Monday, December 15

The transition from BPO1.0 to BPO 2.0

AQUICK glance at the performance of the BPO/ITeS industry shows that India is now an established destination of choice. Despite the recession and the recent weakening of the dollar, this sector has done extremely well with export revenue of $11 billion, compounded annual growth rate of 35% and employing 900,000 directly. Even the domestic market has started picking up with revenue of $1.6 billion. While growth rates are rising, there is a discernible shift from the cost arbitrage based value proposition to optimisation and business transformation; from operations in the metros to tier-I and tier-III cities with the domestic market growing stronger; from BPO 1.0 to BPO 2.0. The Opportunity: The addressable market — locally and globally — is huge and growing. There is an opportunity to earn export revenue of over $50 billion by 2012 at a stretch-growth target of 45%-50% every year for the next five years. This opportunity implies 2.5% of GDP from exports; two million direct employment; expansion and growth in tier I/III cities. There will be strong secondary impact on employment in related service industries. However, if the industry has to achieve export revenue of $35-$50 billion and the headcount has to grow by 15% a year, there will be a shortage of 0.8 to 1.2 million entrylevel graduates by 2012. There will be an increased demand for talent from other services like retail, insurance, banking, telecom and the domestic BPO sector. Moreover, a number of offshore/nearshore BPO destinations like Philippines, Eastern Europe, Latin America and China are emerging as viable options. Cost arbitrage continues to be a driver of global sourcing for most buyers. However, the benefits of cost arbitrage may diminish over time due to the business model itself changing. Therefore, we cannot just rely on a costsavings-driven value proposition. It has to be more constructive, solid and differentiating value proposition The Solution: Given these challenges, the BPO/ITeS industry must optimise between continuing the cost arbitrage-driven value proposition and innovating to a higher value proposition for buyers. The buyers too are changing their expectations. More than 70% of the parent companies expect their captive operations to deliver value beyond cost savings. So, the BPO firms also need to focus on moving from rulebased work to complex judgment-based work. But how can this be done? First, the BPO industry needs to work with the government and academia to create a greater link between the current education system and the industry requirements. Other initiatives should include introduction of BPO-specific curriculum and training teachers in sync with the future requirements of the BPO industry. Secondly, they need to invest in employees to develop domain knowledge and process expertise. Other steps could be to encourage job rotation. Also, BPO jobs should become a career of choice. Firms should work to make the environment safe and secure and implement outreach programmes to influence all stakeholders. They should also highlight the learning and growth opportunities in the BPO industry through success stories and case studies. And third, providers should also work to become business transformation partners (BTP) — from cost advantage to optimisation and transformation of business. GUIDELINES • The BPO industry needs to work with the govt & academia to create a link between the education system and industry requirements. • They need to invest in employees to develop domain knowledge & process expertise

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Internal Opportunities @ IKYA

Internal Opportunities @ IKYA
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