The Indian ITES and BPO Sector has been much on the lime light over the course
of years compared to the other cities of the world. One of the key reasons being
the Expanse of real estate and the available at competitive rates in
International Standard IT Parks and coupled with SEZ benefits in today’s date
and time make the business far more lucrative. Of course, we are very proud
that, We Indians are very enterprising and till 10 years back there was no sign
of the ITes and BPO sector in India and now we are high in global ranking with
our captive business in the IT and ITes and BPO sector.
The real estate market in Mumbai is very conducive and the finest companies are
present here and the most important locations for setting up the IT/ITes and
BPO’s are Goregaon West, Malad West, Goregaon East, Malad East, Powai, Andheri
East (Seepz), Airoli, Vashi, Vikhroli, Kanjur Marg and Thane. Thane is coming up
very well and in the next 1 year by 2010, Thane should have more than 30 lacs
sq.ft of good quality commercial space available in short span.
Here is an excerpt of a report by NASSCOM highlighting the Indian ITES – BPO
Sector.
Global Scenario
Worldwide spending on Business Process Outsourcing (ITES-BPO) services totaled
approximately US$ 712 billion in 2001. IDC projects that by 2006, the potential
ITES-BPO market may increase to US$ 1.2 trillion, with an overall compounded
annual growth rate (CAGR) of 11 percent. While traditionally the key driver for
ITES-BPO activities has been cost reduction, companies are increasing viewing
these services as strategic and essential elements for organic growth.
The Indian ITES-BPO Scenario
According to NASSCOM, the Indian ITES-BPO industry registered a growth of 59%
and clocked export revenues of Rs. 11,300 crores (US$2.3 billion) up from Rs.
7,100 crores, (US$ 1.5 billion) in 2001-02.
The industry is projected to register a growth of 54% to clock revenues of US$
3.6 billion in 2003-04.
India is a popular choice for customers seeking outsourced services because it
is able to offer a 24X7 service and reduction in Indian ITES-BPO Industry
turnaround times by leveraging time zone differences.
In certain Remote Services categories, Indian players have achieved high
productivity levels with the emergence of BPO vendors with deep process skills
and the ability to offer integrated outsourcing solutions. At the core of
India’s great attraction as the outsourcing destination is its unbeatable value
proposition – PQR (Productivity, Quality and Rate) factor.
India has emerged as the most preferred destination for ITES & BPO with revenues
growing well above industry average at a rate of 59% this year contributing
about 25% to the total software and service exports.
• Captive ITES-BPO players have almost doubled their share, growing by a
phenomenal 90%. Captive units grew from US$ 710 million to US$ 1350 million
• Third Party Vendors have increased their presence from US$ 769 million in
2001-02 to US$ 985 million
• Absolute growth in the ITES-BPO segment increased from US$ 549 million in
2001-02 to US$ 856 million
Growth by Service lines – a snapshot
Within the ITES-BPO segment, Customer Care continues to be the dominant segment
with both revenues and employment growing by more than double in 2002-03 over
2001-02.
Other areas that witnessed significant growth were Administration and Finance
registering revenue growth of 67% and 70% respectively over 2001-02. Segments
such as Payment services and HR too have registered a considerable growth in
revenues at 90% and 50% respectively in 2002-03 over 2001-02. In terms of
manpower, Customer care employs the largest number of people followed by Content
development, Administration and Finance. The number of employees in the
Administration and Finance segment has grown by 78% and 60% in 2002-03 over
2001-02.
The key trends witnessed in the Indian ITES-BPO market
in 2002 were:
Ø
Significant increase in capacity: The quantum of new
investment in the industry increased by around US$ 300 million to reach US$ 800
million by the end of 2002.
Ø
The increase in capacity was equally divided between
captive centers (subsidiaries of multinationals ñ such as HSBC, Standard
Chartered, AOL, Dell, Hewlett Packard) and Indian third party providers such as
Daksh, Wipro Spectramind, EXL, Msource, among others.
ITES-BPO Growth by Service Lines
Indian ITES-BPO Industry
• Continued focus on Customer Care and Administration: According to preliminary
estimates made by NASSCOM, customer care and administration were the fastest
growing segments in the ITES-BPO space, with a projected growth of over 75
percent in 2002- 03. The high growth rate can be attributed to the presence of
experienced third party vendors (who scaled up operations) and entry of captive
players. In addition, the availability of a fairly large talent pool also
attracted investors and customers alike to this segment.
• Continued dominance of US and UK markets: NASSCOM’s preliminary estimates
suggest that the English speaking geographies dominated export revenues of the
Indian ITES industry accounting for over 90 percent of the industry total.
• Enormous interest by potential customers: Not only did existing customers
scale up business (in terms of number of processes offshored or seats utilized
or expansion by captives); the sheer cost and roductivity gains realized by them
generated tremendous interest among almost every significant Fortune 100 company
to explore offshore ITES-BPO from India.
• Rapid maturity of third party vendors: Most leading third party vendors
further consolidated their leadership position by investing in infrastructure,
quality standards, employee training and re-skilling, expanding service
line/process offerings, investing in marketing front-ends and personnel with
domain and process skills.
• Increased presence of IT services companies: A large number of IT service
companies expanded their offerings to include ITES-BPO by creating their own
capacities (Infosys, Patni, Satyam, HCL, Cognizant, Syntel) or by acquiring
ITES-BPO players (Wipro deal with Spectramind).
• Emergence of several under-the-radar opportunities: The industry expanded its
radar of opportunities to new service lines such as package software
implementation, System Integration, R&D engineering and new management as new
horizon for robust growth
• Geographical diversification of capacity: A number of players set up
additional centers in new cities drawn by attractive incentives offered by many
state governments, and in an attempt to diversify risk of running a single
location center and to take advantage of lower labour costs in other cities
• The average no. of employees in the ITES-BPO sector is 190 but the range is
huge and varies from as low as 4 people to as many as 16,000 people
• The encouraging trend in this area is the presence of MNC Captive units that
account for 45% of the industry and are a vital determinant of the long term
competitiveness of India in this sector
• Changes in ownership structure:
Ø
Two MNCs have
divested part of their stake in their captive units, British Airways in WNS and
Conseco in EXL. They have capitalized on the market value of their firm by
bringing in a strategic investor(s). The unit then competes with third party
vendors, claiming domain expertise as a differentiator while targeting new
customers
Ø
Venture capital funds
such as Oakhill, General Atlantic Partners, West bridge
Ø
Capital, Warburg Pincus, among others are reported to have
invested close to US$ 300 million in ITES-BPO companies in 2002
Ø
M&A transactions are
on the rise and some IT service companies choosing to buy rather than build in
order to rapidly scale up
Changing customer behavior:
A number of large customers prefer to outsource business to multiple vendors and
also set up a captive unit on their own. In some cases, they are asking the
vendor to build a center on a build-operate-transfer model, in which case the
vendor would grow the center to a certain size and then hand it over to the
customer at the end of the pre-determined period Critical Success Factors in the
ITES-BPO Business are:
The key sub-segments in the Indian ITES-BPO industry are:
Customer care: including database marketing, customer analytics,
telesales/telemarketing, inbound call center, web sales and marketing, sales and
marketing administration
Finance: including billing services, accounting transactions, tax
consulting and compliance, risk management, financial reporting, financial
analysis
Human Resources: including benefits administration, education and
training, recruiting and staffing, payroll services, hiring administration,
records management
Payment services: credit/debit card services, cheque processing and
transaction processing
• Administration: including tax processing, claims processing, asset
management, document management, transcription and translation
• Content development: including engineering, design, animation, network
consultancy and management, biotech research.
• Off-shoring to India has three advantages - significant cost savings,
major productivity gains and dramatic improvements in quality
• The primary driver of cost savings is labour cost arbitrage. The differential
in wages between the parent location in the US or UK and India is more than 70-
80 percent for off-shorable processes.
However, interaction costs increase by 10-20 percent because India is a remote
location, resulting in net savings of 40- 60 percent for the off-shored
processes
• Significant potential exists for cost savings through off-shoring across
industry verticals. Hence, customer interest in off-shoring will not be limited
to just a few verticals, but be much more widespread. Insurance and retail
banking generate the bulk of savings because of the high proportion of processes
that they can offshore. As a result, companies in these two verticals are taking
the lead in sourcing ITES from India and rapidly growing in scale. For instance:
GE has the largest ITES operation in India with more than 12,000 employees and
is growing at the rate of more than 700 people per month.
HSBC, which started offshore operations about two years ago, currently employs
over 1,000 people and plans to double that number in less than a year
Conseco (now EXL eServices) acquired a 350 agent company and has grown the
facility to more than 1700 people in a year
• Off-shoring opportunities vary from standardized corporate center activities
such as accounting, payroll, etc. to more niche and vertical specific
opportunities such as clinical trials support for pharmaceutical companies,
claims processing for the insurance sector, account opening support for the
banking sector, etc
• The ITES industry in India attracts people who are more skilled and qualified
than those who work for BUs or shared services centres in the parent location.
Further, the ITES set-ups serve a multitude of divisions/BUs within the company
(in case of in house providers) and across companies (in case of third party
providers) facilitating transfer of best practices across all. Consequently, the
offshore centers in India have been able to make dramatic improvements in
process quality and productivity as compared to those in the parent location.
if you have any further queries and you need information on the properties
available in Mumbai/Navi Mumbai and Thane and a lot more insight in setting up
your operations then please write to us ssadh@realestatemumbai.com and
we shall connect asap.