initiative into three regions 1) US 2) UK & Europe, 3) Asia Pacific thereby reducing its dependency in a single geography. Such moves by service providers have come at time when potential customer base in these geographies has also seen a growth in maturity. It is without doubt that this year will witness aggressive moves by many service providers to tap this client base.

Expanding the global footprint:BPO service providers are building delivery centers around the world, often in newer nations, that provide a plentiful supply of educated but low-cost workers. WNS recently set up a delivery center in Costa Rica, which is not a conventional site for off-shoring, however it is strategic in terms of its proximity to the US. There has also been expansion of WNS's delivery centers in Philippines, Romania, Sri Lanka and India. This footprint provides clients tremendous flexibility in terms of cost, language capability, real time processing as well as access to Innovation networks driven by a partner.

Focus on mid-markets and SME's:The off-shoring option for the mid-market companies and the SME largely remains untapped. This could be probably because we have not reached out to the SME and the mid-market fraternity, to help them understand how we could be partners of profit in the long run. KPO is another important segment through which we can tap the opportunities available in this space. SME's and mid-market companies largely depend on the trends that could help them in understanding the market better thereby create new business models to change their cost as per short / long term demands. As we move forward, globalization is sure to intensify competition and this will encourage not only the large corporate but the mid-size companies and the SME's to revisit their strategy for off-shoring, push it more aggressively and thereby benefit in the long run.

Global Transformation Practice:Knowledge Component is one of the most sought after value addition in our space. Knowledge services such as analytics, legal services, consulting, amongst others if delivered with precision, adds great value to the client. This arms the service provider with relevant expertise to scale their offer and thereby winning the trust of their client. In addition clients prefer to look out for providers with whom they can propel operational excellence, focus on core business solutions, and enhance end-to end solutions. At WNS, we are already providing consulting and analytics to our clients thereby building not just trust but relationships as well. This is due to the fact that knowledge services help the client to understand its customers, its geographies/demographics, how to better its services/offer, thereby increase customer loyalty.

In our experience we realize this serves as an integral part while signing up new businesses as well. Deep industry and business process knowledge, comprehensive services offered and a proven track record enables WNS to deliver business value to the world's leading companies and continues to be our business proposition.

Business in newer segments:With new business and vertical specialization, outsourcing will continue to grow both vertically and horizontally. Some examples where new businesses have been introduced and are growing are processes such as the litigation support and document review work within the Legal vertical, and the collections business within mortgages in the BFSI segment. A NASSCOM report recently said that growth in emerging verticals such as retail, healthcare and utility would be higher and they are growing three times faster than core verticals. Pharmaceuticals, biotechnology, and food, among others will emerge as new sources of revenue as the BPO industry expands, and demand for value-added services should accelerate in the next five years. Many services that were not offshore earlier will now open up; but volumes in existing services may also shrink. Though, overall the long-term growth presents a healthy picture as increasing cost pressures will ensure that off shoring is imperative.

Technology will drive the change in the industry:Technology has always been the trigger that has driven trends in the industry, and technological advances tending towards the green agenda are going to make 2010 a green year. Green Computing is the buzzword today. Cost savings and energy efficiency being two sides of the same coin, will drive greater adoption for Green computing (or cloud computing) among enterprises. Companies are now looking to consolidation of data centers allowing for optimization of their power consumption.

One such technology WNS has adopted is virtualization, which is one step towards cloud computing; it has been utilized in the data center infrastructure in building a centralized data center. It has obvious benefits in operational efficiency, data centre footprint and power consumption allow for better management and cost efficiencies. WNS's CIO award for two consecutive years in a row is proof of the innovation within this sector. Technology innovation in BPOs will provide truly "friendly technology" for selfhelp, enabling clients to address their concerns quickly. Social networking is a powerful, emerging tool for building customer care communities that incorporate client interface in addressing other client issues - the technology and platforms built for essentially personal and social interactions are catapulting to the next level to serve the purpose of corporate interactions. Social networking platforms serve as a collaborative tool for geographically dispersed teams to work together more closely. WNS has been exploring this platform to build client interfaces for collaborative work across its geographies.

BPOs bring in energy efficiencies:Becoming green is no longer a choice for any industry, governments or individuals. The BPO industry is looking to adopt green buildings, energy efficient data centers, power efficient computers, shared data centers and e-waste management. Many large contracts will soon come with a carbon neutrality condition. WNS is on its journey to carbon neutrality and have a concrete emission reduction plan. WNSs Green Lean Sigma initiative launched in Jan 2008 to spread the message of 'be seen living green', has since had 'Green teams' aggressively promoting the WNS vision of carbon neutrality. Apart from building sensitivity to the environment, we have quality management systems to ensure environment conformance, and have adopted tangible measures in the form of rain water harvesting, energy conservation, saving paper, saving water, managing waste, clean air and clean land, tree plantation, owning a village. Concurrently, over a 100 green projects are running across locations, promoting innovative ideas on

reducing our carbon footprint to ensure our promise is fulfilled. Every new employee who joins WNS takes pledge to comply by WNS's green promise. And the cost advantage remains relevant at all times, When one of the world's largest online travel companies rapidly needed to reduce the cost of its customer care and finance and accounting operations, they turned to business process outsourcing, partnering with WNS. By leveraging the right onshore and offshore model, WNS delivered $3 million in savings right to the bottom line within the first quarter of going live. After ramping up the operations to over 1,000 people in fewer than nine months, WNS delivered cost savings of over 30 percent on the base run rate.

Where do we go from here?


To wrap up the BPO industries character is driven by Technology, Talent (availability), Global Policies, Cost Efficiencies, and of course The Demand for (value-added) Services. These drivers govern growth across markets/geographies and in a variety of new services. A NASSCOM report recently also said that Infrastructure services would also be a key growth driver for the industry with an estimated growth of 10.5 percent in the next fiscal. India is the world's largest offshore outsourcing center, with 2.3 million people in India employed in the IT-ITeS industry. NASSCOM estimates that the industry would hire 150,000 people this year, and the domestic market will witness 12 percent growth this year and would reach Rs. 66,200 crore. The growth rate has been estimated at 5.5 percent, on the back of increased cost efficiencies, utilization rates and diversification into new verticals. Direct employment in the Indian IT-BPO sector is estimated to cross 2.3 million, while indirect job creation is estimated to reach 8.2 million.

OUTSOURCING:Outsourcing occurs when a company purchases products or services from an outside supplier, rather than performing the same work within its own facilities, in order to cut costs. The decision to outsource is a major strategic one for most companies, since it involves weighing the potential cost savings against the consequences of a loss in control over the product or service. Some common examples of outsourcing include manufacturing of components, computer programming services, tax compliance and other accounting functions, training administration, customer service, transportation of products, benefits and compensation planning, payroll, and other human resource functions. A relatively new trend in outsourcing is employee leasing, in which specialized vendors recruit, hire, train, and pay their clients' employees, as well as arrange health care coverage and other benefits. The growth in outsourcing in recent years is partly the result of a general shift in business philosophy. Prior to the mid-1980s, many companies sought to acquire other companies and diversify their business interests in order to reduce risk. As more companies discovered that there were limited advantages to running a large group of unrelated businesses, however, many began to divest subsidiaries and refocus their efforts on one or a few closely related areas of business. Companies tried to identify or develop a "core competence," a unique combination of experience and expertise that would provide a source of competitive advantage in a given industry. All aspects of the company's operations were aligned around the core competence, and any activities or functions that were not considered necessary to preserve it were then outsourced. Today, outsourcing is embraced by companies of all sizes and industry orientations. As analysts Tom Osmond commented in Employee Benefit News, "many companies have decided that transactional and administrative functions are neither core competencies nor valueadded activities. In fact, some companies are putting themselves at risk as a result of using outdated technology and not complying with government regulations. Vendors, by focusing on administration as part of their business model, provide better service enforced by contracts and service-level agreements."

Successful outsourcing requires a strong understanding of the organization's capabilities and future direction. As William R. King explained in Information Systems Management, "decisions regarding outsourcing significant functions are among the most strategic that can be made by an organization, because they address the basic organizational choice of the functions for which internal expertise is developed and nurtured and those for which such expertise is purchased. These are basic decisions regarding organizational design." Outsourcing based only upon a comparison of costs can lead companies to miss opportunities to gain knowledge that might lead to the development of new products or technologies. Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective outsourcing. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees, facilities, equipment, and complete responsibility for a product or function to an outside vendor. In contrast, selective outsourcing may target a single, time-consuming task within a department, such as preparing the payroll or manufacturing a minor component, that can be handled more efficiently by an outside specialist. Vendors providing outsourcing services are generally grouped into two models: Business Process Outsourcing (BPO) and Application Service Provider (ASP). In the BPO model, major resources and assets are transferred from the company to the vendor. Under the ASP model, on the other hand, vendors concentrate on providing selected services for multiple clients. But as Osmond told Employee Benefit News, many variations exist within these two models. "Each vendor has a particular focus and/or point of entry to the market, particularly in the ASP space," Osmond stated. "There is also a wide range of pricing models and option. The good news is that there is a seemingly endless combination of service, pricing, and delivery, providing a solution for most situations. The bad news is that it can be difficult to compare vendors on an apples-to-apples basis.

ADVANTAGES OF OUTSOURCING:Companies that decide to outsource do so for a number of reasons, all of which are based on realizing gains in business profitability and efficiency. Principal merits of outsourcing include the following: Cost savings:- Many businesses embrace outsourcing as a way to realize cost savings or better cost control over the outsourced function. Companies usually outsource to a vendor that specializes in a given function and performs that function more efficiently than the company could, simply by virtue of transaction volume.

Staffing levels:- Another common reason for outsourcing is to achieve headcount reductions or minimize the fluctuations in staffing that may occur due to changes in demand for a product or service. Companies also outsource in order to reduce the workload on their employees (freeing them to take on additional money making projects for the business), or to provide more development opportunities for their employees by freeing them from tedious tasks.

Focus.:- Some companies outsource in order to eliminate distractions and force themselves to concentrate on their core competencies. This can be a particularly attractive benefit for start-up firms. Outsourcing can free the entrepreneur from tedious and time-consuming tasks, such as payroll, so that he or she can concentrate on the marketing and sales activities that are most essential to the firm's long-term growth and prosperity. "What an outsourcing partner really sells is focus," wrote Adam Katz-Stone in Baltimore Business Journal. "In accounting for instance, that is something that typically is seen as necessary but not essential, not the core of the business. So you bring in an outsourcing partner and then you don't have to think about that any

more. You can focus your energies on sales, marketing, all the other things that matter more." Morale:- This is an often-overlooked but still notable benefit that can sometimes be gained by initiating an outsourcing relationship. "Often a business's lack of internal expertise or dedication to non-core tasks results in poor attitudes and ultimately poor performance," wrote Kevin Grauman in CPA Journal. "This can lead to overlap and duplication of internal efforts. An effectively designed and ongoing communication process emanating from one or more outsourcers can greatly reduce or eliminate these duplications." Flexibility:- Still others outsource to achieve greater financial flexibility, since the sale of assets that formerly supported an outsourced function can improve a company's cash flow. A possible pitfall in this reasoning is that many vendors demand long-term contracts, which may reduce flexibility. Knowledge:- Some experts taught outsourcing of computer programming and other information technology functions as a way to gain access to new technology and outside expertise. This may be of particular benefit to small businesses, which may not be able to afford to hire computer experts or develop the in-house expertise to maintain highlevel technology. When such tasks are outsourced, the small business gains access to new technology that can help it compete with larger companies. Accountability:- Outsourcing is predicated on the understandingshared by business and vendor alikethat such arrangements require quality service in exchange for payment. "Paying for a business service creates the expectation of performance," stated Grauman. "Outsourcers are well aware that this accountability is both practical and legal, with fiscal implications. The same cannot be said for internally provided functions."

DISADVANTAGES 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 can be addressed and minimized, however, by companies who go about the outsourcing 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 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.

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 important," urged the Journal of Accountancy. "If a function is not strategic to your business for instance, payroll services or health insurance needs in a recruiting agency with only ten employeesconsider outsourcing it to an expert provider." Some businesses share strategic decision-making with their 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 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 other companies and service-provider directories. You can then begin contacting potential 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. 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 contract should clearly define responsibilities and performance criteria, outline 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.

KPO,s (knowledge process outsourcing)

Introduction to KPOs
Definition:- Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves high-value work carried out by highly skilled staff. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisionstypically those that are easily undone if they conflict with higher-level business plans.

Introduction to KPO:Knowledge process outsourcing (KPO) is the term used to describe outsourced support that requires deep domain knowledge and the exercise of judgment and interpretation. It differs from traditional BPO / ITO outsourcing, which tends to focus on rules-based processing. KPO typically requires people with higher education, specific skills, and specialized business experience. As the work entails decision-making, offshore teams would need to be more closely integrated with the onshore teams that they support than would be the case in a typical outsourcing engagement. Process transparency is a major barrier to using KPO services. Many organizations do not track carefully which decisions are made by whom, and rely so much on informal social processes (and "soft skills") that it is unclear how much the use of KPO would disrupt existing operations. However, requirements like Sarbanes-Oxley and radical transparency movements like full cost

accounting, shareholder activism and eco-labels and moral purchasing require organizations to be more explicit about when and by whom decisions are made. These trends make it easier for outsourcing non-critical jobs to be considered by qualifying the impact of decisions in advance. Furthermore, it becomes easier to evaluate and compare success. A fully developed service economy enables KPO by treating all functions as services. So do more technical trends such as service oriented architecture, enterprise application integration and telework: it is easier to outsource a job if it is already being performed outside the head office. Organizations adopting ISO 9000 and ISO 19011 should also find it much easier to integrate externally provided KPO into their operations and audit them on a fair basis. As of 2007, most US organizations were hiring foreign professionals under H-1 visas to do jobs in the USA for several years, after which they would return to their home countries as managers to train and supervise others, continuing to report to their former business units.

Mark Kobayashi-Hillary and Dr Richard Sykes attempts to define KPO:


"KPO is merely a continuation of BPO, though with rather more business complexity. The defining difference is that KPO is usually focused on knowledge-intensive business processes that require significant domain expertise.The offshore team servicing a KPO contract cannot be easily hired overnight as they will be highly educated and trained, and trusted to take decisions on behalf of the client. IT outsourcing is strongly focused around technical professionalism, and the migration to business process outsourcing introduces this extra dimension of application professionalism. Ever more complex services, as implied by KPO, demonstrate this very well. The profile of people being hired to serve within KPO service companies are more diverse than just being drawn from technical IT services these are people with MBAs, and medical, engineering, design or other specialist business skills. KPO delivers higher value to organizations that offshore their domain-based processes, thereby enhancing the traditional cost quality paradigm of BPO. The central theme of KPO is to create value for the client by

providing business expertise rather than process expertise. So KPO involves a shift from standardized processes to advanced analytical thinking, technical skills and decisive judgment based on experience."

What is KPO?
It is being claimed that KPO is one step extension of Business Processing Outsourcing (BPO) because BPO Industry is shaping into Knowledge Process Outsourcing because of its favorable advantageous and future scope. But, let us not treat it only a 'B' replaced by a 'K'. In fact, Knowledge process can be defined as high added value processes chain where the achievement of objectives is highly dependent on the skills, domain knowledge and experience of the people carrying out the activity. And when this activity gets outsourced a new business activity emerges, which is generally known as Knowledge Process Outsourcing. Knowledge Processing Outsourcing (popularly known as a KPO), calls for the application of specialized domain pertinent knowledge of a high level. The KPO typically involves a component of Business Processing Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). KPO business entities provide typical domain-based processes, advanced analytical skills and business expertise, rather than just process expertise. KPO Industry is handling more amount of high skilled work other than the BPO Industry. While KPO derives its strength from the depth of knowledge, experience and judgment factor; BPO in contrast is more about size, volume and efficiency. In fact, it is the evolution and maturity of the Indian BPO sector that has given rise to yet another wave in the global outsourcing scenario: KPO or Knowledge

Process Outsourcing. The success achieved by many overseas companies in outsourcing business process operations to India has encouraged many of the said companies to start outsourcing their high-end knowledge work as well. Cost savings, operational efficiencies, availability of and access to a highly skilled and Talented workforce and improved quality are all underlying expectations in outsourcing high-end processes to India. The future of KPO has a high potential as it is not restricted to only Information Technology (IT) or Information Technology Enabled Services (ITES) sectors and includes other sectors like Legal Processes, Intellectual Property and Patent related services, Engineering Services, Web Development application, CAD/CAM Applications, Business Research and Analytics, Legal Research, Clinical Research, Publishing, Market Research (Market research KPO ) etc. In today's competitive environment, focus is to concentrate on core specialization and core-competency areas and outsource the rest of the activities. Many companies and organizations have come to realize that by outsourcing non core activities, not only cost are minimized and efficiencies improved but the total business improves because the focus shifts to the key growth areas of the business activity.

Scope and Future of KPO:According to a report of National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce that serves as an interface to the Indian Software industry, Knowledge Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion would be outsourced to India. Another report predicts that India will capture more than 70 percent of the KPO sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are also expected to join the KPO industry. According to a recent study by Evalueserve, a Gurgaon based outsourcing company having service chart for global world, the global KPO market is expected to grow at a cumulative annual growth rate (CAGR) of 46 per cent, from $1.2 billion in 2003 to $17 billion in 2010.

Compare this with the prediction for the low-end outsourcing services market. This is expected to have a CAGR of 26 per cent, from $ 7.7 billion to $39.8 billion in the same period. Evalueserve says India provided $3.5 billion of BPO and KPO (but non-IT) services in 2003 and is expected to grow at a CAGR of 36 per cent during 2004 to 2010. Hence, it is likely to earn $30 billion in 2010 by providing these services. Country general manager, Kelly Services, Achal Khanna Says India still maintains the competitive advantage for providing, and the combination of the most cost-effective and high quality manpower- this is India's strength in the offshoring business. In the future, it is envisaged that KPO has a high potential as it is not restricted only to Information Technology (IT) or Information Technology Enabled Services (ITES) sectors, and includes other sectors like Intellectual Property related services, Business Research and Analytics, Legal Research, Clinical Research, Publishing, Market Research (Market research KPO), etc. "Over the past year or two, the outsourcing industry has been throwing up jobs for Doctors, Engineers, CAs, Architects," says Jacob William of the Bangalore-based Outsource to India, which employs 500 people and offers services in the big-buzz, big-bucks area of knowledge process outsourcing. "Unlike the first wave which was more about entering data and answering phone calls, these jobs involve skill and expertise." Also, of course, the talent is much more affordable. "Law firms in the US charge an average of $400-450 per hour, and we do the same work for $75 to $100 an hour" In the Indian context, KPO salaries could be 25-50 per cent higher than those offered to the same domain experts such as Engineer, Doctor, CA, Lawyer, Architect, Biotechnologist, Economist, Statistician and MBAs, In its annual publication Strategic Review 2005, Nasscom has said the high-end activity of the BPO industrythe KPO or knowledge process outsourcing could be worth $15.5 billion by 2010. According to earlier estimates, the BPO industry itself was expected to be about $20bn by 2008; hence a very significant portion of the sectorin excess of 50% is

now projected to be knowledge based. This represents significant metamorphosis of call centre sector business to completely different model. The projections are based on a white paper released by Evalueserve. The paper cites reasons for a possible KPO boom. It says higher savings by outsourcing knowledge based activities combined with the scarcity of specialized talent in developed countries could lead to growth in the KPO sector. Billing rates for KPO are higher at $30-45 per hour compared to just $10-14 in the BPO business. However, the paper also warns of several challenges like higher quality standards, greater investments and inadequate talent. The study estimates that while the compounded growth rate of BPO till 2010 would be just 26% KPO is expected to be grow at almost 46%.

Bottlenecks in Future Growth:A study on Knowledge Process Outsourcing (KPO) sector shows a huge supply gap that threatens to cripple its growth. Research, a UK-based research services company, has gathered evidence suggesting that the KPO market may just about reach a size of $5 billion by 2010, manned by 100,000 people instead of projections of a $12 billion market supported by 250,000 employees. This accentuates Nasscom's projections of a shortfall of 500,000 workers in ITES and BPO sectors by 2010. Assuming average revenue per person of $55,000 over the next four years, 100,000 knowledge workers point to a $5 billion market. This size, though based on a CAGR of 32%, is still 60% less than the $12 billion potential projected by big KPOs, like Evalueserve, last year. Rocsearch COO, Ashish Sinha says the sector is restricted by low employability despite high graduate turnout, and competing demand from other sectors as jobs grow faster than the workforce. For example, all the 2,000-odd IIM and top 10 B-School graduates are employable, while less than half the 84,000 graduates from Tier-II B-Schools would make the grade.

The study sees only 500,000 of the over 3 million workers added to the labour pool in 2005 as employable in global firms and of these, just 2 in every 100 are likely to opt for work in knowledge space.

Why KPO?
If we look into any financial newspaper, magazine or any literature giving knowledge about the outsourcing business in India, what is found to be most referred word is KPO meaning thereby knowledge process outsourcing. Many new business concerns are coming day by day in Knowledge Processing Outsourcing Industry and KPO is emerging as a new sector that promises to provide long-term jobs for intellectual, analytical and knowledgeable people with a pay scales much higher than the BPO sector. The following are the few areas which are being associated with the KPO sector. Research & Development Financial Consultancy and Services Advanced Web Applications Business and Technical Analysis Learning Solutions Animation & Design Business & Market Research Pharmaceuticals and Biotechnology Medical Services Writing & Content Development Legal Services Intellectual Property (IP) Research

Data Analytics Network Management Training & Consultancy

Now, why should some company invest time and money in knowledge process outsourcing? The basic fundamentals of outsourcing apply equally to knowledge based services as well. A shortage of skilled professionals and availability thereof at higher costs increase the cost of maintaining such services in the host country whereas the same job can be got done with similar precision and quality and at much lesser costs abroad. The major KPO benefits which can be derived are described below.

Benefits of KPO:Standardized technical education is widely available to all in the developing countries especially in India. This skilled and trained manpower is accessible at very low cost as well. It, therefore, is always a wise decision and makes sense to utilize such services. Outsourcing of activities to KPO companies can provide the following benefits: Valuable cost savings that can be utilized elsewhere. Trained professionals at work. Standard operational efficiency. Increase in profits. Savings in time and management energy for maintaining in house services. Option to recruit a larger work force without raising costs.

What KPO can deliver to you?


Any company involved as service provider in the KPO industry works in close coordination and association with the client and provides services that are predefined in terms of quality and standard of work. While working with a KPO firm, the outsourcing company can expect to get the following: Good quality work. Lower costs. On time delivery of services. Uninterrupted services. Adaptability to changes in required quality.

Does it imply that with the rise of KPO entities, BPO (Business Process Outsourcing) become extinct. It is undoubtable that KPO is a step ahead of BPO but this does not mean the end of BPO. The BPO Industry will exist and continue to be successful in India . BPO has its own strengths and way to solve a particular problem and the BPO market is long term in nature as compared to the KPO market. With every passing day the BPO market expanding and so is the various systems and processes through it. The following are various areas in which the BPO presence shall not remain in existence but shall also keep growing. Data processing. Basic data entry. Department Outsourcing. Provides technical support. Provides email support to its customers. Even after the entry of KPO in the Indian market, the amount of total revenue earned in the outsourcing industry in BPO will be higher as compared to the KPO industry. The BPO exports will be as higher as $20 billion by the end of 2010 in comparison to KPO projections of $12 billion in the same period. As per a recent study done by experts the BPO industry is expected to grow globally at a CAGR of over 26 percent by 2010. There are a number of notable differences between KPO and BPO. The six elements that separate these two processes are: Focus Process, Specialization, Driving force, Activities, and Client contacts. BPO has a process which is much more simple than KPO. While BPO places an emphasis on low level processes, KPO places an emphasis on high level processes such as patent filing, investment research, and legal issues. When it comes to focus, KPO focuses on the application of knowledge rather than processes. The differences in specialization between are primary connected to their domains.

Most BPO workers do not need to have a large amount of knowledge in any specific areas. The primary requirements for BPO workers are a high command of the English language and simple computer skills. In contrast, KPO workers are expected to specialize in specific fields. Some examples of fields where KPO workers are expected to have specialized knowledge are financial analysis. These professionals are expected to be qualified as a CA or MBA. When it comes to driving force, again, KPO companies place an greater important on knowledge rather than business processes. This is the exact opposite of BPO companies. The activities of KPOs are different from BPOs as well. Any activity that requires specialized knowledge will be connected to KPO, while BPO will use a rigid structure for handling business procedures. KPO workers can expect to deal with international clients on a regular basis. They will be responsible for communication issues, and direct communication will be essential in situations where complicated tasks must be performed. A number of people have said that there are few differences between KPOs and BPOs. In reality, KPOs are simply one end of the spectrum. The KPO is an extension of the BPO, and allows businesses and organizations to carry out a large number of processes. There are a number of powerful advantages that can be gained from Knowledge Process Outsourcing. When work is outsourced to other countries, companies in the developed nations can save large amounts of money on the cost of manufacture. A number of studies have indicated that these savings are as much as 40% to 70%. In addition to this, the profits that are created by the use of KPOs are double the revenues that are obtained from BPOs. While BPOs have statistically brought in about $11 per hour, KPOs have been shown to bring in as much as $24 per hour.

Perhaps one of the most powerful advantages of Knowledge Process Outsourcing is the advantages it brings to developing countries. By generating revenues from this industry, a country can become more prosperous.

After Conquering the BPO Wave, India is Ready to Flourish in the KPO Sector:Outsourcing this is by large the most uttered word today, right from global corporate during their business planning to being the butt of school and household jokes. The rapid proliferation of globalization and liberalization has revolutionalized global business as it is conducted today. Regional market boundaries have been erased, compelling all closed economies to open their markets for global trade and business. This being viewed as a very healthy sign for the global economy has paved way for the conception and implementation of new business models such as outsourcing.

Dawn of BPO:The sustenance and success of any business is determined by its cost competitiveness and time-to-market window. Companies across the world are constantly striving to devise business models that will enhance the efficiency of these two critical parameters. The origin of the outsourcing business model is a culmination to this effort. Companies identified outsourcing a part of their business functions to cheaper locations overseas that have an abundance of skilled labor and necessary infrastructure, aided in significantly reducing their operational expenses and in improving their return on investments. It also resulted in a faster turnaround time as the outsourcing arrangement resulted in a round-the-clock, 24/7 business model. India, China, Malaysia, The Philippines, Russia, Eastern European countries and a few Latin American countries were identified as ideal targets for outsourcing locations by more developed economies. India with its wealth of English speaking, skilled and talented unemployed youth became the most sought after destination for business process outsourcing during the mid and late 90s when the outsourcing industry was gaining pace globally.

India Rules the BPO Roost:The late 90s witnessed a surge in the services sector of the Indian economy with numerous BPO centers for global conglomerates emerging in all the metros. From technical customer support to bill handling to medical transcription services to banking back-end operations to insurance services, BPO put India on the world

map and identified that it was a force to reckon with in the post-globalization world. BPO services in India initially started with email and voice only customer support services that later led to the mushrooming of numerous call center hubs across the length and breadth of the country. While this created employment opportunities for numerous graduates and part time job seekers, there was a progressive transition of these call centers into more professional outsource service centers offering specialized high end services to overseas clients. India was reckoned as the preferred outsourcing location by global majors that evinced the fact that India had taken a definite lead over its counterparts to make the most of this BPO boom. Though manufacturing is yet to evolve as Indias forte, the success of the services sector more or less balanced the void created in the Indian economy by the lack of adequate manufacturing activity. The dawn of the new millennium signaled the expansion of the bandwagon of BPO services that were outsourced to India by foreign companies. The Indian BPO industry saw an increased demand for services including healthcare medical billing and coding, claims processing; insurance and tax processing; data entry and management services; software and engineering services and other similar outsource-able functions. The Indian BPO industry was making waves and was amassing revenues to the tune of $4 billion by 2004-05. This constituted a major chunk of the global pie of BPO revenues.

Graduating to KPO:While the BPO industry in India was flourishing, the dusk of 2005 saw the emergence of a new spectrum of outsourcing services termed knowledge process outsourcing (KPO). Considered to be the next tsunami of outsourcing services, countries across the globe were preparing themselves to ride the KPO tide; India being no exception. Knowledge process outsourcing as the name indicates is the outsourcing of specialized services that warrant the expertise of highly skilled persons. It includes engineering, legal, medical, banking, market research and consulting services. Unlike BPOs that could employ people with a basic education base and good English speaking skills, KPO requires the services of employees with qualification and experience in that particular area.

KPO Triggering the Next Bull Ride in the Indian Economy!


Numerous studies on the global outsourcing industry indicate that while BPOs shall enjoy a cumulative annual growth rate (CAGR) of around 25 percent in the next 4-5 years, KPOs, which are currently in a nascent stage, are expected to grow

at a CAGR of over 45 percent during the same period. Research also indicates that the global KPO industry is expected to be worth over $15 billion by 2009, with India expected to account for nearly 70 percent of this revenue. This shows the enormous potential the KPO industry holds for the future of the Indian economy. The emergence of numerous R&D outsourced centers, business research and consulting firms, firms offering legal services to overseas attorneys and clients and data analytics centers all indicate the propitious growth of the KPO sector in India in the ensuing years. The immense growth estimated for the KPO industry in India indicates the large volumes of employment opportunities that the educated mass of the country could foresee. It also portends the growth in infrastructure and increase in FDI that the country will enjoy in the coming years. The continuing boom in the Indian BPO sector is a promising bellwether to what lies ahead for the KPO sector. It is not an exaggeration to believe that India will surely emerge among the global super powers through the growth of its services sector in the next five to ten years. The next few years could well be the golden period of the Indian economy, thanks to the outsourcing boost!

Accenture case study:Accenture is advancing towards high performance with a procurement BPOs outsourcing solution that has increased spend under management, reduced risk and produced performance improvements and innovationall while driving bottom-line savings. Were well on the way to achieving our aggressive target of percentage of spends under management," says Al Williams, CPO for Accenture, a goal to be delivered over a three-year period. We are confident that, with continued focus on the endto-end procurement BPOs approach from Accenture Procurement BPOs BPO Services, we will achieve that goal." Accenture's journey to achieve high performance through procurement BPOs transformation began in the late 1990s, during a period of rapid global expansion

and dramatic business change. Although company revenues were increasing, the cost base was rising at a similar pace. To maximize profitable revenue growth, Accenture's procurement BPOs organization became a primary focus of a global operational efficiency program. For the typical company, procurement BPOs costs can represent between 50 and 75 percent of annual revenues; thus, procurement BPOs is frequently among the first functions that senior management targets as they look to reduce costs. Incremental savings in procurement BPOs can add up to impressive benefits. The decision to pursue procurement BPOs outsourcing was more than just a matter of having the companyitself a pioneering global outsourcing services provider"practice what it preached" to its clients. It was also because outsourcing solutions have a unique power to meet the kinds of challenges that Accenture faceddisparate processes that were being employed across a fragmented, global operation. Accenture's initial foray into procurement BPOs outsourcing delivered significant cost savings. By 2003, however, the company was looking to take its procurement BPOs outsourcing arrangement to the next level. In the midst of the global economic downturn at that time, the company sought to achieve additional cost advantages, and to expand the percentage of spend under centralized management. At the same time, Accenture also wanted to develop the deeper synergies of an integrated procurement BPOs outsourcing solution that can drive business value even beyond cost reduction. To achieve both these goals, the company turned to Accenture Procurement BPOs BPO Services, an Accenture offering that delivers a full suite of source-to-pay outsourcing services. The decision was based on much more than just proximity. Accenture Procurement BPO Services had demonstrated that it had the resources and capabilities to generate both cost savings and business value. With an integrated service model, deep sourcing skills and an industrialized delivery capability, Accenture Procurement BPO Services could provide flexible arrangements, global reach and consistently high service. According to David Boone, Accenture Procurement BPOs Services lead executive for the Accenture account, "This deal provided Accenture with an attractive combination of capabilities. Of course, we had detailed knowledge of Accenture's business and its operational needs. At the same time, this would be an arrangement with the same rigor, and maybe more, of any outsourcing relationship. They would

view us as they would any other service provider; we would relate to them as we would with any client." One of Accenture's goals as it began this next phase of outsourcing its procurement BPOs was to advance more quickly to a holistic procurement BPO models, expanding the coverage of procurement BPOs outsourcing to more spending categories and more geography. According to Al Williams, chief procurement BPOs officer for Accenture, "Procurement BPOs is best delivered on a comprehensive basis, including demand management, sourcing, negotiations, transaction processing, compliance, help desk, reporting and analytics, and more. We believe there is tremendous upside for us in buying a large portion of our procurement BPOs capability from Accenture's own procurement BPOs services offering because of its ability to help us advance toward coverage that is truly global. That outsourcing team is serving a large number of clients, so they are able to leverage their advantages across a wide base." Historically, moving from a local to a global procurement BPOs model has been challenging for Accenture, which had been a partnership and became a public corporation in 2001. It has taken time to reinvent an organizational structure that had previously been similar to a franchise of hundreds of companies run by individual partners who oversaw procurement BPOs within their responsibilities. As David Boone says, "Success in procurement BPOs transformation comes in part from leveraging volumes across the enterprise through centralized coordination. One of the successes we have enjoyed with Accenture, and a cornerstone of our future success together, has been in our ability to work with the company's procurement BPOs team to advance the goal of buying off of centrally negotiated deals. When we are able to help executive management agree to uniform or standardized requirementsrather than each local entity deciding on its particular brand of laptop computer, office chair or cubiclewe accrue significant savings for a client." More rigors in assessment and measurement of business impact has also been a goal of Accenture met by this outsourcing relationship. "Accenture Procurement BPO Services uses validated external benchmarks of the procurement BPOs capability to assess the maturity of a procurement BPOs organization. This is a comprehensive assessment of people, processes, technology and organization structure."

One of the key reasons for pursuing procurement BPOs outsourcing is in reducing risk and generating greater predictability and speed to value. Accenture Procurement BPO Services can deliver on those goals for Accenture through a "tool box" of subject matter experience, processes and technology enablers. A global delivery network, including Centers of Excellence focused on procurement, help to enable an industrialized, high-quality, global procure-to-pay platform in a multi client environment. Advanced business analytics capabilities and tools, also available through the Centers of Excellence, help drive additional savings. These assets enable Accenture Procurement BPO Services to deliver not only efficiency and cost savings, but innovation and consulting guidance, as well. A strong, teaming relationship between Accenture Procurement BPO Services and Accenture's retained procurement BPOs team has been another hallmark of this successful outsourcing solution. Accenture maintains a purposely lean global procurement BPOs group with a sharp focus on strategy, policy, process, technology, change management and the customer experience. Williams notes that it is through this kind of close partnering with their service provider that organizations can dramatically improve the business impact of procurement BPOs outsourcing. "Accenture Procurement BPO Services can focus on the details they are good atimproving procurement BPOs operational efficiency, for example. Our retained organization can focus on identifying new directions, new areas where the outsourcing provider can then apply its skills and resources to improve its impact," Access to expertise and deep procurement BPOs knowledge is also a benefit of the outsourcing relationship with Accenture Procurement BPO Services. "With an outsourcing solution," says Williams, "we look to maximize the advantages of having access to intellectual capital, supply market information, sourcing techniques and tools. Category expertise, for example, is one important area I am looking to Accenture Procurement BPO Services to provide. Information on contingent labor is another big value point for us right now, because that is Accenture's single largest category expense. As we move forward together, these are some of the procurement BPOs areas where we are setting the bar even higher." Accenture's experience has demonstrated that procurement BPOs outsourcing provides organizations with the ability to transform and scale much faster than they can solely by building up an internal capability. The gains made by Accenture's procurement BPOs organization through a transformational outsourcing arrangement with Accenture Procurement BPO

Services have surpassed the original business case. During this outsourcing arrangement, Accenture's percentage of total spend under management has continued to increase. "We're well on the way to achieving our aggressive target of percentage of spends under management, a goal to be delivered over a three-year period. We are confident that, with continued focus on the end-to-end procurement BPOs approach from Accenture Procurement BPO Services, that we will achieve that goal. For a global professional services company, achieving our target would be quite an achievement. More important, it would advance us toward the ultimate goal of leveraging that spends under management to drive higher benefits to the bottom line and increase the quality of goods and services by our suppliers."Accenture's successful outsourcing relationship with Accenture Procurement BPO Services highlights several important themes and keys to success with procurement BPOs outsourcing: 1. Emphasize value creation and high performance. If procurement BPOs is to fulfill its potential for the business, it must transform itself from a support function to a value generating function."To maximize the impact of procurement BPOs transformation, the way an organization views procurement BPOs has to change. Senior leadership must realize that procurement BPOs can be a strategic enabler. The procurement BPOs organization has a much better chance of contributing to the competitiveness of a company if it's positioned on a par with company leadership, and not simply as a clerical and tactical function." By extension, then, a procurement BPOs outsourcing arrangement must be based on a truly strategic relationship. As Williams puts it: "Given the degree of outsourcing we're doing, we have to link up with our provider at a strategic level. We expect to be partners all along the way in that innovative process." Accenture and Accenture Procurement BPO Services intend to increase the use of external, industry-specific benchmarks as a means of measuring progress toward high performancebenchmarks such as those established by CAPS Research. Such benchmarks provide the rigor that can demonstrate the business impact of procurement BPOs transformation, thus helping to deepen the strategic role of procurement. 2. Improve relationships with suppliers. Procurement BPOs organizations can look to outsourcing to help get better performance fromand forge better relationships withtheir suppliers. According to David Boone, "We can help Accenture improve its supplier relationships because we are continuously in the market and consequently have a broader and more comparative, multi client view of how a supplier's performance stacks up in terms of pricing, technology, delivery

and reliability. This experience enables us to very quickly establish realistic expectations for both our clients and their supply base, which significantly hastens the sourcing process and increases the likelihood of long-term success. Our continuous sourcing and category management activity in the market has enabled us to develop a supplier performance management process that is more efficient and neutral, resulting in more constructive reviews and facilitated conversations about execution and value creation." 3. Leverage advanced technologies and business intelligence tools. Outsourcing can deliver several important benefits to procurement BPOs organizations from a technology point of view. First, the standardized and increasingly multi client platforms used by a service provider such as Accenture Procurement BPO Services deliver leverage on license, implementation and run costs. The service provider also has in place proven architectures for interfaces, as well as a road map for new features, tools and integration technologies. Second, from an organizational perspective, a procurement BPOs organization is likely to get higher-priority service from a third-party provider than it will from an internal IT organization. The "pleasing the customer" attitude at the heart of an effective service provider is hard for even the best internal organizations to beat. In terms of specific technologies, as Accenture moves forward, it is working to develop more advanced business intelligence capabilities available through Accenture Procurement BPO Services. According to Greg Spray, solution strategy lead of Accentures BPO Services, "We are now working to develop new, Web based desktop tools that will make information available for all procurement BPOs managers, enabling them to easily see the current status of the flow of, not just money, but 'supply chain events.' We anticipate the day when we will be living in an environment of true 'inter-company shared information.' As the supply chain/purchasing function becomes more intelligent, it also becomes more of a real-time function. That will be one of the keys to unleashing the true business value of procurement." 4. Secure procurement BPOs talent. Access to deeply knowledgeable and experienced people is a key reason many organizations such as Accenture have turned to an outsourcing model. In addition to experience and skills across the range of procurement BPOs strategy, supply management, technology and processes, Accenture Procurement BPO Services also has access to consultants experienced in related areas such as supply chain management and specialized category management. The talent management process overall can be more robust for organizations leveraging procurement BPOs outsourcing. That's because a service provider such as Accenture Procurement BPO Services is constantly hiring

experts across the range of procurement BPOs capabilities, and also incorporates leading practices in hiring, developing and managing procurement BPOs talent. At the same time, transforming the retained procurement BPOs organization is also critical, regardless of its size. In Accenture's case, having marketing capabilities on the retained team has been important to advancing the visibility of procurement BPOs within the global company. Having change management expertise on the team has also helped by enabling the organizational changes that have to occur for procurement BPOs transformation to be successful. 5. Foster an environment of continuous learning and innovation. Procurement BPOs transformation is truly a journey. For that journey to be successful, both the company and its outsourcing provider must be open to continuous learning and the possibilities of innovation. "We are in many ways creating our own trail, teaming with Accenture Procurement BPO Services. One of the hallmarks of our joint team is that, although we are developing advanced procurement BPOs solutions based on today's leading thinking and practices, we are continually learning, too. Accenture Procurement BPO Services is helping its clients learn and is continually watching the market, innovating and driving continuous improvement in itself. There is a basic humility at the heart of an effective outsourcing relationship. Where we are right now is great; but we know that it can always be greater." Piloting innovative ideas is part of this learning-based approach to procurement BPOs transformation. For example, Accenture and Accenture Procurement BPO Services are piloting a program to put centralized contracts in place in a limited geography around several strategically important spend categories. Compliance will then be monitored against these centrally sourced contracts. Companies are making the procurement BPOs transformation journey at different paces."It is interesting for Accenture Procurement BPO Services to find that customers we spoke with two years ago are now coming back to us and asking for more details about what we've learned on our own journey. 'We weren't ready for outsourcing back then,' they tell us, 'but we need to talk about it again now because we just haven't made the progress ourselves we hoped we would.' " Recent research by Accenture into the characteristics of procurement BPO masterythe strategies and tactics that separate the high performers from the alsoranshas shown that procurement BPOs outsourcing is key to achieving high performance. The high performers in the study clearly showed greater take-up of outsourcing across the six functional dimensions identified in the research: order management, accounts payable, supplier help desk, user help desk, catalog management and goods receiving.

"The choice facing executives in both the commercial and government sectors is, in one sense, fairly straightforward. When it comes to procurement BPOs transformation, you can do it yourselfif you have the time, resources, skills and ongoing leadership commitment. Or, you can turn to an organization that has already made the investment in time, effort, money and experience in developing advanced procurement BPOs capabilities. For us, this choice remains an easy one to make. Since procurement BPOs must contribute to an organization's overall goal to achieve and maintain high performance, we owe to our shareholders to construct our operations on the best thinking and experience in the marketplace."

Conclusion: The BPOs and KPOs have some benefits and some disadvantages. The companies should try their best and make such policies and strategies that even the employees remain happy and work with full satisfaction. Due to globalization India has made huge progress. Many people who were not getting a high profile job with low education due to entrance of BPOs and KPOs they got placements. Over all it gave rise to the Indian economy and even the people of India. It also changed the views and perspectives of people and made them realize the importance of standard of living.

Bibliography

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