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Gone are the days when service functions were developed by the corporates in-house for captive use. Today, corporates benefit significantly from outsourcing of business processes almost everywhere on the planet. This article is a quest into the boom and backlash to the BPO activity in India.
Business Process Outsourcing (BPO) is a buzzword among the corporates in the world today. Gone are the days when service functions were developed by the corporate's in-house for captive use. Today, corporates benefit significantly from outsourcing of business processes almost everywhere on the planet. Looking to the growth and government's support to it, BPO is being recognized as a specialised sector in India. In this article, the outsourcing of business processes has been discussed in India from various standpoints.
BPO In India
Over the last few years, outsourcing of business processes has been gaining popularity driven by the fact that US firms have been enjoying much success from adopting this business strategy. European organizations have increasingly been focussing on what they identify as their core competencies and have been looking to reduce costs while maintaining high levels of quality for non-core activities and processes. To this end, two broad approaches had developed. One, to centralise the non-core processes into an in-house shared service functions to derive benefits of centralisation through an in-house process or through a wholly owned subsidiary. Two, to identify an acceptable third party service provider who will handle the processing work. The current economic climate has encouraged the latter trend as the organizations continue to look for more innovative ways to improve efficiency and cut costs in order to survive the turbulent marketplace. Hence, the business process outsourcing.
In India, as far outsourcing of business processes is concerned, the outsourcing of legal services (LEGAL SERVICE IS NOT A CORE COMPETENCY FOR A TYPICAL COMPANY - IN OTHER WORDS, IT IS NOT A RESOURCE WHICH WILL BE USED BY A COMPANY TO BUILD OTHER PRODUCTS)comes on the first count. In other areas also (discussed later in this article), BPO is quite in vouge in India. Nowadays, more and more companies are announcing BPO and call centre projects in India. As per estimates, India is set to become the most popular destination for BPO operations. A large number of multinational companies are outsourcing their business processes offshore to Indian BPO companies. BPO has got impetus with the technological breakthrough with Internet for communication across the globe which has been the largest advantage for the success of the BPO business.
More importantly, India has a pool of talent and has the second-largest English-speaking population with computer knowledge in the world after US. Also, costs are lower in India compared to other countries for outsourcing. The technology in India is state-of-the-art and the country is rightly located in terms of the geographical position, and the policies of Govt. of India are also favourable for software and BPO sector.
Major Areas of BPO Sector
The non-core business process areas are the core areas of BPO business. Simply speaking, outsourcing of non-core business processes is popular among the corporates today. These non-core business processes areas may inter alia include IT enabled services (ITES), e-logistics, management of facility & operations and legal services. Of these, outsourcing in ITES e.g. software & call centres is amazingly popular across the globe.
Government's Support to the BPO Sector in India
Recognizing the growing importance of the business process outsourcing, the Government of India has introduced various policy concessions and initiatives to accelerate the growth of the IT-enabled outsourcing market. Spearheaded by associations such as National Association of Software and Service Companies (NASSCOM), the Indian software and services industry has also taken various steps to ensure that India becomes the global hub for IT-enabled outsourcing in the future. Some of the steps take by the Government and industry for the ITES/BPO sectors are as follows:
# In May 2002, the Government of India has accepted the recommendations of NASSCOM and removed certain procedural bottlenecks that were hampering the growth of the Indian call center industry.
# The Government of India (Central Board of Direct Taxes - CBDT) has allowed total income tax exemption on the export of IT enabled outsourcing services under Sections 10A/10B of the Income Tax Act, 1961. These IT enabled products or services are:
i. Back-office Operations
ii. Call Centres
iii. Content Development or Animation
iv. Data Processing
v. Engineering & Design services
vi. Geographic Information System Services
vii. Human Resource Services
viii. Insurance Claim Processing
ix. Legal Database
x. Medical Transcription
xii. Remote Maintenance
xiii. Revenue Accounting
xiv. Support Centres; and
xv. Web-site services
# Foreign Direct Investment (FDI) for 100 percent of the equity has been permitted in BPO companies.
# Permission of duty-free imports of capital goods (under the Export Promotion of Capital Goods scheme) for BPO companies.
# The Government has promoted several Software Technology Parks (STPs) which provide ready-to-plug IT and telecom infrastructure. STPs also allow single-window clearance for all regulatory compliance issues. Currently, several STPs have been established across India covering most of the major towns/cities.
Contribution of BPO To The National Economy
As per the NASSCOM-McKinsey Report, 2002, the revenue from BPO will reach $24 billion by 2008 and the IT-enabled services (ITES) sector will contribute 37 per cent to the total IT software and services export market. Thus, BPO is likely to contribute up to 3 per cent to India's gross domestic product (GDP).
The BPO sector is expected to provide employment to 1.1 million people by 2008 as per a report by the NASSCOM.
Source : legalserviceindia.com