The Hindu Business Line : Three waves that can hit Indian BPOs

Chennai, March 26 We can foresee three significant changes in the BPO (business process outsourcing) space, foresees Mr Arun Subramony, Vice-President (Global Delivery), UST Global.

The ‘three waves that can hit Indian BPOs’ are in pre- and post-processing services offered in the mortgage BPO, voice-based call centre services, and engagement/pricing models, he explains, speaking to Business Line.

“There is currently a big downturn in the volume of mortgage applications for the new and existing homes, sales of which are the lowest in 13 years. And the recent cuts in interest rates by the Fed have not triggered a surge in refinancing options,” elaborates Mr Subramony. As a result, he forecasts vendor consolidation at the enterprise level, which will lead to a ramp-down in the mortgage BPO sector.

In the voice-based call centre services, Mr Subramony anticipates further consolidation. “Reasons are many. One, investments required for providing voice-based services continue to go up,” he says. “Cost of labour including attrition management, which constitutes nearly three-fourths of the total operating cost, is on a J-curve.”

The second reason, according to him, is that self-help automation packages are beginning to take away almost 30 to 40 per cent of the traditional call-centre work offered by BPO companies. “In these scenarios, the customer leverages the automation package to specify her requirements to granular levels, thereby reducing the total transaction time.”

Thirdly, Mr Subramony is of the view that the increasing adoption of the Internet as the primary channel for customer service has been diminishing the role of call-centre.

On the significant changes in BPO engagement/pricing models, he predicts the death of the ‘butts-and-seats’ pricing model, where services are billed on T&E (time and expenses) basis.

“We will see a shift towards ‘incident-based’ pricing,” expects Mr Subramony. “Here, the BPO vendor is paid a fixed fee for completing a transaction end-to-end. This trend will increase the accountability on the vendor side, as there is an incentive to complete the incident ‘faster, better, cheaper’.”

No slowdown impact

Replying to a question whether the perceived US ‘slowdown’ has impacted UST Global, Mr Subramony has an immediate ‘No’ as the answer. “We planned to achieve an organic growth of 55-60 per cent this year, and we are currently on plan.”

There are reasons for this optimism, he adds.

“One, 95 per cent of our revenues are from Fortune 500 companies. These firms are typically seasoned to weather ‘storms’ and have been baptised by fire over many cycles. Two, over 60 per cent of our revenues come from long-term contracts, where the impact from short-term fluctuations is minimal. And three, as a US-based corporation, our practice has always been to strategically hedge our risks and forex exposures,” explains Mr Subramony.

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