The Hindu Business Line : Perfect launch pad

The Indian BPO sector is moving towards the next phase of growth, with more investments in technology. And the `platform model' of business could be the take-off point. An update.

A technology platform is an underlying application on which transactions could be processed to deliver the desired benefit for the customer's clientele.

A few weeks ago, British energy firm PowerGen decided to shut down its Indian call centre operations and move back hundreds of jobs to the UK, citing customer dissatisfaction. Earlier, Apple closed its month-old customer support centre in Bangalore, citing rising costs as one of the factors.

Braving these developments, not to mention data leaks and the continuing cry against outsourcing, as blips on the path to progress, the Indian BPO sector is looking for the next phase of growth. And this growth, industry watchers and players believe, will largely be driven by more investments in technology.

John McCarthy, vice-president at analyst firm Forrester, says that as the market gets more mature, Indian vendors need to invest in technology such as Web services, service-oriented architecture and the Internet to deliver services to customers.

The recent Ninth ITES and BPO Strategy Summit of Nasscom too dwelt on the issues faced by the industry and it is evident that technology investments are set to shape the sector in the future.

`Platform BPO'

Indian vendors such as TCS, Infosys and iGate Global, among others, have already started investing in creating technology platforms of their own, says McCarthy.

Stressing the need to invest in a back-end technology platform, McCarthy says a common delivery platform makes sense for companies in handling economies of scale in the long run. A technology platform is an underlying application on which transactions such as claims and mortgage, among others, could be processed to deliver the desired benefit for the customer's clientele.

While `platform BPO', as it is coming to be called, has been around for some time, it is only in the past year that the concept has started gaining currency in India, especially after TCS acquired Pearl Group.

"Platform BPO is all about process standardisation and creating predictable delivery, which, in turn, results in better quality offering," says V.Bharatwaj, assistant vice-president, 24/7 Customer, which predominantly operates in the voice space.

All these years, clients used to have their own technology platforms through which the vendors used to deliver the services.

As the clients get caught with legacy issues relating to antiquated platforms, a section of them have started insisting that vendors should invest and own the platform and deliver services through them.

Benefits for both

A vendor investing in and creating the platform would mean that the capital expenditure of the client stands reduced to that extent, says Harsh Vinayak, managing director of Keane's Business Transformation Services in India.

Stating that platform is the way to go forward, Vinayak says his company is leading a consortium of about 100 companies in the US to develop a common platform.

Using a platform for delivering the required processes not only improves efficiency, but also raises the quality of the offerings.

"It also helps reduce the cost for the vendor as the same platform could be used for servicing other customers," says Pankaj Vaish, head of Accenture's BPO operations in India.

Bharatwaj says his company is yet to invest in creating and owning one. "We normally use the platforms of our clients to deliver the services," he adds.

Platform BPO is part of the second generation of the BPO industry, where the focus is on the productivity improvements. The first generation focussed on costs and quality. Further as part of the third generation, clients are looking at vendors to help them extract value from the underlying data that is generated while servicing them using analytics, says Bharatwaj.

"From the data that is generated while handling millions of transaction, we expect to derive value by providing meaningful insights to customers such as predicting trends, including customer behaviour, spending pattern, etc, using analytics," says Bharatwaj.

The latent value has always been there in the processes, but has not been extracted by the vendor proactively to make business processes more efficient and meaningful, he says.

Some reservations

While it looks like `platform BPO' is set to gain momentum, a section of the industry believes that it is still early days for the `transformational BPO'. Several large clients are still hesitant about transforming to a new platform, says Harsh Vinayak, adding vendors need to depict the platform as a unique selling proposition, as in the case of payroll processing firm ADP.

Further, as the industry adapts to platforms and automated processes, there is the fear of job redundancy.

Dismissing these fears, however, Pankaj Vaish says as technology gets deployed, there will be a shift in the nature of work. Employees will be redeployed to do more of high-value work such as analytics, as the industry evolves, he says.

Repositioning by vendors

As a global delivery model becomes the de-facto standard for the industry, companies are looking at various locations for seamless delivery and also to leverage efficiencies of various regions. McCarthy suggests that Indian firms put forth a strategy to enhance their multi-cultural and multi-geographic presence as their current exposure in various geographies in terms of capabilities is not adequate.

The Accentures and IBMs have a much bigger scale in North America and Eastern Europe, among others, which are the biggest areas.

Meanwhile,adopting an aggressive stance, global vendors such as IBM, Accenture and even EDS for that matter have beefed up their Indian presence considerably in the past few quarters.

The recent acquisition of majority stake by EDS in Mphasis will not only enhance the second largest company's presence in India in the IT services space, but also give a strong foothold in the BPO space.

Indian vendors, especially the IT services firms, have followed the integrated approach by merging their BPO operations.

Indian firms Wipro and Infosys have merged their BPO subsidiaries and have started offering integrated services.

McCarthy says this re-positioning by vendors is driven by market requirements. "There are synergies in having an integrated IT & BPO. The clients are looking at doing more work with different pieces. They want you to take over the infrastructure, application and BPO and a whole host of things. Indian vendors have built out their infrastructure capabilities in the last two years."

Another round of consolidation

Industry observers predict that another round of consolidation is imminent as vendors look for scale.

"I think it's a much tougher future for the stand-alone third-party BPOs unless they build scale," McCarthy says.

But third party vendors are seen building up scale. Transworks, part of the AV Birla Group, has agreed to buy Canadian firm Minacs Worldwide in a deal exceeding $125 million. The TransWorks deal is part of a wider move by Indian firms to inch closer to their clients.

Changing dealscape

Even as the BPO sector evolves, the deal structures are witnessing changes.

"Multi-tower" deals are gaining significance and may become the norm of the industry soon, says Vaish.

Compared to the earlier `single tower' deals, wherein a single process or function would get outsourced, clients are now insisting that the vendor take over multiple processes and range of functions, says Vaish, citing the recent example of Accenture's Unilever deal.

Benefits for client

1. Reduces capex

2. Raises the quality of offering he gets and the efficiency

3. He can apply the analytics angle to tap more value from data generated by such transactions

Benefit for vendor

1. He has economies of scale, platform cuts his costs as he can apply the framework for many clients at one go.

vishwa@thehindu.co.in