BPO Next Decade Will India BPO Inc make a difference?

Date:   Saturday , June 28, 2008

It has been less than a decade since the “offshore” revolution shook India and the world. India rode the wave of Y2K, created an industry, put Bangalore on the world map, generated a robust middle class, and made a fistful of millionaires. Recently, India IT Inc has been the catalyst for creating the BPO industry with the same lofty goals as once dreamed about in IT. So, will India BPO Inc be the same type of dominant player in the world? Where is world BPO going in the next decade and what role will India BPO Inc play in it?

BPO in next decade will have at least two distinct characteristics:
* Business transformation to a “boundary free” corporation will be the cornerstone for BPO
*. BPO will broadly span the process chain and not just be transaction driven

BPO and “boundary free” corporations
In 1995, I published a monograph (Price Waterhouse Review Research Report titled: “Business Process Outsourcing: Shattering boundaries, maximizing shareholder value”) identifying that in the future, companies will create an atomic structure where expert BPO providers will offer services to support the companies’ business. BPO will be the basis for creating this new model of business. We have seen some examples of this already: Dell and Cisco with their manufacturing, Amazon with its distribution. For established companies, this is achievable but it will require them to create strategy and manage change successfully in order to transform themselves. For many corporations, this transformation may mean the difference between surviving and succeeding. Their approach to BPO will be completely driven by long term change agenda, dependence on the service provider to provide flawless execution, and their joint ability to implement the change seamlessly. Their selection of the BPO provider will be driven not by just the cost advantage but by their ability to “partner” with them in creating and managing this change.

What does this mean for India based BPO providers? First of all, a strategic change in business is driven by the senior most management. Therefore, an external provider has to be a trusted advisor to them. This requires access to the Board and “C” level executives and an established reputation for being an expert in advising customers on not just the subject matter but also in managing change. A business transformation decision is driven by a longer strategic view and not just a tactical cost saving incentive. Businesses will expect their providers to be experts in their process domain, experienced in creating and managing the change, and be a long-term strategic player in process delivery. Given this future playground for BPO providers, India based BPO providers need to begin investing in this capability now and gain credibility over the next decade. Subject matter expertise, depth of industry knowledge, and robust technology platform will be the basis for competing for business; and a sound plan for gaining access to the senior executive’s offices will be the rule in their new environment. Today’s providers, who are competing on cost advantage and transaction process capabilities, will have to refocus their business plans and approach to gaining business.

Managing BPO through the entire process chain
Most of today’s BPO work, especially the offshore processing, is based on transactions that do not have the breadth of the entire process chain – it is customer relationship management not “Market to Collection”, it is accounts payable not “Procure to Pay”, it is component manufacturing and not “Design to Maintenance”.

When a service is based on the entire process chain, the provider is expected to bring the expertise in process, technology platform, and applications supporting the process as well as managing the change in the business model. A BPO provider will no longer depend on the customer providing business/process definition or the technology solution. The provider will be expected to have an efficient process – based on best in class performance metrics – information technology built around the process chain, and consulting for integrating the process with other business processes. Businesses will measure the success of outsourcing not just on the cost savings but also on the overall effectiveness and efficiency of the process and the end business results achieved. Two of the key measures of success will be the provider’s ability to affect change in the customer’s business model and responsiveness of the process management to keep up with the changing business requirements. A total process management by the provider thus will help create the “boundary free” corporation as discussed above.

How will this affect Indian BPO providers? All of the impact described above will be applicable to the provider – be an expert in the process, become a strategic advisor, and provide change management. Additionally, providers will have to establish and operate their own technology platform rather than depending on the client. This means that the current emphasis for technology outsourcing will diminish since the BPO providers will be in control of the technology solutions and platform. This is a major change in direction for most of the India based providers who depend on the client’s technology solution for the BPO service. It will also alter the business model for IT application service providers since BPO providers will be managing the application platforms and not their customers.
Creating process expertise will also require a different type of investment for service providers. BPO providers today can depend on their expertise in process improvement – utilizing quality tools – since they are managing only a portion of the process. They will have to become experts in their process domain, create consulting and process management expertise and then, most importantly, establish operational management capabilities. This multi-dimensional expertise is shown in the figure.

In summary, India BPO Inc has a tremendous future ahead of her; especially, given the fact that it can learn from India IT Inc on how to establish a “beachhead” and make inroads into client’s business environment. However, it will require investment and a strategic directional shift to achieve success. India BPO Inc’s success will have to be built on her ability to demonstrate expertise and not be driven by an external event such as Y2K. The competition will be tough – other countries will want their share of the BPO pie and the entrenched American BPO providers already have some experience in managing the entire process chain and have access to the “C” suite. This competition should excite India BPO Inc and not deter it from playing on the global field.