India Diary: A CIO recounts his visit to BPO vendors Date:   Monday , May 31, 2004 Shiva, the Hindu God embodies a central paradox in life, writes Chris Satulla in the Philadelphia Inquirer. The ascetic lord of Hindu mythology is considered the creator and the destroyer. To create something new, you must destroy the old. For the automobile to prevail the blacksmiths had to suffer; knowingly or otherwise, Bill Gates replaced the typists and clerical staff world over with his ubiquitous Windows. We too wanted to change. For us to grow from a billion dollar market cap company to 10 billion dollar company some things have to change. With this broad mind-set and a strategic view to address some of the issues that we will face in our corporate ventures, we packed our bags wanting to see how global sourcing could assist us in this journey. We went looking to educate ourselves, explore and evaluate the possibilities of the growing phenomenon of offshore Business Process Outsourcing. We were amazed by what we saw. While we are all used to on-shore outsourcing, a fact in every company’s operations, we strongly believe that the opportunity for offshore is tremendous and definitely worth pursuing from a long-term standpoint. To start with, we avoided the death-by-Powerpoint syndrome. We carefully planned the agenda so that we were not listening to hours of marketing monologues. We allowed each company a 15-minutes slot to talk about itself. Details of infrastructure architecture, voice-training programs, and candidate selection are all hygiene factors—everyone had to have them to exist. We spent most of our time listening about the companies’ actual work for clients (the fact that no one allowed us access to client detail and data was reassuring from an IP protection standpoint); learning how the vendors actually address the logistics of the work effort; and saw how it actually took place by walking the floors at night when the majority of the work is done (to synchronize with U.S. time zones). We sat in classes for voice neutralization training, talked to actual worker bees about their backgrounds, work effort, motivations and long-term aspirations, and rounded off with talking to the cab drivers on what this industry has done to the local community. Broadly, the industry is divided into three segments: pure-play BPO’s, IT industry BPO outfits and captives. Two of the largest pure-play BPO organizations have been gobbled up by IT organizations in the last couple of years – Spectramind was acquired by WIPRO and IBM acquired Daksh during our trip. While the IT companies were late to the table they have capitalized on the opportunity. Given their contacts, customer base, proven track record of offshore work and existing infrastructure they are expanding very fast. In some cases, the larger companies of the world have set up their own captive BPO—case in point are GE and American Express. One metric that was very difficult for us to fathom was the rate of growth in the number of employees. WIPRO’s Spectramind—a gorilla in the industry—was established in March of 2000 and had 8,500 employees when we met them (and has probably crossed 10,000 by the time we flew back!). As some industry veterans admit, no company hires pro-actively. The nature of the work and cost structures encourages any hiring for a new contract only after the ink has dried on the paper, the only pro-active effort is construction of facilities for business growth. However, most vendors almost guarantee a 2-3 month turnaround in making trained staff available—no matter what the scale of operations; 5 or 500. Where do all these people come from? With the economic liberalization the number of educations institutions multiplied to capitalize on the business opportunity. Yes, education has become a big business—3 million graduates are produced every year and as a result the resource pool is tremendous. The industry’s high-octane growth is propelling consumerism faster down the middle-class in India. While the state’s role is being destroyed private sector entrepreneurship is being created and rewarded. The staff we spoke to was a mixed group—some were genuinely thrilled to have a job and the prospects it offered, while to others it offered a good starting job. A common element across the board was that they all seemed at ease with a metric-based work organization, especially as companies went out of their way to provide all kinds of concierge services to keep the employees happy and motivated—we even met a “Chief Fun Officer.” When it comes to actual work what is apparent is their biggest selling proposition—doing any work as a process. While the typical “customer phonecall support” is easier to transition, what was interesting to observe was complex back-office processes. It seems that every company has a group of people called “transition leaders” who possess an innate ability and expertise in working on the typical service industry’s ad-hoc, people specific, non-measured work efforts. They then work with you and through a structured methodology come up with a clearly defined, rule based, and fully measurable “process”. The value of metric driven business processes is a big win for service organizations that have gone through the evolution of all kinds of organizational improvement initiatives—all the way from Hammer’s re-engineering to Motorola’s Six Sigma. Having metric driven processes ensures that processes are viewed the same way as production environments—outputs are measurable and managers “earn” more people when metrics say so. The industry measures itself on two main metrics—the number of seats and number of processes. The fact that they offer organizations cost arbitrage, variable costing, measurable process output, guaranteed annual productivity improvements of 10-15% for the first 3 years and a level of scalability (both up and down) adds on to make it almost a no-brainer for the back-office centric organizations. Not having delved deeper into the actual work being done as yet, I would suggest using the following criteria to decide as to how to go through the evaluation process: • Definitely visit the companies, there is nothing like actually seeing the facility. • Prior to the visit : a. Match corporate size and your set-up (will you be a valued customer based on your size of effort projections or a small fry?) b. Agree on some base hygiene factors that you expect to have (infrastructure, training etc.) and do not want to be bored with at every place. c. Demonstrable process and domain expertise relevant to your segment of the industry. d. Demonstrable expertise in areas of operations in other industries. e. Talk to other companies in your industry doing off-shore BPO. • While on-site: a. Focus on corporate positioning b. Focus on client history and metrics over time period c. Discuss and evaluate possibilities of other processes/possibilities based upon your nature of business versus “lift and drop” of existing processes. (think strategic) d. Observe simulated work processes being handled by the company that has relevance to your industry segment. One important lesson is to prepare your comments for the vendors after the visit has taken place and you are back in your offices—you will be hounded by calls from all the vendors that you visited and others who hear about your ventures. From our perspective the BPO market will evolve into domain expertise or domain practices within large organizations. Also as the industry matures the pool of “worker bee” people will change over time as the continued economic boom will result in graduates seeking more creative work and shying from repetitive/monotonous work. The big question is whether it will result in students working full-time after Grade 12 or people working part-time to provide an income stream during college years? The BPO industry in India is entering its formal schooling years as it approaches its 5th anniversary. Its diverse support of industries provides it a unique platform to offer services to companies that they have never thought of—after all to innovate and change the marketplace most of the ideas people get are from other industries. The industry definitely needs strong and innovative business leaders who have domain expertise to build credibility and can provide strong partnerships and support groups. It is also evolving from a pure customer call industry to doing more of the back office processing and is planning to grow into an intellectual capital pool. The offshore BPO industry is going to continue its stellar growth – the question that you have to answer is “Are you ready for global sourcing at your workplace?” The CIO who visited India and has written this article has chosen to withold his name for privacy reasons.