India BPO Trends Blog

Pramod Haque has been going around the country side and spreading the same message. Here is a report of what he spoke in Bangalore.

Why is this happening? Why are costs in Pune coming to that of Bangalore or Chennai?

1. Lifestyle costs: I remember a time when salaries in different cities even for the same company was different for the same grade. It simply reflected a cost of living of that city as well as a lifestyle of that city. With media and mass advertising, lifestyle across all urban locations are the same. The Bangaloreans drink as much beer as the Punjab da munda and do not retire home for a meal of thair saddam ( curd rice ) any longer. How eager is the Pune youngster to stick to his sol kaddi? Not much I guess.

2. Demand outstripping supply: At the BPO forum of the MCCIA here in Pune we have been trying to do a study of the annual labor being supplied by various educational institutions. There is also an initiative to scope the existing pool of manpower. But such studies are easier conceptualized than actually carried out and delivered. In short no one knows what is the supply and the demand just keeps getting upped.

More in next….

Venkat

I was yesterday at the dinner of the CEO forum of the MCCIA, here at Pune. The speaker of the evening was Mr Pramod Haque, Managing Partner of the VC firm of Norwest Venture Partners. He talked of his two investee companies and why they had chosen Pune as the preferred location over many other cities which they had closely examined.

But hidden in his message was the topic which is the subject matter on hand. His coverage in the Pune Newsline carries the full story. But his warning note is ‘‘India (and Pune’s) biggest advantage is its cost advantage. But if salaries don’t settle down, it will become uncompetitive versus China and Eastern Europe.’’

To regular readers of my blog this should sound familiar.

I had wanted to ask him some questions during the Q and A, but held myself back.

1. If his investee companies needed talent ( and that was the main message of the evening ) would he hire them without offering more to employees with experience. Does he expect them to switch from existing employers without a good jump?

2. If his employees were being offered a 50% hike by the competition down the street what would he do? Match the offer and hold them back? Let them go?

I have said before in many forums and I am saying this again. Unless we take collective action as a joint forum we will not be able to achieve cost control. This is so because many factors of costs are influenced by the environment external to the enterprise.

Venkat

The key driver of why BPO is moving to India is costs. Get this right. It is cheaper to do things here than it is wherever it was getting done before. Labor cannot move but with IT, work can. So we have work coming to India.

Having got the basics down how are BPOs looking at costs? And that horrible thing called cost control?

IMHO very badly. Right now the spending pattern would put a drunken sailor on shore leave to shame. To get a glimpse of it…see my earlier posts on the Party psyche.

Think about it. How does an average office in Mumbai pay a telephone operator? What does the telephone operator in Hotel Taj, a five star hotel, get? Or Karsandas Khimji and Co, a typical trading firm in Masjid Bunder pay its telephone operator. Do they have free lunches? Or weekly parties?

So why should call center agents be any different?

” There is an acute scarcity and hence prices of agents and perks are much higher.” Logic accepted…but does the customer care about it. When you become too costly…guess what he will do? He will base his decision on exactly the same reasons that bought him here in the first place.

Venkat

Yesterday’s ( Sunday ) Times of India carried a full page graphic recount of the events that occurred in the Fraud. It was very interesting reading.

The story has all the elements that make it newsworthy. BPO, Young girls, International crime, Ill gotten wealth…and oh yes…trips of Bangkok

There are two ways to look at this coverage. One is that this kind of negative publicity would result in increased outsourcing backlash. Data is not safe in Third World countries kind of thing.

The other is that it would serve as a warning to every latent criminals heart, that should he attempt to do anything like this, retribution can be swift. In this case it came in just about 2 to3 months.

Hopefully companies handling such sensitive data will be more careful and put in place processes and procedures that will effectively stop such events from occurring in the future.

Venkat

The post fraud scenario is rolling out as expected.

BS 7799 auditors and certifying agencies are making hay while the April tropical sun shines down in Pune and other cities of India.

Even small names are quoting fees higher than what the Big 5 used to quote for the same services some time back.

“Concerns about data to third world countries” articles have appeared in most publications in the western world. As if fraudsters do not work in the developed world.

The Police in Pune must be complimented for really taking strong action…which is as it should be.

Venkat

The fraud is playing out as it should. Today’s Times of India has a front page article which is a plug by a security consultant who sells hardware security solutions. So far the anti-outsourcing lobby has not jumped into the fray. But that sure will. How about Congressmen…they seem to have not heard about it.

Meanwhile there have two more arrests. Mphasis has done what it should. As any employer they have called in the police.

The question really is what can stop identity thefts. We all have ourselves received numerous emails purportedly from ‘Banks’ we do not have accounts with asking us to submit passwords on their ‘clone’ site. Pshing as it is called. What is the percentage of such crimes in the US? Is data unsafe only when it comes to India?

Venkat

The fraud that occured is of course quite dramatic and should not happen at all. But the fraud will of course solicit the usual press.

One range of articles will be about how it can be dangerous for data to leave the country and go to a Third World country where laws are lax or nonexistent etc.

Another range will be by the consultants ( and Forrester has already jumped in ) saying that it will undermine the credibility and harm the nascent industry etc.

We will then see the data security consultants coming right in and selling the concept of data security certification, the hardware guys telling us how data could be secured in so many ways etc etc.

And are we not forgetting the flurry of seminars that will follow some time later?

Whether the original perpetrators made money or not the ambulance chasers definitely will.

Venkat

About 10 -12 years back, at Vital Link Outsourcing, when we started BPO operations, we had to make a choice of choosing our accounting software. We had a choice of EX a accounting package from Tata Consultancy Services ( TCS ) from the House of Tata’s, India’s leading business house. The other alternative was Tally from a small no name business outfit in Calcutta.

The launch of EX was preceded by a slick advertising campaign, that many old timers from India will recollect. Naturally the strong ad campaign and the big house name behind the product made our decision veer in their favor.

Starting 1st April, 2005 we mark the end of our decade long tryst with a software that caused us more pain and anguish that we had bargained for. ( But aren’t all software like that you might ask ) We made the decision and moved to Tally. If ever there was a most damning statement against the House of Tata’s this is one of them.

Why did we do that?

EX was never supported. Bug fixes were paid version releases. Usability issues were never fixed. User base of accountants / CAs was rather restricted and getting more limited by the day. Dealers were not interested in the product any longer and support was sporadic and patchy, at best.

TALLY on the other hand had acquired a large user base of folks who knew its intricacies. With the release of the VAT regime in India, Tally was all over the place with its VAT compliant upgrade. The folks at EX were sleeping on the job. In short Tally was the pre-dominant market leader in its category. And did we have a choice?

Why this had to happen? The simple fact is that for TCS, EX was a small division too miniscule to merit top management attention. For the Tally guys, it was their livelihood. It was Tally or bust for them. Naturally the Tally guys had the fire in their stomach, that the guys who ran the EX division of TCS sorely lacked, sitting on their fat behinds.

No one gets fired for buying IBM they say. So it would be, we thought, with TCS. But IBM just kind of closed the division, it looks like.

What does all this ranting of changing accounting packages, have to do with running a BPO unit in India, you might as well ask.

The question is whether your BPO vendor is solely focused on serving you or not. Or is he a current ‘must have’ BPO division of a large multi focused conglomerate?

At Vital Link Outsourcing we are seeing a lot of large names not satisfying their large name customers. Giving BPO a bad name in general on both sides.

All due to a strong lack of focus on the part of the service provider.

Venkat

The Gartner report released about 4 days back is all that a report should be. Alarming, shocking and meant to make folks sit up and take notice. Propel them enough to go out and buy the report. After all the primary business of all analysts is to first and foremost sell what they generate.

Having said this, is the prediction that about 60 -70 % of all call center BPOs will shut shop true or not?

In one word the answer is YES.

In one word your question may be WHY?

The answer will now have to be a little longer. Most of these BPOs have been started in the first flush of enthusiasm by every Tom, Dick and Hari in search of the pot of gold at the end of the BPO rainbow. Most of them lack a solid business model, are undercapitalised or lack sheer grit and execution capability that would separate the men from the boys. What ever the reasons for the weakness, there has to be some element of culling that nature has ordained.

Is this good? Not if you are one of the those going to be culled.

But if you are the one who is strong enough to survive then it is good.

Those who are going to close will throw up lot of trained talent and other resources which the strong can grab and emerge stronger.

I can already see this happening and it is good for the industry.

Venkat

About two weeks back S a lady of about 40 years of age, wife of a friend of mine, mother of two girls including one appearing for her 10th standard exams was returning home from a party at Madh Island in Mumbai, India. The party went on till about the wee hours and it was about 6 am when she was riding on a two wheeler of one of her colleagues.

S was a process trainer in one of the leading call center BPOs. And it was the norm to throw a party by the BPO every quarter and all employees were expected to attend and ‘bond’ with each other.

While coming back…after probably one too many by the youngster who was ferrying her home, they had a fall and she injured her skull with a deep fracture. Bottom line is that she is in coma for the last 3 weeks. And no one know when she will come out of it.

Her daughter appearing for her 10th had to do so under such trying circumstances. The lack of medical facilities has left the family facing financial difficulties. When she will come out of coma is anybody’s guess.

Sorry for the sad part.

But the issue really is….what is the employer’s responsibility? If this were the US the employer would be sued for organizing a party and serving alcohol till the wee hours, to probably youngster who did not have the official permit to drink, and sending them home in two wheelers without helmets.

But it is Party time folks in BPO land. And such small incidences be damned.