The Indian enterprise market has matured enough for Indian BPO providers to start targeting the domestic market. What factors will drive this growing trend?

“Kitna deti hai?”(what’s the mileage?) the ubiquitous phrase aptly captured in a TV commercial for India’s best-selling cars was so true for Indian enterprises looking to buy IT or business process outsourcing (BPO) services. Considering recent trends, this psyche is changing, and Indian user enterprises are finally waking up to the tremendous advantages that BPO solutions bring to the strategic and operational aspects of their businesses.

Benefits like 75 percent reduction in operational costs, a 50 percent reduction in turn-around time, optimizing cash flows, accelerating revenue cycles and improving your understanding of the customers cannot stay ignored for long. In the light of these tangible and immediate benefits, BPO services and solutions are no longer an option that enterprises can leverage to stay competitive. Rather, they are strategic imperatives in the hands of the enterprise’s leadership, business groups and business support functions.

It is a sign of increasing maturity. So far, the Indian IT and BPO industry has been growing on the back of a cost advantage as compared to local resources available in developed economies. This advantage did not exist for local enterprises. A cost-conscious user community would have missed out on an opportunity to create a lean, highly profitable organization that is quick to respond to customer needs and preferences, and comply with regulations.

There has been a paradigm shift though, with the recent economic downturn acting as a catalyst. With competition from larger, cash-rich corporates increasing, Indian enterprises too have begun implementing global best practices, building highly efficient and scalable business processes, increasing customer responsiveness and hastening time-to-market for a wider range of solutions and services. Cost is no longer the only, or even the most influential factor in an Indian enterprise’s decision to purchase an IT / BPO solution.

Business process transformation and product innovation are turning out to be the topmost drivers of the local consumption of BPO services and solutions. Key drivers for growth in BPO service adoption in the coming years will be the need for greater control and real-time monitoring of enterprise assets, better analytics and intelligence for effective business decisions, customer-centricity, seamless integration of assets and systems gained through M&As, future proofing of business processes and lower operational costs.

New buyers have emerged as they finally start seeing value in enhancing business processes through technology. Sectors like manufacturing, media & publishing, education, banking, insurance, utilities, retail, telecom and government have begun to increase their spends on technology and BPO solutions, and will continue to do so in the coming years.

All indicators point to the fact that the user community is building a layer of next-generation business solutions over the initial layers made of infrastructure, automation and core business components. More than ever before, the CIO conversations are beginning to revolve around how they can help their organizations become good corporate citizens and how they can enable compliance and risk management. The focus now is on how to use technologies, processes and frameworks to enable best practices and industry leadership. With the spate of frauds, stricter regulations and closer scrutiny by a vigilant investor community, the companies’ boards are holding CIOs responsible for building investor-friendly, corporate governance-compliant processes.

India: Opportunity for Indian BPO Providers
Here lies the opportunity for the BPO sector in India, a potential $15-20 billion opportunity, according to the Nasscom-Everest India BPO Study. A recent Gartner study also picks out India (along with China and Australia) as key regional economies that will see most growth.
The Nasscom-Everest India BPO study says that reliance on a cost-savings-driven value proposition alone will not be in the best long-term interest of the Indian BPO industry. The reason being the continued appreciation of the Indian Rupee against the U.S. dollar, inflationary pressures and resource scarcity. The report further states that BPO providers need to innovate and build “new, higher-value propositions for buyers” or seek to “optimize the current environment to continue the cost-arbitrage-led proposition”. Clearly, addressing the business challenges of enterprise users in India through innovative solutions combines the two approaches.

Therefore, the future is bright for providers of technology and business solutions, with a focus on designing, developing and implementing building blocks of next-generation enterprises. The user community is bound to lap up solutions that power the enterprises’ focus on its core, while strengthening performance at the non-core edge of the ecosystem. These solutions combine the next-generation technologies and domain expertise. They would help enterprises overcome challenges that arise from changing customer mandates, new regulations, mergers & acquisitions, technology obsolescence and the emergence of new technologies like cloud computing and mobile devices.

One such solution could be the paper-to-ERP solution, which streamlines the entire lifecycle of document processing in any enterprise. This business need is driven by a suite of solutions that meets requirements of tax processing, KYC processing, invoice processing, insurance claims processing, account opening form processing for banks, application and examination sheet processing for educational institutions, etc. These are solutions that cut across the various departmental silos that exist in a user enterprise, and fuse business processes and technology.

Another solution that considers the vast and diverse Indian demography is a mobile survey solution that meets the need of research firms to conduct surveys on mobile devices. A mobile survey solution can help the researcher, and government agencies for projects like the census survey and reach out to respondents in remote locations with limited access to computers and the Internet. Such a solution provides real-time reports, survey templates, simultaneous data collection, analytics, multi-user collaboration and offline data collection on simplified user interfaces. This is a major leap ahead in survey research projects, and if they manage to meet the complex needs of survey research projects will turn into a ‘killer app’. This is an example of business process solutions that deliver business-critical information real-time in non-traditional formats for next-generation applications.

A key technology trend that will provide a major impetus for the BPO services in India is the emergence of cloud computing. This has enabled a new delivery model that helps convert CAPEX into OPEX. It is non-disruptive and offers advantages of economies of scale, which is a win-win for both, the BPO service provider as well as the enterprise user. From a CFO’s perspective, an invoice processing solution on the cloud for instance, will help reduce accounts payables, accounts receivables and Days Sales Outstanding rates, optimize cash flow and lead to more effective management of working capital, lower order-to-cash (OTC) processing time and costs, and roll capital efficiently, among other benefits.

Finally, there is one key component of a BPO solution or service that will define its success and popularity in the Indian market. It is the ability of the solution to simplify complex business processes. Indian BPO providers have a clear advantage in this regard. Apart from technology expertise, what will stand in good stead for Indian BPOs is their understanding of the local environment, their experience in integrating and customizing technology, knowledge of the complex tax and accounting practices, and the invaluable advantage of being based here. The reason Maruti continues to produce the largest-selling cars here in spite of competition and higher costs is not just because it has an answer to “kitna deti hai?” but also because of its endearing Indian-ness. The government must now pitch in and incentivize local businesses that buy and implement solutions from Indian BPO providers. That will spur the next big wave in the Indian IT and BPO industry.

The author is Vice Chairman and CEO, Datamatics Global Services