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<p>A PROJECT REPORT ON</p> <p>1</p> <p>TABLE OF CONTENT1. INTRODUCTION</p> <p>4 7 8 14 27 30 31 32 33 57</p> <p>2. INDUSRY PROFILE3. HISTORY 4. CURRENT SCENARIO 5. BPO IN INDIA 6. SWOT ANALYSIS OF BPO 7. PORTER FIVE FORCE MODEL OF BPO</p> <p>8. TOP FIVE COMPANIES9. COMPANY PROFILE</p> <p>9. WEBLIOGRAPHY</p> <p>2</p> <p>INTRODUCTIONBusiness Process Outsourcing: Companies are increasingly outsourcing key business functions and their related IT operations. The BPO industry is built around the raison d etre of efficiency and costeffectiveness. With the current focus on core business capabilities, many companies are outsourcing select business functions to expert partners. BPO takes a set of activities and takes on the responsibility of reengineering the entire way the operation is done. Outsourcing is required in different areas like Finance, Health, Accounting, Human Resources of companies, etc. Globalization, competitive markets, and mergers and acquisitions are the primary stimuli for business-process outsourcing. By outsourcing business processes, companies can get a firm assessment of the cost of running their operations. Business Process Outsourcing (BPO) Benefits BPO is important because it links to shareholder value.</p> <p>As customers have become more sophisticated, they have come to realize that the goal is to link business performance to shareholder value. Business Process Outsourcing or BPO has gained prominence because people have asked, "When do I get the business result?" BPO is about optimizing business performance to drive value creation.</p> <p>Executives want shareholder value from investments.</p> <p>3</p> <p>This is an important shift in management thinking with respect to IT and shared services. They want to know how your shared services and world-class processes are creating shareholder value for the firm. They are likely to ask, "What about partnering with a supplier to sell our capabilities to the outside?"</p> <p>BPO has emerged as a repeatable model for reducing costs while increasing service quality.</p> <p>Businesses have worked for decades to use alliances to combine and leverage their unique skills and access to markets. The building of core functions, while outsourcing non-core functions, has moved from theory to practice. This trend has become increasingly important as globalization expands the range of competitors and innovation rapidly raises the bar in many non-core areas.</p> <p>Business Process Outsourcing (BPO) is often the next step after shared services.</p> <p>Companies that have centralized services and created a shared services organization have already handled some of the change management issues that arise from Business Process Outsourcing or BPO. They also often see the next step as BPO.</p> <p>Some functions, such as procurement, are no longer buried in the back office.</p> <p>What once was considered a necessary evil - procurement - is now laden with big expectations. But CEOs do not want to know how you do it, they just want you to do it. Outsourcing procurement is particularly appealing to corporations with large</p> <p>4</p> <p>decentralized spend, where corporate controls little or nothing.</p> <p>You can now make a business case for BPO outsourcing.</p> <p>Companies generally outsource processes to shift accountability and control costs. Management can then focus on core areas, and not have its attention diverted to other areas. Outsourcing also allows companies to avoid capital expenditures, which is especially important in non-core areas that may need new systems. Generally, companies only want to spend money on core areas.</p> <p>INDUSTRY PROFILE</p> <p>5</p> <p>Potential of BPO The ITES industry, of which BPO forms a very important part, is expected to be a $17 billion industry in India and generate over 1.1 million jobs by 2008. The sector has grown by 73% during the last fiscal and recorded revenues of Rs. 7,100 crore.</p> <p>HISTORY The concept of outsourcing started with Ross Perot when he founded Electronic Data Systems in 1962. EDS would tell a prospective client, "You are familiar with designing, manufacturing and selling furniture, but we're familiar with managing</p> <p>6</p> <p>information technology. We can sell you the information technology you need, and you pay us monthly for the service with a minimum commitment of two to ten years. BPO is the act of transferring some of an organization's repeated non-core and core business processes to an outside provider to achieve cost reductions while improving service quality. Because the processes are repeated and a long-term contract is used, outsourcing goes far beyond the use of consultants. If done well, BPO results in increasing shareholder value. The main difference between BPO and more traditional IT outsourcing is that BPO offers companies a way of achieving transformational outcomes much more quickly. In a typical BPO contract, a service provider takes over a specific corporate function. Effective BPO encompasses much more than just changing who is responsible for performing the process. In BPO, the outside provider not only takes on the responsibility to manage the function or business process, but also re-engineers the way the process has been traditionally doneOutsourcing became a catchphrase in business areas in the 1990s. It was a well appreciated addition to the business lexis This market comprises 9 business functions of human resources, procurement, finance and accounting, customer care, logistics, engineering/R&amp;D, sales and marketing, facilities operations and management and training. Outsourcing is a corporate strategy that companies adopt to enhance competitiveness of the company. By outsourcing non-core part of business operation and only concentrating on the core competence, companies can increase the productivity and efficiency in management.</p> <p> Outsourcing as strategy is not new. Some examples of Outsourcing, such as GM and EDS, Xerox and EDS, Kodak and IBM, are more than a decade old. Over the years, the scale and scope of Outsourcing has evolved considerably. It has also migrated from primarily Fortune 500 companies to large and midsized companies.</p> <p>7</p> <p> Since the 1970s, many Western companies began manufacturing products in offshore locations such as Japan, Korea, Thailand, and Taiwan. Despite the relatively high cost of transporting the goods by sea and air, it was cheaper to make them in the Far East (and in Mexico after the NAFTA treaty) than to keep manufacturing in the United States or Europe. Most companies are now adjusted to manufacturing being done offshore. What took place in manufacturing is now occurring in back-room processing and services. Ten years ago, if anyone had boldly predicted that by 2003 we would begin to see backroom service centers and call centers housed in India or the Philippines, they would have been laughed at. How could high-touch customer service agents who interact directly with customers work halfway around the world? The cost would be prohibitive given that monitoring the agents would be impossible and every call would be international. Manufacturing and service outsourcing have changed over the years. It is a macroeconomic trend to which every company needs to react. If your competitor can make a product and provide associated services for less than you, then you need to follow, or risk being put of out of business. Although initially low-skilled jobs such as manufacturing, call center, and computer coding were shifted abroad, as more companies expand their offerings into outsourcing, new functions like human resources and knowledge skills like technology are being outsourced. As the worldwide migration continues and the movement overseas matures, more high-skilled jobs such as accounting and engineering will likely be sent abroad.</p> <p> As functions are outsourced, more standards in processes are created. Just like in ERP where business processes such as finance and manufacturing were standardized, a similar thing will happen in HR, logistics, and accounting processes. Also new</p> <p>8</p> <p>technologies such as Business Process Management and self service portals will help accelerate the push to outsourcing. The next generation of Business Process Outsourcing has emerged as a priority for businesses looking to better options in managing their application portfolios. The first wave offered low-cost, off-shore development labor, but today firms are demanding new, less risky options for applications that are strategic, complex, or mission-critical, while still taking cost into consideration. Outsourcing has moved from a niche technology management tool to a mainstream strategic weapon. Business Process Outsourcing leverages process driven efficiencies in terms of organizational excellence, responsiveness &amp; branding, financial efficiency and customer relationship. BPO is emerging as a powerful and flexible approach that business leaders can use to achieve a wide range of tactical and strategic aims. The most common business process that gets outsourced is call centers. Call centers and Help Desks of many multi national and fortune 500 companies are being outsourced to low waged, English speaking countries such as Philippines and India. Countries like India with vast IT human resources are also attracting outsourcing from American IT/Technology companies to outsource their IT Help Desks. Many of these help desks are state of the art with latest Help Desk software and help desk hardware with technical savvy IT graduates behind them answering your questions.</p> <p>BPO MARKET ANALYSIS: Business Process Outsourcing (BPO) Market Analysis</p> <p>9</p> <p>The Business Process Outsourcing (BPO) market is expandingSuccessful providers have best practices, methodologies, and industry standards that allow deals to get done quickly. The entire BPO field has learned from past deals, so we now see bigger deals with better foundations. As a result, BPO is continuing to be used in new functional areas, new industries, and across the world.</p> <p>BPO has come a long way in the past three years.Three years ago, BPO meant payroll processing and benefits administration - not exciting enough to talk about at a conference. Mainly the big consulting firms were talking about it, said Scholl of Gartner Dataquest. Since then the mega-deals have become very important in shaping the new form of Business Process Outsourcing or BPO. The field has become much more segmented, complicated, and sophisticated. It will fundamentally change how businesses work.</p> <p>The BPO market is growing, but not as fast as expected.Business Process Outsourcing (BPO) is still the top growth market for IT services, but several factors - the economy, the BPO adoption curve, and the technology innovation downturn - have slowed its growth. BPO is driving growth in system integration and IT services. Every single BPO engagement includes sub-components of IT consulting, application development, IT outsourcing, and process management.</p> <p>The key drivers of Business Process Outsourcing (BPO) have changed.Cost savings and variable cost structures are more important. Information security, the ability to execute, and business continuity have also become more important. But strategy and transformation are less important. As are innovative financial and tax structures. Technology management - including IT outsourcing - is moving into the hands of processbased management organizations. Of 50 CIOs surveyed, on average, they outsourced 28 percent of their IT budget, said Bobby Cameron, Principal Analyst at Forrester Research. And they are looking to outsource 34 percent. One company has out-sourced 76 percent of its IT. This is just the tip of the iceberg.</p> <p>10</p> <p>The ITO paradigm is being restructured. IT organizations used to build everything. Now an increasing amount of their work is below ground. The emerging business model is collaborative and operates at a process level. Firms specialize in their core competencies and collaborate with other specialists for the balance of the work. The technology to operate these outsourced processes - which used to be supplied by internal IT - is now provided by the process outsourcer. The market drivers are more practical than in the past. Gartner Dataquest conducts a BPO survey every fall. In fall 2001, the top two drivers of Business Process Outsourcing (BPO) were focus on core business and reduce costs, both of which are more practical than the previous year's top driver: gain competitive advantage. Companies are either doing BPO or not even planning to do it. There's not much middle ground at the moment, said Pierre Mitchell, Vice President of Research at AMR Research. A joint survey by AMR Research and CFO Magazine found that those doing BPO are aggressively doing it in non-core areas to save money or gain expertise. It's not about reducing headcount or reducing capital costs. Travel and payroll are the most outsourced functions, by far, ahead of outsourcing accounts payable, asset management, expense reporting, indirect procurement, recruitment, direct procurement, and warehousing. As big suppliers become committed to procurement BPO, it is growing. The top three criteria are vendor viability, domain expertise, and price. And while 64 percent of the respondents said BPO is growing (and only 2 percent said it was shrinking), only 55 percent justified Business Process Outsourcing (BPO) on return on investment - even though they should, to show that value is delivered. CFOs are involved in 90 percent of the decisions. The average contract life is one-year (41.4 percent) and three-year (28.8 percent), but 50 percentage. BPO staff will come from numerous sources. People from industry may have process experience on a large scale, but they often do not have multi-client skills, which they need because they must serve different clients in different ways every day. Some people come from consulting, but they often lack operating experience. And IT people lack domain (process) expertise. As a result, BPO providers must mix-and-match skills from these different sources.</p> <p>Integrators with outsourcing expertise are gaining ground on BPO specialists. 11</p> <p>The integrators are learning specialty areas more quickly than the specialists are learning to form outsourcing agreements and manage service delivery. The next generation of procurement outsourcing will be procurement utilities. These are utilities that companies "plug into" to get the procurement services they need. These utilities will have standardized processes, a common infrastructure, and a menu of procurement services. Companies will select from the menu and thereby leverage the common processes and infrastructure. Business Process Outsourcing (BPO) expansion is going to be infinite. Providers will find ways to get to this higher-margin work. In fact, the Business Process Outsourcing (BPO) marketplace is similar to the ITO marketplace in 1992-93. That's when CEOs and CFOs asked their CIO</p> <p>CURRENT SCENARIO:BPO includes:</p> <p>12</p> <p>Customer S...</p>