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Past five years have seen a big bang in the Indian Business process outsourcing (BPO) industry as almost every American Company has its BPO set in India. Large companies of US are having savings by being a part of the industry. BPO as we know are the Business Process Outsourcing units which function by collecting the data provided by the company's US headquarters, analysing them and sending out the processed output back to the headquarters or to the desired venue as directed by the company. BPO industry is often indicated as a socio-technical industry because it clubs the technology with the social beings or human resources at a vast scale in order to reach millions of clients all over the world. Now, BPO industry tops the list of the profitable sectors in Indian economy.
According to India Business directory(2009) the BPO sectors demands are increasing from western countries increasing multiple reasons like due to the availability of cost-effective labour in India, which is highly skilled and also they are good in English speaking. There was 14% registered growth rate of BPO sector in India during the first 6 months of 2007. During last five years the growth rate of BPO industry of India was low because of less investment from outside countries, whereas now BPO industry is viewing some optimistic signs with investments from western countries. Mr. Som Mittal, President, NASSCOM (2011)Â said that Indian IT-BPO industry grew by 19% to reach USD 76 billion in 2011. A strong grow is seen in domestic market of 16 percent having Rs.789 billion revenues. Direct employment graph is also high and satisfactory which is expected to reach nearly 2.54 million, along with addition of 240,000 employees.
Questions may raise that why India has been chosen by so many companies to open their outsourcing units. There are many reasons for choose India. Some of significant factors are tech savvy professionals, cost effectiveness, better competencies; improve business risk management, 24 hours customer support and economies of scale.
FE bureaus (2009) explains in his article that the BPO sector in India has been the fastest growing sector, having growth rate at a compounded annual for over 37% to aggregate revenues of $14.8 billion in financial year 2009 from $1.6 billion in financial year 2002. There is huge increment in direct employment for this period from 155,000 to almost 1 million people. It shows India as fastest growing sector.
Aims and Objectives of Research:
The main objective of this research is to introduce the business processing units. Why they need to came into existence and how they are beneficial for India's economy. Since five years every American company has its business processing units in India and they are earning huge amount. Then the researcher finds out the various drivers and challenges of Indian BPO Industry. International Business Machines (IBM) is a large company of USA. This research is to explore the reasons that why IBM has chosen India for their business process unit. The factors which are supporting for India to maintaining its top position in this sector will be discussed as well. Overall objective of this dissertation is to explore the IBM Daksh which was started in 2004, its top ten BPO's of India. What are the Impacts of BPO in India in terms of economy? Because of new IBM Daksh more job opportunities are bringing for new generation as already this BPO is serving 25,000 employees in India. How BPO's are affecting culture and life styles, educational system and Development of rural areas as new projects are going to provide job opportunities for rural area people. To achieve the aims and objectives of the study, some of the questions are below which must be met, are as follows:
To explain the Business Process Outsourcing (BPO)
To discuss the various drivers and challenges of Indian Business Process Outsourcing (BPO) Industry
To analyze the competition of India with other countries regarding Business Process Outsourcing (BPO) industry
To understand the drive of Business Process Outsourcing (BPO) in India
To discuss briefly about International Business Machines (IBM)
To investigate why International Business Machines (IBM) has chosen India for IBM Daksh
Discuss the rapid growth of IBM Daksh in India
To analyze the impacts of BPO industry on India
Statement of Problems:
The literature shows that Business Process Outsourcing (BPO) industry has rapidly increased in India. The study will investigate the obstacles and challenges of Indian BPO Industry. This will also highlight the demanding drivers for Indian BPO industry. Researcher will engage looking at how the IBM has introduced their BPO in India and how these steps of organization are aligned to its strategic planning process. Moreover the impact of BPO industry over India's economy will also be discussed. Case study discussion will explore the BPO industry in India and how India is leading in this industry. The remarkable growth of IBM Daksh will also be discussed.
According to Thomas. N (2005) Business process outsourcing (BPO) can be explain as some of business processes goes to an external vendor within the organization. Because of fast technology, telecommunication infrastructures are ruling over old methods of communications so Business process outsourcing (BPO) initiatives often contain the transfer the work to international vendors.
India's BPO industry is spread over engineering and technical fields. Whereas the China is dealing in manufacturing and technical industry .Whereas Mexico has expertise in manufacturing.
Indian BPO Industry:
During the last few years, India has gone through changes in political, social, economic infrastructure and Information Technology. Business Process Outsourcing introduced in only in the early and mid 1990's, but now the entire country seems to be vibrating with the 'BPO fever'.Â BPO's are dealing in different fields; Technical support, Customer support, Insurance processing, web search etc. There are many supporting reasons for Indian BPO industry's flourishing but cheap labour costs as compared to western countries and the bunch of skilled, English language known employees have always been the two leading factors.
According to a NASSCOM study, 54% growth rate of Indian ITES-BPO recorded during 2003-2006. During the same time period Indian BPO sector created job opportunities for around 74,450 additional personnel. By the year 2009, the ITES- BPO of Indian sector employed around 1.15 million people, along with expected sale of 21$ to 24 $ dollars.
IBM also known as the International Business Machines headquartered in Armouk, USA was found in the 1880s. IBM had a very sharp increase in its infrastructure in the early years, from 1925 to 1950 the gross income of the company made a huge leap from $13 million to $266 memillion. This is drastic increment. It employs scientists, engineers, consultants and sales professionals from around the world and is stationed in over 170 countries across the globe employing more than 450,000 employees. The company mainly deals in manufacturing and sales of hardware and software but also provides a range of services for Aerospace, Automotive, Banking, Chemicals and Petroleum, Retail and Telecommunications and many more.
According to the article India industry:Â IBM acquires DakshÂ eServices (2004) that IBM has acquired DakshÂ eServices that is India's third largest BPO Company. The IBM Daksh is providing call centre services to more than 15 clients including Amazon, Citimortgage and Sprint. IBM Daksh was started in 2004 with a total strength of 6000 employees which now has strength of more than 25,000 employees all over India. The offices of this BPO are stationed in all the major cities now namely Chennai, Bangalore, Hyderabad, Kolkata and Delhi. The BPO has been opened in India keeping the following in mind:
Innovative business process services to valuable clients.
Improve operational efficiency.
Take advantage of global economy.
Less work load on the US offices.
Why IBM has chosen India for its BPO- The Global Process Services?
M. Purwar (2010, pp.6) explained that BPO provides efficient services at reasonable costs. They majorly focus on timely operations, less cost of infrastructure and end to end management. Another powerful benefit of BPO is that they spread organization's network outside the country effectively. In same perspective India has many attractive aspects for US companies so they open their offices and even start new business ventures. Low tariff rules are another big reason for choosing India as BPO by IBM.
Mascarenhas (2010) said that IBM is quite confident regarding the growth prospect of the services sector in the domestic economy. They offer wide range of services from software- related services to cover HR aspects of companies, so they plan to hire 5,000 employees in IBM Daksh.
There are several reasons to chose India but some of core reasons are discussed below:
One of major reason is cost effectiveness is big reason to choose India BPO industry for IBM Daksh. In India, people are willing to work at very low wages whereas wages are four times higher in USA as compared to India. If the wages of manpower would be much less for company, they hire more manpower in same resources that enhances the capability of organization. In IT sector of India, employees offer tech support, troubleshooting at very low prices. As well the Indian work environment is very flexible and adapts easily to any change implemented. It is also very welcoming to the western work culture and has shown more work efficiency by adapting it and thus providing a comfortable platform for the US Company to launch its numerous projects and has made a healthy growth rate of 8% of its revenue.
India produces the largest number of graduates every year and they must know how to understand and speak English language. Also, nearly 85% of Indian education system considers English as the first language and higher education is given mostly in English making nearly 90% of Indian fluent and well versed in English and thus adding one more advantage to the outsourcing sector. Other countries like China have more skilled employees but they do not have knowledge of English. IBM took interviews with many BPO employees and wanted to hire more than 80% of computer literates whistle remaining are undergoing training. Every BPO after recruiting, trains it employees with the process which they are into. IBM is USA based Company so they in truth were need of manpower who knows English language. India's BPO industry fulfils this requirement in sufficient way. Manpower of India is also being informed about the culture of western society and manners. Mike (2009) explained that the India is in the process of making huge commitments in providing its people, to their basic right of full education including females.
It would be interesting to know that India has the world's second largest population of engineers and third largest population of scientists and researchers and unfortunately India's job market is very small compared to its giant manpower. It has lead to growth to the main developments in IT, business processes outsourcing. So, skilled labour is readily available to the MNCs at a very cheap rate and due to the unavailability of desired employment, candidates tend to put forth less salary expectations themselves. This definitely offers a good nest for IBM which has already spread its wings all over the planet.
Indian Government is well aware with their technical potential. M. Purwar (2010, pp21-22) explains that IT is top priority of government and maximum relax policies have announced for betterment of BPO industry in India. Some of favourable government policies are described below:
Nasscom is most prominent advocator of the IT/BPO industry in India. It has played a vital role in promoting the IT industry to achieve the IT vision. It derived India to attain a top position in BPO sector globally.
According to Indo base article Government of India has reduced licensing requirements, due to this foreign investment become accessible. The reforms have also removed restrictions on investment and made the process of investment easier. This has tremendously helped the IT/BPO industries.
IT Act is another great effort of Indian government for BPO sector growth. The legal framework of IT Bill was passed in 2000. It provides a legal authentication of contacts done through internet. Through this employers can prevent computer crimes, electronic conversations and exchange of documents.
Indian government has recognized the importance of Venture Capital Funding, than the Ministry of Information Technology has put a National Venture Fund for the Software and IT Industry with a corpus of Rs. 100 crore. It provides Venture Capital to encourage and establish software professionals and relatively small IT units.
IBM BPO is investing a good amount of its revenue to train and give higher education to its staff and has collaboration with many Indian Universities and colleges for this purpose. The Indian employees have supported and encouraged the company for this new training system. Now, the company has already started to reap the fruit of its strategy as it gets better, efficient and trained executives who are already familiar with the company's projects.
Opening BPOs around India has enabled IBM to work even in areas which are outside its expertise and has helped to reduce the company's expenditure and effort in understanding somebody else's expertise and then implementing them in itself. Thus, the US offices do not have to spend time to learn or handle issues related outsourcing and can engage themselves in other operations which are resulting in higher productivity and efficiency.
One of the most important reasons to choose India's BPO industry is their 24 hours working manpower. They work for seven days of week with same efficiency. Such additional points are not possible in USA units of IBM. In other words, 24 hours functioning ads to the efficiency of the India based BPOs.
All above mentioned factors have made Indian BPO industry beneficial for IBM to transfer its BPO unit to India and IBM Daksh has been successful in employing the potential human resource of India and establishing a randomly growing BPO with a socio-technical nature with India's investor friendly economy.
Indian BPOs are not much affected by the recession of 2008-2009 due to strong IT services and skilled manpower along with low cost infrastructure. Paranjpe, India Burea (2010, pp1) explains that here is lot confusion in the southern edge of Europe because of current recession, where as the traditional Indian IT has not been affected in bad manner.
Researcher will describe the nature of research and along with the implications of practical issues according to research objectives. Here main conceptual issues of research are highlighted. The aim of this chapter is to identify the research methodology and allied with objectives.
Research Strategy: Case study method:
Research strategyÂ is a plan of action that gives path to your ideas and findings that enables you to conduct research methodically (Saunders, l997, pp-74). According to Robson (1993) are three general research strategies as: experiment, survey and case study. Single case study method is adopted for this research, because the research questions could be addressed through in-depth understanding of phenomena concerned in real life.
According to Yin (1994, pp-13) any two characteristics of case study are that its not only will explore the BPO industry in India aligned with IBM Daksh but uses multiple methods of data collection. Qualitative and Quantitative both methods could be used parallel which help to understand in-depth phenomena of research in real life BPO industry.
Scapens (1990) describes the four types of case studies. Illustrative case studies are those where the research attempts to come up latest technologies and practices adopted by large organizations and industries. This research also enlightened IBM Daksh implemented in India and how IBM came up with betterment and innovation. Whereas experimental case studies study has also been applied on this dissertation. It showed how difficulties come up in implementation of IBM Daksh in India and during the implementation of new procedures and techniques. How IBM gathered benefit from them.
Choosing the case study:
Researchers have adopted the case study research method for many reasons. Robert K. Yin (1984, pp-5) argues that case study research method is an experimental inquest that helps to implement a modern phenomenon within its real-life framework; and there are multiple ways of data collection are used.
Normally "how", "why" and "how are answered through case studies method. Such as to answer in the present study. This study seeks to find out how India's BPO industry has become the top and why IBM chose India, along with impacts of this on India's economy.
How selection of India's BPO industry is aligned to IBM's corporate strategic planning process. The study is also trying to give explanation the reason why they are trying to outsource their units and how those will help to grow them in market and can maintain competitive edge. For these reasons, a case study strategy appeared to be the most appropriate research strategy to use.
Current case study has started with an extensive literature review about the topic, to get in-depth study about India's BPO industry and its driving factors that bring it at top.
Methods of data collection:
The primary data for this case study has been collected through the qualitative interview, document study and questionnaire.
The researcher preferred qualitative interview method because through this the best data collection was gathered having comprehensible and profound information about the subject. In other words Hagen (1992, pp-82) argues that qualitative approaches are used to obtain tin-depth understanding while quantitative methods provide limited information about particular phenomenon. The most important strengthen point of qualitative approaches is vast exploration and understanding of significance frames, that address the feelings of manpower in India, which are real-life implication in present project Hagen (1992, pp-82).
Open and structured interview methods are used in this research.
The proposal of an open interview is simple. The researcher conducted informal conversation with the respondent from IBM about specific topics. Normally respondent leads the course of the interview other then interviewers.
Semi-structured interviews are usually in between two extremes. There is more knowledge about topic due to greater extent of discussions. Researcher asks mostly open ended questions who gather in-depth information. So most of the questions are completely open-ended which discuss the deep issues of subject. So the consequently collected information is qualitative as well quantitative. One major benefit is that the interviewer continues until do not get answered sufficient portion of questions. The people from IBM were interviewed taken from different hierarchy levels of company in order to get a broad range of perspectives on the subject under study. The researcher went to interview to Supervisor of IBM Daksh to clear points about how they are going in India and progress of BPO. Researchers come up with its long term effect on India's economy. All the interviews were tape-recorded to keep record of all data for better understanding.
Document study is an indirect method of data collection. Here the researcher gather data from something produced for some other reason Robson (1993,pp-272). This information can be obtained from official documents such as memos, procedure, plans, reports, policy statements, evaluation reports, press accounts, public relations materials and information statements. Even the advertisements of IBM Daksh can be used for document study.
It is quantitative method of research. By adopting this technique researcher can analyse information in descriptive manner. Questionnaire is about measuring a market and quantifying that measurement with statistical data. This technique is strong when used for segmentation analysis and mean that key audiences can be targeted and monitored.
Field notes are used as basic diagnostic technique. After interviews, the researcher assessed that what had been recorded and how data comes up with the knowledge about subject. It was crucial to commence this exercise in order to refine the collected data Riley et al (1994, pp-100).
Once the content of data gathered that matched the spirit of the study had been identified, the researcher make an appropriate analysis sheet to make sure that each interview was analyzed properly.
Outsourcing is basically the process of delegating non-core functions to an external resource or organization that can deal task in effective manner. It was started in early eighteen. In this process, the outsourcer and the outsourcing partner have a superior relationship as compared to the relationship between a buyer and a seller.Â In fact BPO is process of involving third party to get services at low cost.
There are many reasons behind out sourcing. Some of them are cost cutting, improving efficiency; focus on core competencies, outside experts, skilled manpower, and 24 hours availability of employees to better efficiency.
Outsourcing is beneficial in many ways for organization; it becomes the organization more flexible in terms of culture and working hours. It helps organization to free up its cash flow. India has offered itself as the nest of this blooming industry and has welcomed many foreign companies to station their BPO sectors here. Indian BOP industry is at top due to many reasons: Most important is that India has numerous ways to reduce tariff barriers. Indian BOP companies have unique capability of providing efficient business solution with low costs. Low cost of infrastructure is another strong reason for successful BOP companies of India. IBM also known as the International Business Machines headquartered in Armouk, USA was found in the 1880s, is a big giant of USA. They selected India for their BOP unit. They started IBM Daksh which was started in 2004 with a total strength of 6000 employees which now has strength of more than 25,000 employees all over India. The BPO has been opened in India after analysing some strong factors. Some of them are Cost cutting, innovative IT business process services, improve operational efficiency and less work load on US offices are included. Initially it had its offices in Gurgaon, Pune and Bangalore but not has reached almost every major city in India like Chennai, Kolkata, Hyderabad, Mumbai, and Delhi. Now it has moved its attention towards the Tier 2 and Tier 3 cities to avail the comparatively lower costs and more human resource. One very powerful reason for growth of IBM Daksh is the manpower of India. They know English language, can speak fluently. In 2004, the employees who worked in Daksh were just 6000 in comparison to 28,000 (approx) working today at the various newly opened Daksh facilities. Daksh also promises to hire 5000 more employees by the end of next year. India is a large pool of man power. Indian government policies are favourable for the growth of BPO industry.
India has many competitors of BPO industry. Philippine BPO industry is more expensive then India, having small talent pool. Whereas China is deficient in English language. Russia has better technical skills but with poor infrastructure and language. Mexico is 30% less cost than US but only good for low end jobs.
BPO industry has tremendous role in Indian economy. IT sector is supporting largely in economic growth of country. The growth in the contribution of BPOs towards gross domestic products has revealed a sound rise from 1.2% to 5.3%. More BPOs are bringing more jobs for youth of India. BPOs have played a significant role in the balance of payment.