Part - I

Introduction to Business Process Outsourcing (BPO)

Business process outsourcing (BPO) is the delegation of an intensive business process to an outside service provider who owns administers and manages it according to a defined set of metrics. Business process outsourcing is generally for back-end administrative functions that are necessary to run a business but are not a part of the core business.

The terms IT enabled services (ITES) and business process outsourcing (BPO) are used interchangeably now days. ITES is basically a subset of BPO. If process that is outsourced involves use of Information Technology it is called ITES else it is just business process outsourcing. In India, at current growth rates, the $2.3-billion BPO industry is fast catching up with the much-acclaimed IT industry ($7.2 billion in 2002-03).

In the 1st phase, BPO industry has grown mainly due to the business of catering towards services to foreign clients mainly based in USA & Europe. Six types of players occupy the current Indian BPO space:

Captive BPO: The BPO industry in India started off with a few large global corporate setting up their facilities in India, primarily for their global back office-processing requirements. Some of the major players who set up these center included General Electric, American Express, British Airways and the Citigroup. The primary reason was the significant cost savings achieved through the relocation of processes to India.

Indian start-ups: Given the high growth potential of the BPO industry, a number of Indian entrepreneurs have set up BPO operations in the last 3 - 4 years. These start-ups commenced operations with a few niche players like Talisma Corporation that provided CRM solutions. Since then, a number of broad based players such as EXL, Daksh and Spectramind have entered the market and are growing fast.

Indian IT service companies: Over the last 2-3 years, a number of Indian IT service companies have entered the BPO space. Most of them have entered the industry by setting up joint ventures, in-house divisions and/or subsidiaries. Examples of these include Infosys that set up a wholly owned subsidiary, Progeon; TCS, that formed a joint venture, Intelenet, with HDFC Bank; MphasisBFL, that set up a wholly owned subsidiary, MSource.

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*Contributed by -
Pankhuri Jain,
PGP I,
IIM Kozhikode.