INDIA BUSINESS WORLD - MAY - JUNE 2007
The Month that was ...

BUSINESS PROCESS OUTSOURCING TOUCHES NEW PEAK

Move over night long slogs on mundane outsourcing jobs. The $9 billion business process outsourcing (BPO) sector has graduated to the third generation services, or BPO Ver 3.0. Thanks to moving up the ladder many of the over 5,00,000 staff now see a meaningful career in outsourcing and companies are able to get tasks with higher billing rates. Sample the work in BPO 3.0: developing structured products for investment banks, using Monte Carlo simulation (statistical tools, in common lingo) based patent valuation, providing actionable legal and engineering reports for products that can be launched in multiple global markets and more.

This is far too complex from what the industry started with that is, transcribing medical records, answering phone calls and data entry (BPO Ver 1.0). Later the firms graduated to doing problem solving and decision making tasks such as processing insurance claims or enhancing limit on credit cards. That was BPO Version 2.0. While the third version is being incorporated by BPOs over the last few months, it is still in its infancy. What distinguishes itself perhaps from the other versions is that the companies are recruiting experts with up to 15 years of experience and the higher billing rates.

Now, in the third avatar, while a huge labour arbitrage remains the driver for instance, what lawyers deliver here for $75 per hour costs $400 per hour in the US the point is that "the kind of work that we deliver now was never really being done (even in the host country) as it was too expensive for many global companies," stresses Sanjay Kamlani, co CEO of Pangea3, a Mumbai based legal process outsourcing service provider. Bangalore based BPO 24/7 Customer's V P (global marketing) V Bharatwaj adds, "We are extracting value from transactions that clients make. This is the third generation of BPO."

The first generation was plain vanilla services like answering calls, the second version included rule based processing and involved 'lift and shift' kind of operations. "Now, the customer has seen the India centres deliver to specifics, experienced the quality and is wiring more complicated tasks. Like, for a financial services customer we worked for four months to analyse data and predict the customers most likely to buy a product. We came up with relevant models using mathematical and co relation modelling to create the predictive analytical model," says Mr Bharatwaj.

That's often the kind of work that knowledge process outsourcing (KPO) companies claim to do. But even here the scaling up to more complex tasks has happened only recently. For instance, banks are routinely looking at products that offer good returns. Gurgaon based Evalueserve has engaged PhDs in statistics and mathematics to deliver such work. The company claims that investment banks from the US, Japan and UK have outsourced new products development work to it.

Here's what the Evalueserve's COO and country head Ashish Gupta has to say on it: "We are running offshore research centres for clients and helping them grow. For instance, in the West the sales person may just be spending 15 minutes with the client but all the MSO (marketing sales and operations) related work is executed at our office. We have built customised Monte Carlo simulation based patent valuation techniques to deliver intellectual property related work. Such scaling up has happened only in the last few months.''

In Mumbai on the other hand, Pangea3 does the high end work for about 50 of its 150 clients. "For an auto emissions product company we studied emission law in various countries and also did the intellectual property and technical analysis. The challenge here is that each country has different emission laws. Even within the US, the law may differ across states. In many instances such work was not being done earlier due to costs and complexities involved. Now, companies are seeking vendors around the world who can deliver such jobs,'' says Mr Kamlani.