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The
business-process outsourcing (BPO) sector has grown by
spectacular levels, providing employment to more than
200,000 BPO professionals. Projected to grow at an
average of 38 percent until 2010, it will contribute
more than $12 billion in revenue.
Similar
to India’s experience, growth in the Philippine BPO
sector has been driven by relatively lower labor costs.
This was the salient characteristic of the first phase
of global BPO development in the ’90s through the early
2000s, where clients and providers placed emphasis on
cost, efficiency and productivity. As customers in the
US and Europe searched for ways to bring down cost
further, they turned to low-cost providers in India, the
Philippines and others to perform customer-care, HR and
accounting BPO services.
As
established BPO providers are besieged by new entrants
from China, Latin America and other relatively
lower-cost countries, new sources of service
differentiation became crucial to getting and
maintaining more customers. This was when the second
phase of BPO development, characterized by focus on
quality, took place starting in the early 2000s.
To
survive in the long term, local BPO players have adopted
quality standards and practices like Six Sigma, Total
Quality Management, ISO 9000 and Capability Maturity
Model or a combination of these quality programs.
However,
these cost and quality advantages are fast eroding as
BPO services become commoditized and as the sector
reaches maturity. In fact, the global BPO sector is
likely to see only a modest 2-percent growth in 2007
after a hefty annual growth of 14 percent in the last
five years, per the Technology Partners International, a
sourcing advisory firm.
Consequently, it is now imperative for BPO providers to
set the stage for the third phase of BPO development,
which focuses on innovation. In a 2005 IDC survey among
BPO clients in the
US,
35 percent of the respondents indicated their need for
BPO providers to drive innovation.
A 2005
McKinsey Study makes a strong case for innovation by
suggesting that by 2010 the Indian IT-BPO sector can
generate an additional $10-billion to $15-billion
revenues over its $60-billion export target with
innovation as chief growth catalyst.
In
India, the National Association of Software and Service
Companies (Nasscom) established the Nasscom Innovation
Forum to build on innovation as the key differentiator
for the Indian IT and BPO industry. In 2004 it
instituted the Nasscom Innovation Awards to recognize
Indian IT and BPO companies who have instilled
innovation as business-platform new ideas, products,
processes or technologies.
BPO
innovation may come from three fronts: business model
innovation to change the structure and/or financial
model of the business; services/markets innovation to
create new or significantly differentiated services or
go-to markets; and operations innovation to improve the
effectiveness and efficiency of business processes.
One
Indian BPO that bagged the Innovation award for business
model innovation is Kale Consultants, which created “a
platform-based BPO business model” for the travel and
transportation industry.
Explaining the difference between a BPO and a
platform-based BPO, Mr. Vipul Jain, CEO and managing
director of Kale Consultants, said that in the former,
the customer has the infrastructure and process manual
in place where payment is settled on an hourly basis.
“In a
platform-based BPO model, we run the customer’s revenue
accounting system on our ‘platform’ in our premises with
the data shared by the customer. We actually transform
the customers’ software to run the process on our
platform,” said Mr. Jain.
Another
Innovation awardee is Evalueserve, the global research
and analytics firm recognized for its business
intelligence services, customized reports and
value-added research for clients in different industry
verticals. Evalueserve is a pioneer in services
innovation and has created the new business segment
called KPO (knowledge-process outsourcing). The company
is one of the first KPO providers of research and
analytics services from India serving the global market.
It has been successful in differentiating itself from
the traditional offshoring models.
An
Innovation award finalist in the area of operations
innovation is Genpact, an Indian global BPO player based
in India with 19,000 employees, which developed a model
to curb BPO employee attrition. This eventually helped
the company reduce its direct cost by 12 percent
amounting to about $3.3 million, thereby improving
operational efficiency.
The list
of innovative Indian BPO companies is a testament to the
focus of their BPO sector on innovation as a
differentiator. Our local BPO players can, likewise,
take the innovation route to differentiate their
services and compete against the emerging low-cost
countries.
Local
BPO players can incorporate innovation initiatives in
the strategic planning process providing focus in this
area. At the same time, government and industry bodies
can emulate the Nasscom Innovation Forum and Innovation
Awards to promote and recognize innovation in the BPO
sector to sustain future growth. A culture of innovation
promoted by management and creative and innovative ideas
should be rewarded.
****
“Mirror Image” is a rotating column featuring writers
from the DLSU Professional Schools Inc.
Reynaldo C. Lugtu Jr. teaches management and marketing
courses in the MBA Program of De La Salle Professional
Schools. He may be e-mailed at rlugtu2002@yahoo.com or
visit his blog at http://rlugtu.blogspot.com. |
