New models Vs Old realities in BPO

February 1, 2012: Whenever we think of an outsourcing service provider, the first thing that comes into our mind is the picture of a call centre executive talking to a customer abroad over the phone. But such a picture is vanishing from the leading players in the Indian outsourcing and IT sector. Top BPO vendors in India have moved away from the conventional business model of drawing success through the integration of low-cost English speaking labor force and smart technology.

But for the major players in India such as Infosys, Tata Consultancy Services and Wipro, this erroneous perception is the least important of the issues they face as they focus on maintaining the momentum of growth as the global financial crisis is taking its toll. In India, the outsourcing sector still remains a fast growing business. For instance, Tata Consultancy Service witnessed a growth in revenue of 24 per cent in 2011.

Even though the growth of revenue is similar to that of the old times, the manner in which service providers operate has changed.

Business models have changed. The service providers have moved into value added services from the traditional call centre and from the tailor made software development to research, design and consultancy services. The service providers are also keen in entering the cloud computing space. Such activities displace the traditional backend activities and business processes.

Presently the major players such as Infosys, TCS and Wipro earn a significant portion of their income from clients from the developed economies. In the case of Infosys, 64 per cent of its revenue in the recent quarter comes from United States.

Now the leading players in the outsourcing sector have started to move their operations overseas to serve the leading clients in those markets. Even though majority of their workforce is still in India, they have started to hire employees in those foreign markets. Tata Consultancy has hired 1000 employees in the United States in 2011.

However the businesses who are technologically sophisticated also encounter new pressures. This is as a result of globalization. One of the important problems they face is with the economic crisis in the Europe and the United States, which forms the major market for these service providers.  During the 2008 economic downturn, the budget cut from the part of the clients had impacted the service providers in India. The service providers now says that they have learned lessons from the previous problems and are in a better position to prevent the occurrence of the same mistakes as they make their way forward even at a period of crisis in Europe and slow growth in North America.

Infosys had moved into the European market to reduce the dependence on the US market, but this move makes it more vulnerable as Europe is in crisis. Now they move into other developing markets such as China and Mexico, but faces new challenges in management and culture.

Another important problem they face is with increasing competition from Philippines and from emerging players such as Cognizant and HCL. 

However the growth projections prove that the leading players will stay ahead in the competition leaving the traditional call centre players’ way behind.

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