Divya Prakash

159278026
Evolution of BPO Industry in Gurgaon
The term Business Process Outsourcing or BPO refers to outsourcing in all fields. A
BPO service provider usually administers and manages a particular business
process for another company. India is currently the number one destination for
business process outsourcing, as most companies in the US and UK outsource ITrelated business processes to Indian service providers.
Business process outsourcing industry in India was largely accelerated by
the liberalization of telecom sector in 1990s and is currently the fastest
growing industry in India. India has been the most preferred location for business
process outsourcing for most western organizations due to many reasons. These are
cost competitiveness, which entails cost of labor infrastructure and currency
exchange rates, Labor competitiveness, which includes a large available pool of
skilled labor, proficiency in English speaking, familiarity with western markets and
domain knowledge. The cost advantages of offshoring to India are significant. It
costs less than US$ 7,500 annually to hire a call center agent in India as compared
to US$ 19,000 in the United States and US$ 17,000 in Australia.
India is able to offer a 24x7 services and reduction in turnaround times by
leveraging time zone differences. This difference in time zone is because of India's
unique geographic location. When it is day in India, it is night in America and even
as we go to bed, they rise and go to work. This time difference has been intelligently
brought to their advantage by the call centers/BPO. Not only does the time
difference allow Indian companies/BPOs/Call centers to service American clients by
working in the nights, it also helps in better utilization of their resources. The
companies can utilize the same resources to serve other clients in India and abroad
during the day. Thus the time zone difference also helps in sharing of
resources which, in turn, saves costs and also earns call centers better revenues.
BPO operations in India started in early 1990s when several European airlines
started using Delhi for their base operations. A British airways captive later led to
the creation of a new organization WNS, World network services. A captive back
office of 30 people was formed for the data entry work.
Later American express consolidated its japan and Asia pacific back operations in
Gurgaon region and assigns Raman Roy to set up a call center in Gurgaon. Later in
1997 GE started its captive BPO operations through its subsidiary GE capital
international services (Gecis). Raman Roy then left Amex and joined as ceo for Gecis
and started overseeing the data entry work.
Other BPO operations in Gurgaon started accelerating due to internet boom and
access to financial services. Sanjeev Agrawal backed by $3 million venture funding
from CDC Capital Partners, sets up Dakshe Services in Gurgaon and begins offering

email support service. Raman Roy and some team members from GECIS quit, and
with VC funding from Chrysalis Capital started Spectra mind.
After 2002 consolidation of the BPO firms started. WNS buys UK based Town
and Country and US based Claims BPO to enter insurance segment. One Source
buys British Telecoms call centre in Ireland. WNS becomes the first Indian third
party BPO firm to hit $100 million revenues. IBM buys Daksh for $130 million. GE
sells 60 per cent in Gecis to private equity firms, General Atlantic and Oak Hill
Capital for $500 million. Gecis becomes the largest third party Indian BPO firm. In
2002 Spectramind 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
Spectramind went on to start Quatrro in 2006, a BPO specializing in high end
BPO/KPO services. By 2002 all major Indian software companies 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
In India mainly two forms of BPO existed, captive BPOs and third part
BPOs. In case of captive BPO, the parent company had set up a dedicated call
center to serve its clients and give them best quality services in time. HSBC and
Citibank prudential were some of them. While in case of third party BPOs it handled
many accounts or processes. WNS global services, Accenture, HCL were some
among third party BPOs.
Here are some of the reasons to why Gurgaon was a preferred location for
organizations to setup their BPO offices. Apart from availability of skilled and
abundant human resources, English speaking professionals, favoring government
policies such as FDI laws, passing of IT bill in 2000, setting up of national venture
capital fund and support from mascot, which led to the overall growth of BPO
industry in India, these are some of the reasons which favored Gurgaon in
particular.
1. Its proximity to the national capital, which is only 15 miles from the city
attracted many NRIs and small firms to start set up their businesses. The
proximity to Delhi gives companies access to political decision makers.
2. The availability of abundant land in the Gurgaon region at fairly low price
helped in making it a BPO hub. So, in the 1990s, when multinational
companies looked for office space to house thousands of employees in call
centres in India, Gurgaon became an obvious choice.
Indian real estate company DLF persuaded Jack Welch then the chief executive of
General Electric (GE) to set up a facility in Gurgaon, and in 1997 it became the
first US Company to outsource software work to India which prompted others to
come to Gurgaon. Genpact story best illustrates Gurgaons success. The company
began as a call centre within General Electric, but it was hived off in 2005 as a
separate entity, and began to service other clients outside of GE. Today it employs
nearly 60,000 people, and has centres across the world.

But Gurgaon has its own problems. If we look outside the world-class offices
and luxury homes, little works not the sanitation, the power supply, or even the
public transport. Every company is like a self-contained island. They have backups
for everything water, electricity and food. With no reliable public transport
available, Genpact provides cabs to take over 10,000 employees back home. Its a
fully-fledged operation, with control rooms to monitor traffic, GPS tracking and
security guards to ensure safety. The company has to take on the responsibilities of
the government, which in turn increases the cost of company from 10 to 15%.
Despite the lack of municipal facilities, companies are still pouring into Gurgaon
because we dont have too many cities in the world that offers talent in an entire
gamut of services in a single place.
Booming India 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. Tier II cities offer a cost advantage
due to the relatively lower cost of living. For instance, according to a BPO major
currently considering setting up operations in Chandigarh, for employees, it is 60%
more expensive to live in Delhi-NCR, a traditional BPO hub, as compared to
Chandigarh, a Tier II city.
For BPO industry Tier I cities have attrition rates as high as 60% over the past few
years. Service providers and clients have becoming increasingly concerned about
this trend as it translates into increased recruitment and training costs, impacts
service quality and also poses a significant data security threat. However, survey
respondents state that smaller towns have relatively lower employee attrition rates
of around 10-15 %, making them an attractive destination, especially for
transactional offshoring. In addition, location specific sops from state governments
enhance the investment attractiveness of the Tier II cities.
But moving the industry totally towards tier II cities is also not feasible
because of the increase in the training costs for tierII city employees. In tier II cities
cost of maintaining 24*7 operations is higher due to frequent power outages and
also training specifically for voice based processes is higher which is the key area of
BPO industry. TierII cities although low in infrastructure are significant contributor to
the talent pool.
Pramod Bhasin, the former head of top BPO Company Genpact, says that companies
have begun to give something back to society and that its working. The city is
unplanned, he says, but the government hasnt stood in the way either, they let us
succeed. He then says As in Silicon Valley, these things tend to work on themselves
and regenerate. Gurgaon is the future of India.

References:

http://www.bbc.com/future/story/20131001-gurgaon-indias-it-capital
https://www.pwc.in/assets/pdfs/evolution-of-bpo-in-india.pdf
http://shodhganga.inflibnet.ac.in/bitstream/10603/14282/14/14_chapter%205.pdf