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A STUDY OF BPO INDIA QUANDARY - A HUMAN

RESOURCE APPROACH

Prof. Saroda Chatterjee

Department of Business Administration, Scottish Church College

ABSTRACT

The IT enabled services (BPO) industry is being looked upon as the next big employment generation hub

(NASSCOM estimates that within 2020 revenues will be nearly USD 65 billion), which is a positive thing. But

for a sector, which constitutes a substantial part of employment creation, and is quite headed to form a lion’s

share according to the above forecasts, it is a perturbing fact that it is suffering from acute crisis of manpower-

both in terms of head-count and skills. A vast majority of the 310 reckless start-ups are headed for dead-end-

firms with $10 million-20 million VC funds that ran out of cash without creating anything more than white

elephants. They have driven down prices to grab business, but have failed to deliver. They were always clueless

about people-the key element of the BPO. At least 60,000 of the 1,83,000 workforce change jobs every year.

About 80% look for better leaders. Team leaders want quality professionals. As quality HR agents are becoming

hard to find, big moves to the much talked about smaller towns, sound bleak.

Keywords: BPO Industry, Start-ups, HR Approach, Employment

I. INTRODUCTION

„Outsourcing‟ can be defined as – “An organization entering into a contract with another organization to operate

and manage one or more of its business processes”. A BPO differentiates itself either by putting in new

technology or by applying existing technology in new way to improve a process.

II. OBJECTIVES

1. To understand the BPO industry scenario in India, in terms of its-

a) Current Trends

b) Strengths, Weakness, Opportunities, Threats.

c) The problem- the root, the effect, the implication.

2. To recognize the importance BPO sector to the Indian Economy

3. To develop a framework of analysis for the industry

4. To address its existing problems from a Human Resources Perspective

5. To conduct analysis on technical aspects of human resources inefficiencies with the help of a case

study

6. To recommend possible solution to the crisis

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III. METHODOLOGY

Primary and Secondary, Data Collection dealt with later in details.

Data Assimilation, Sampling – Stratified Sampling Applied to survey conducted among Wipro Employees. &

Stratified Random Sampling- Applied to survey among students.

Applicability of Recommendations – Industry and Domain Specific – BPO, Human Resource Management,

Collection of Primary Data: Survey among Wipro Spectra mind Employee & Survey among Students and

Collection of Secondary Data: For sources, see References.

Table – 1

YEAR Revenue Generated By

Indian BPO Sector

2012-2013 US $ 00.800 Billion

2013-2014 US $ 01.691 Billion

2014-2015 US $ 04.978 Billion

2015-2016 US $ 11.063 Billion

Table – 2

Year Percentage

Contribution to GDP

2013-2014 0.30%

2014-2015 1.20%

2015-2016 1.90%

Direct employment to Indian BPO exceeded 8.6 million in 2014.

To What Degree Is The Indian BPO Sector Externalized?

It is quite exiting and also a little disarming to know that this sector of the economy is profoundly exposed to the

global opportunities and global threats to a very large extent. BPO is a not only a substantially contributor to

GDP and an simplistic employment generator all over the country, but it also utilizes the prime competitive edge

of the country – i.e. educated, proficient, yet cheap labour and a large English–speaking community. In fact, the

roots of Indian ITes started with foreign intrusion, so externalization is pronounced in its case, more so in case

of BPO.

Table 3

Revenue/year 2011 2012 2013 2014 2015 2016 CAGR

(%)

Off-shore BPO REvenue 1322 1825 3017 6439 11063 14230 78.91

Indian/Domestic BPO

Revenue

912 1205 1961 3298 7412 9811 69.35

Total BPO Market 2234 3030 4978 9737 18475 24041 9.45

**Figures in US$ Million.

Which Are The Key Players?

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Table 4

Company Type Rank (2013)

Genpact Pure play 1

WNS Pure play 2

Wipro Spectramind ITes 3

HCL BPO ITes 4

ICICI OneSource Conglomerate 5

IBM Daksh ITes 6

Infosys Progeon ITes 7

TCS BPO Conglomerate 8

EXL Services Holding ITes 9

24/7 Customer Pure play 10

**Ranking based on revenue earning capacity – both domestic and foreign.

Top tier IT services vendors such as TCS, Wipro, Infosys and HCL are catching up with their

standalone counterparts or pure-play vendors such as Genpact and WNS.

SWOT Analysis of the BPO industry in India is essential to the understanding of the acute problems

that understanding of the acute problems that underlie the current situation. But even more

importantly, as my research is on the HR perspective of the situation, it would very quintessential to

focus on the problem area, i.e. the WEAKNESSES.

MATRIX 1

Strengths:

1. English-speaking population

2. Round the clock advantage for western

customers due to the huge time difference.

3. Operational Efficiency

Weaknesses:

1. High Attrition

2. Man Power shortage

3. Poor HR Practices

4. Over-reliance on foreign market

Threats:

1. Stiff competition other ITes destinations-

China, Philippines

2. Anti – outsourcing Legislation in U.S.

3. Recession- hit economies

Opportunities:

1. NASSCOM Association

2. $117.5 billion ITes market by 2018.

The primary aliment is the undernourished area of Human Resource Practices which has translated

into a danger zone, and the viscosity of the situation has become denser as these weaknesses are

making the way for various global economic and competitive threats. The analytical section shall be a

profound diagnosis of this predicament.

III. ANALYTICAL SECTION

“The outstanding industry is HEAVILY dependent on a single most important factor of production of service –

its WORKFORCE.”When the foundation on which you build the empire is shaken? It shatters in a domino-

SWOT

Analysis of

Indian BPO

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pattern. That‟s exactly the scenario like back home. Today, it is facing a stiff manpower crisis in terms of the

above, i.e.:

Quality Quantity Retention Dedication Availability

Table 5

Indicative parameters Rate in %

Industry attrition rate on a 5-year basis 45%

Projected cost of attrition as percentage of annual salary 150%

Percentage of workforce contributing to 80% of output 20%

Hire vs. Attrition Margin 0.09%

Direct annual loss to industry due to various workforce 23.43%

Besides, recession or not, attrition figures are always on the climb, as shown under:

Attrition Rate in %

60%

30%

Year

Now that we are aware of the crisis, we shall develop a framework of analysis before proceeding to

the take on practices.

Framework for Analyzing the Human Resources Perspective of the BPO Crisis

The BPO industry is large, and the type of players also varies between two dominant types- stand-

alone or pure play and IT service players. The size of the BPO industry through large, does not call

for much of variance among the players. Consider the following:

MATRIX 2

Wipro Attrition Average 48%

TCS Attrition Average 43%

Infosys Attrition Average 47%

IBM Daksh Attrition Average 35%

0^^^^02 04 06 08

Industry

Attrition

Average 45%

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Now, if we calculate the variance, it would be as follows:

(0.48-0.45)2 + (0.47-0.45)2 + (0.45-0.35)

2 + (0.45-0.43)

2 = 1.17%

Which is almost negligible? This essentially implies that with a margin of error of 1.17% any of these

companies can be successfully chosen as representative of the other three. The same universality of basic

parameters can be found in almost all companies throughout the industry.

One more justification for the generalization of the development framework is the very core HR scenario. All

companies invariably face the common set of HR problems. The echo of the same inefficient HR practices can

be seen throughout the industry, irrespective of the size, location, or profit margin of the company. Employees

share similar feelings of victimization, distrust, insecurity, and lack of job satisfaction.

The above discussion is very crucial to the understanding of the texture of the industry. It would be, for

instance, an injustice to apply the same procedure for a highly differentiation industry such as the

precision instrument industry! But for BPO, we just proved its applicability, and in doing so, we

established the framework.

Case in Point: Wipro Spectramind

Wipro (an acronym of “Western India Palm Refined Oils”) started as a vegetable oil trading company in

1947 from an old mill at Amalner, Maharashtra, India founded by Azim Premji‟s father died in 1966. In 1977

Wipro entered the information technology sector. In 1979, Wipro began developing its own computers, and in

1980 Wipro moved into software development and started developing customized software packages for their

hardware customers. This expanded their IT business and subsequently developed the first Indian 8086 chip.

Since 1992 Wipro has begun to grow its roots offshore in United States and by 2000 Wipro Ltd ADRs were

listed on the New York Stock Exchange site. The company‟s revenue grew by 450% from 2002 to 2007.

Foraying into BPO Arena: In 2002, Wipro acquired Spectramind and became one of the largest BPO service

players. Wipro provides business process outsourcing services in areas Finance & Accounting, Procurement,HR

Services, Loyalty services and knowledge services . The company had initially paid $10m for a 24% equity

stake. Recently by putting on the table a total of $93m (around rs 456 cr.) in cash for 90% stake in Spectramind,

a business process outsourcing (BPO) company, Wipro has shown its intent to become a key player in this fast

emerging sector. Spectramind's annual business was $11 million with 2500 employees. And Wipro spectramind

is increasingly becoming an important contributor to its total revenue:

TABLE 6

2010 2011 2012 2013 2014 2015 2016 2017

5.78% 6.81% 7.98% 8.69% 8.88% 9.45% 9.77% 10.08%

TABLE 6 shows year wise% contribution by Spectramind to total Revenue of Wipro.

Today Wipro Spectramind is fully owned by Wipro and is India‟s largest third party provider of BPO

services. Wipro Spectramind has offices in India and in the US. The quantum jump in the revenue

post its acquisition by Wipro is shown as under:

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Graph

REVENUE GROWTH

50 41

40

30

20 12

10 5

0

00-01 01-02 02-0

Human Resource Statistics At Wipro Spectramind

Workforce Size- 12500 Indian Employees as of 2014

Median age of employee- 28 years (5 annum average)

Male : Female ratio- 78:22 (2014-15)

Starting salary- 1 lakh INR per annum (2015)

Salary of BPO employees- 5 lakh to 25 lakh INR per annum.

The echo of this hiring trend can be found in almost every other company belonging to this industry.

BPO is virtually lame without, really, REALLY efficient people. But what are these companies, in our

case Wipro, doing to retain them, motivate them, develop them? Let‟s figure out.

Employee Benefits at Wipro Spectramind: Provident fund, Gratuity, Group medical insurance

scheme, Compensation as compared to industry average, Recreation, Cafeteria, ATM, and Concierge

Facilities and Corporate Credit Card: Provision of Cellular Phone/Laptop, Employee Stock Option

Plan, Loans

That was impressive! But how well does it translate into a sound manpower scenario? Let’s figure

out. Consolidated Evaluation Report of Employee Management at Wipro Spectra mind – The

Yardstick

Table 7

Indicators Value Remarks On Status*

Attrition Rate as of 2008-09 38%** Good

Manpower shortage faced (2008) 1500 people Good

Staff Retention Index 2.5 Average

Cost to due to 1 employee leaving 8% of salary Average

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Hire vs Attrition Margin 0.01% Very Poor

Report Employee Security Scandals 1 N/A

*Remark based on comparison with industry average.

V. INTERPRETATION & EXPLANATION

Attrition:

Despite offering better compensation package to its employees, as we have already seen .IT

bellwether Wipro faced the highest rate of attrition at 23.1 percent during the last quarter of 2014-15

and 24 per cent on an annualized basis in terms of numbers, attrition rate means: Total number of

resigns per month (whether voluntary or forced) divided by (total number of employees at the

beginning of the month plus total number of new joiners minus total number of resignations)

multiplied by 100.

VI. ASSUMPTIONS

Calculate the cost of the person(s) who fills in while the position is vacant & Calculate the cost of lost

productivity at a minimum of 50% of the person‟s compensation and benefits cost for each week the position

is vacant, even if there are people performing the work.

Calculate the lost productivity at 100% if the position is completely vacant for any period of time &

Calculate the cost of conducting an exit interview to interview to include the time of the person conducting

the interview, the time of the person leaving, the administrative costs of stopping payroll, benefit deductions,

benefit enrolments.

Calaculate the cost of the manager who has to understand what work remains, and how to cover that work

until a replacement is found & Calculate the cost of training that the company has invested in this employee

who is leaving.

Calculate the impact on departmental productivity because the person is leaving. who will pick up the work,

whose work will suffer, what departmental deadlines will not be met or delivered late & Calculate the cost of

lost knowledge, skills and contacts that the person who is leaving is taking with them out of door. Use a

formula of 50% of the person‟s annual salary for one year of service , increasing each year of service by

10%. Subtract the cost of the person who is leaving for the amount of time the position is vacant.

What the employees have to say…

Underneath, it is summarized the results obtained from an e-mail survey conducted in 6 centers of

Wipro Spectramind all over India.

Only 12% of the respondents said that their employer company, i.e. Wipro Spectramind is the best.

Only 3% of the respondents expressed clear desire of contemplating long term association of the company

in the future leagues of their career.

Only 7% of the respondents felt that Wipro Spectramind respects employee security and privacy.

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89% of the female employees felt they are victimized.

Only 1% of the respondents said that they experienced job satisfaction.

VII. FINDINGS

Part 1: The Root

THE IMPLICATION

THE EFFECT

THE PROBLEM

THE ROOT

The wave of dissatisfaction that is raging through the industry employees is a matter of deep concern.

According to experts, if there are two industries in India, where Human Resource Managers are in the

most challenging positions, one of them is BPO, (the other being Hospitality Industry).There is

something grossly uncomfortable, non- conducive, and thoroughly incompatible about BPO culture in

general, which we shall explore now as “The Root” of the problems, by talking up the situation for

old friend Wipro.

90% of the Wipro respondents to the questionnaire felt that their job wasn‟t leading them

anywhere.

IT‟s is the central knowledge- capital based sector today, and yet the BPO arm of it thoroughly

discourages higher education. Education loans benefits are applicable to unit of Wipro, but not so,

in real terms, to Wipro BPO.

76% of the respondents felt that they had been misguided about the job type, job role, and job

expectations by the company. Commitments had been made otherwise.

100% of respondents said that they had no personal life.

61% of Wipro employees feel that their relationship with peers and managers is highly strained,

not open, and lack mutual respect and coordination.

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99% of the female respondents feel that BPO job is unsafe for them, and something needs to be

done.

Compensation: From our analysis, the overall compensation structure design is not competitive when

compared to general market practices, means that BPO employees do not receive as much cash-in-

hand as their peers in other industries.

Part 2: Implications for India Why is India Worried If BPO Employees Are Unhappy?

In the Global Technology Index 2007 of the Meta Group, Philippines ranked 2nd in knowledge

information-based jobs. Also, unlike many Asian countries, Filipino population enjoys a compatibility

with Western culture, a result of being a former American colony. More and more companies are

favoring Philippines today to India as a BPO destination (despite its comparatively a little higher

cost), due to the following:

Higher quality of service due to higher dedication and higher motivation of employees.

Less switching costs due to conductive market structure.

According to experts, Philippines BPO market is aggressive, but Indian BPO market is

cannibalistic.

In short, India is on the verge of losing a fertile revenue-generating market.

Besides there are concerns about service quality and security, in the wake of several well-publicized security

breaches and saturation in the Tier I and Tier II cities such as Bangalore, Chennai, Gurgaon and Pune.

According to the NASSCOM reports- The-ITes industries are struggling with the critical issue of the most

rapidly growing sectors in the Indian industry- is grappling with the issue of skill shortages, high attrition rates,

performance management along the confidently and security concerns. All these issue are having a negative

impact on the BPO industry and the country as whole, both in terms of revenue & employment.

Graph

INDIA BPO EXPORT REVENUE AND GROWTH ESTIMATES US$ BILLIONS

5 0

11

FY2010(E) FY2013(E)

VIII. CONCLUSION

It is no easy task for an HR manager in this sector to bridge the ever increasing demand and supply

gap of professionals. Unlike his software industry counterpart, the BPO HR manager is not only

11

30 At stake is:

2.5 of India’s GDP by 2013

2 million multiplier on growth and

employment on account of secondary

effects

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required to fulfill this responsibility, but also find the right kind of people who can keep pace with the

unique work patterns in this industry. Internally most HR managers are busy putting in efforts on the

development of their employees, building innovative retation and motivational schemes and making

the environment livelier. At Wipro Spectramind, for instance, HR managers are combating the issue

with the following proposition on table:

o They are developing a scheme to offer 100% variable pay to most employees.

o Talks about extending The Education Loan benefits to the BPO arm are on.

o Employee motivation programs focusing on the non-financial incentives are being

developed.

IX. RECOMMENDATIONS

To Play the Balancing Act

To Combat the 'Low Brow' Problem

For instance, in the table below, it is summarized the results obtained from a survey conducted among

100 students belonging to different departments:

Table 8

Department Number of students

B.A Honours 50

BCom Honours 15

BSc Computer Science

Honours

15

English honours 20

The following questions were asked to these 100 students. The pie charts show the distribution of

responses.

Q 1: will you be interested in a BPO job after completing graduation?

YES NO

7.00% 93.00%

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Q 2: Do you believe in the notion that a BPO job is a „low grade‟ job?

As the above data reflect, the general notion of the people is biases heavily against the very status of a BPO job

– an issue, which needs to be collectively addressed by the BPO companies.

Employee Security: Finally, it is high time that the companies become responsible about their employees,

especially the female employees.

REFERENCE

[1] www.bpowatchindia.org

[2] www.nasscom.in

[3] www.indianbpoobserver.com

[4] www.wipro.in