What are the requisites for setting up a BPO industry in India? Well that’s not what we address in this article; instead, we voice out something which is very much associated with this sector, a impact study. The sudden boom started since early 1990’s has spurred the growth in employment opportunities, standard of living, foreign exchange and also to our national GDP.
The roads of globalization instigated this remarkable journey of BPO to station and establish the international network in our soil. It has routed its operations in varied areas like hospitality, financial services, retail, travel, etc. It is observed that along with the growth of the industry, some events have started creeping out and has created a significant impact. Thus, came into existence of the happening words for this sector – Attrition, Breakthrough and Costs, which has become the real nightmare to the sector.The performance of the industry, as evident from the present scenario is a boon to our economically crisis faced country. One can witness the trend of hike in the growth rate of this industry leaping from 10% to 20% in the span of few decades. Yet another significant feature is India being regarded as a dominant player in the global platform.
The revenue figures for the sector surpass its earlier years earning. The exports have risen sharply from US$12.9 billion in 2004 to US$ 23.6 billion during 2006, further projections for the year 2007 is at US$31.3 billion.
Viewing from the economic perspective, the boom is really a boost to our country, by providing a source or means for achieving the economic growth; it also enhances the status of the people associated with this sector. On the other side the industry has contributed for the disparity in the income levels in the society.
The sector has provided opportunities for college drop-outs, retired people, non-graduates, etc to get employed with sufficient training and enables them to work like others, which otherwise would not have been possible.
The overall productivity of Indians has increased and is still expected to grow, NASSCOM has projected that there lies a space for creating nearly 1.1 million jobs in the next two years in this avenue.
Newer venture and collaborations are happening in the arena which has tapped the employment and hidden entrepeurnership talent in India. The ample opportunities, commendable performance, significant revenue and growth have really marked this invasion as a breakthrough in India.
Despite the stunning growth in the industry, there has been a significant underperformance as compared to the expectations. Though, it may sound contradicting, the industry experiences some phenomenon which is curbing the growth and acts as an indirect impediment. The attrition rate is quite higher than any other industry and withholds the growth of the sector; as new employees would take there own sweet time to settle down. Even the fresher would have to cross the learning curve of the industry / company. On an average the attrition rate in the industry has been 30%-35%. In this context the HR department assumes greater significance in retaining and hiring the employable resource. Companies like WIPRO, TCS are also facing such problem where the attrition rates range beyond the industry standards. The companies try desperately to resolve the issue by weaving a good HR policy. On a closer look the inherent problems associated with the industry could be understood as follows.
1. Monotonous work culture
2. Long and irregular work timings.
3. Unrealistic targets
4. Inability to meet the long term objectives
But the industry sources say that the main reason for attrition is poaching by other competitors, which can’t be predicted and countered easily. But, as a matter of fact, the entire issue can’t be clinked with poaching. How far can a person travel by shifting from one office to other? How does it help in long run? At one point of time, the person will be out of this sector despite drawing attractive salaries.
Basically, it requires an effective motivational training and a livelier environment which makes the office, a sweet office. Generally, the BPO companies are tagged with “wok for fun” label. However in reality, the work pressure and stress faced by the employees in the sector is immense and much more than in any other industry. The scope for job satisfaction and growth potential across verticals is less when compared to other industries. Yet another factor that turns as a hurdle for the growth of the sector is increasing costs.
India entered the BPO segment and is considered as a better place for global outsourcing is mainly due to the cost factor – the benefit factor. Our country is rich in its human capital if not capital intensive. Abundant talent and cheap labor is the advantage to the investor in the segment .the companies would spend only 20% of the cost incurred in their countries, and is more than sufficient enough to meet the Indian costs.
Getting employed in a MNC engaged in the business of outsourcing is a matter of pride, with the increased empathy and sense of belongingness the output from the employee increases. All the above said factors add up together for a better synergy and a way to mint huge profits at a lower costs. Currently, things have started to swing against the BPO industry as the cost incurred for attrition alone, is rising like ever before. Latest survey indicates that major chunk of the cost of BPO in India, is only hiring cost. On the other side they are unable to hike the sale prices as the market faces stiff competition which would impact the volumes drastically. The second major cost is retention cost incurred as per HR policies to counter poaching. As the costs are soaring rocket high, attrition rates are not dropping down.
Due to high attrition and high cost of training a fresher and waiting till he passes through the learning curve inflades the costs to such companies. Therefore, the basic “cost advantage” factor is slowly wept from the BPO segment which is prevalent in India. Companies like GE, HP have rolled back to their own workplace in Australia and Ireland, as they could not strike the balance between the cost and the revenue. At least, 10% to 20% of their cost is attributed to employee related cost. In the years ahead, it is predicted that BPO segment may also report loss as their cost advantage on outsourcing will be tampered, unless the recoveries from the clients are increased.
Apparently, BPO industry is surrounded and squeezed by attrition and overall operating cost from all the sides, unless the margins are increased days are not too far to see some glorious companies start reporting losses.
India entered the BPO segment and is considered as a better place for global outsourcing is mainly due to the cost factor – the benefit factor. Our country is rich in its human capital if not capital intensive. Abundant talent and cheap labor is the advantage to the investor in the segment .the companies would spend only 20% of the cost incurred in their countries, and is more than sufficient enough to meet the Indian costs.
Getting employed in a MNC engaged in the business of outsourcing is a matter of pride, with the increased empathy and sense of belongingness the output from the employee increases. All the above said factors add up together for a better synergy and a way to mint huge profits at a lower costs. Currently, things have started to swing against the BPO industry as the cost incurred for attrition alone, is rising like ever before. Latest survey indicates that major chunk of the cost of BPO in India, is only hiring cost. On the other side they are unable to hike the sale prices as the market faces stiff competition which would impact the volumes drastically. The second major cost is retention cost incurred as per HR policies to counter poaching. As the costs are soaring rocket high, attrition rates are not dropping down.
Due to high attrition and high cost of training a fresher and waiting till he passes through the learning curve inflades the costs to such companies. Therefore, the basic “cost advantage” factor is slowly wept from the BPO segment which is prevalent in India. Companies like GE, HP have rolled back to their own workplace in Australia and Ireland, as they could not strike the balance between the cost and the revenue. At least, 10% to 20% of their cost is attributed to employee related cost. In the years ahead, it is predicted that BPO segment may also report loss as their cost advantage on outsourcing will be tampered, unless the recoveries from the clients are increased.
Apparently, BPO industry is surrounded and squeezed by attrition and overall operating cost from all the sides, unless the margins are increased days are not too far to see some glorious companies start reporting losses.
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