Domestic BPO Scoring a Home Run

8/14/2019 Domestic BPO Scoring a Home Run

1/18

newsline

issue81

AuGusT 2008

Domtc BPO:

scorg a Hom R

11 seZ: A wdo or th iT sctor

18 natoa sk Rgtry: spgscrty or th ida iT-BPO idtry

12 what Kp th ida iT-BPOladr at th Top

04 Domtc BPO Markt ida:scorg a Hom R

08 nAssCOM Rarch: Forayg thsotar Prodct spac10 Booz & Compay: Byod Arbtrag:

Ohorg o egrg, Rarchad Dvopmt


2/18

Today global uncertainties are at their highest with

uctuating currencies, unprecedented oil prices,

ood crisis, sub-prime led downturn and orthcoming

US elections, all coming together at the same time.

No surprise that the mood across businesses issombre, and sometimes sceptical. Businesses

worldwide are under pressure as is the Indian IT-BPO

sector; however, it continues to grow proftably. In dollar

terms, the absolute growth in FY2007 was a robust

USD 12.4 billion, and the orecast or growth in FY2009

is 21-24 per cent, though on a larger base as per

NASSCOM research. These confrm Indias strong value

proposition and the resilience o the industry.

It is critical to reect on growth drivers both or

Indian and multinational companies. The industry

has progressively diversifed its geographical spread,service oerings and the vertical market it operates

in, thereby providing cushioning against the downturn

across sectors, customer relationships have matured

and value being delivered by companies has increased.

Besides cost, India oers reduced time-to-market

and talent. This is important given the IT-led business

transormation that customers worldwide are going

through. Today, Indian IT-BPO companies are delivering

services that are an integral part o the global delivery

chains or customers, and they are frmly committed

to moving towards an end-to-end services model wehave seen this demonstratively in the BPO segment.

Reacting to margin pressures, companies are

enhancing productivity, efciency and resource

utilisation. Wage moderation and lowering attrition

levels are proo points o this trend. We believe benefts

o this efciency improvement will have long-term

eects that will ensure increased competitiveness o

the Indian IT-BPO industry against emerging locations.

As companies look at markets beyond the US andthe UK, the growing and relatively insulated domestic

market in India looks increasingly attractive. Economic

growth has spurred IT spending government and

private sectors, and globally ocused companies

are now tapping into the domestic market a large

opportunity. Companies operating in the small and

medium segment have also exhibited maturity with

their niche strategy. 100 new product companies have

been ormed in the last 12 months alone, many o these

being backed by institutional unding a reection o

the positive investor confdence.We still have a lot o work to do. The education system

needs to be upgraded; economic development needs

spread to Tier-2 and 3 cities; inrastructure needs to be

improved and efcient power systems are required to

oset oil cost impact. Policy level streamlining or STPI

and SEZ, resolving complexities at operating levels in

VAT, service tax and FBT is an action item. We need

government support or this. NASSCOM continues to

work with appropriate agencies to get these important

issues resolved, as all our member companies work

against the global uncertainties and together, we areconfdent o steering the industry through this phase

Sm Mittl

President, NaSScoM

Ho th ida iT-BPO idtry Facg Crrt Goba ucrtat

3August 2008 Newsline

Prdt Dk

The services India is deliveringtoday are an integral part othe global delivery chain or

customers, and they are frmlycommitted to moving towards anend-to-end services model we

have seen this demonstratively inthe BPO segment.


3/184 Newsline August 2008

i Foc

Th Domtc BPO Markt ida:scorg a Hom R!The Indian domestic market has undergone a

transormation over the past decade rising rom

the periphery to emerge as a viable, high potential

opportunity or the countrys IT-BPO sector. From a

situation where the domestic business did not fgureon the industrys agenda, to now, when companies

are evolving strategies targeted at building a presence

in the domestic sector, the market has witnessed

heightened interest rom customers, as well as

outsourcing services providers at a global level. It

has also emerged as a silver lining or companies in

todays changing markets especially against global

economic uncertainties.

As per NASSCOMs analysis, the domestic market saw

a growth o 40 per cent (26 per cent in INR) in FY2008

to clock revenues o USD 11.6 billion. With 450,000

employees currently, FY2009 estimates peg the

domestic market ~ USD 13 billion, backed by a strong

growth prospect, with sustained ination as a possible

medium-term risk.

Domestic BPO has emerged as a major segment in

this pie. As Rajdeep Sahrawat, VP, NASSCOM says, It

was predominantly voice, but other complex processes

have been added, with more in the pipeline. He also

eels, there is very little to dierentiate companies

rom the product point o view and thereore oeringvery high quality, personalised, 24x7 customer service

is critical. This requires scale, exibility and expertise.

Domestic players have certain advantages, starting with

areas like cost management and efciencies, deeper

understanding o Indian businesses, requirements

and greater exibility. The market in its current growth

phase will always need niche mid-sized quality players.

In this space, since English language skills are not

imperative, the market becomes relatively larger,spanning Tier-2 and 3 cities as well.

The reasons or this recent turnaround are related

to the changing global market conditions, however,

the Indian market is slightly insulated to these

disruptions, displaying a growth rate o 26-27 per cent

in FY2008. Recent outsorucing deals in the verticals

like banking, insurance, airlines and telecom also

support this trend.

Globalisation is a actor spurring organisations to

improve efciencies and utilisation the credit orboth these go to the BPO industry. As the Indian

economy becomes globally integrated, businesses in

India are beginning to ace increasing levels o global

competition and being driven to deliver world-class

products and services. The BPO sector has emerged

as an eective means o entrusting specialists

with the task o consistently delivering the desired

high levels o quality, leaving the client organisations

to ocus on their core businesses, comments Radhika

Balasubramanian, COO, Domestic BPO Operations,

Intelenet Global Services.

Intelenet was quick to recognise the growing potential

o the domestic BPO segment and was one o the

frst movers in the industry. The company acquired

Sparsh and entered the market in 2005. Since then,


4/185August 2008 Newsline

i Foc

Intelenets domestic business has grown rom

3,000 to over 16,000 employees, oering services in

14 Indian languages across seven locations in India.

Ctomr rvc catay markt

The domestic BPO market is also getting catalysedby the gradual reduction in connectivity costs.

Prolieration o the Internet is creating dynamic

business delivery models that can meet high

customer demands and expectations. As Indian

and MNC players gear up to boost market share

by increasing responsiveness to clients, they are

observing captive BPO and other third party service

providers, who have the credibility o meeting

world-class standards, setting best practices and

displaying process excellence. Encouraged by this

recognition, Indian BPO players have enhanced their

ocus on the domestic segment. Raising awareness

about the deep productivity benefts o outsourcing,

BPO service providers are urther driving the growth

o the domestic market.

Sandeep Soni, ED and CEO o Spanco BPO Services

is driving the company to tap the emerging business

potential in this market. Currently, customer

care, sales and marketing are the largest business

segments or domestic BPO. With increasing

consumer maturity and vendor sophistication, therewill be an increased demand or outsourcing o

complex processes, he says.

Th mrgg opportty

Recent business intelligence studies and industry

analysts are pointing to continued growth in the

Indian BPO sector. As per a recent study by NASSCOM

and the Everest Group, Indian BPO industry can grow

fve-old over the next fve years to clock revenues

upto USD 28-30 billion by 2012, i they receive the

required fllip. Avendus has orecasted a CAGR o

35 per cent or the Indian domestic BPO industry

or the next our years and projected that the sector

will be a USD six billion industry by 2012, up rom

USD 1.8 billion in 2008.

Aditya Gupta, President, InoVision Group adds,

While the domestic BPO market is still in its

inancy, it has huge potential. Customers are eeling

the need to provide better customer services,

scale-up rapidly, enhance productivity and reduce

time-to-market. The current share o third partyvendors is around 18 per cent o the overall market

and is set to increase to 30 per cent by 2012. BFSI and

telecom together account or nearly three-ourth o

the total revenues generated by this sector. Verticals

like retail, healthcare, insurance, etc. are growing at a

rapid pace and the PSU and government sector is also

looking at outsourcing. InoVision has been active

in the domestic market, providing voice-based, back

ofce and loyalty management services.

Chandra Iyer, Head, APAC o Firstsource eelsdomestic companies, particularly in the telecom

space have been looking or partners to help them

manage their explosive growth while maintaining

dierentiated customer service. Firstsource is

working with two o Indias top three mobile

providers. It is handling an entire suite o services or

Airtel including voice and back ofce in areas such as

customer accounting, VAS provisioning, raud and

credit monitoring, customer service, collections and

customer retention. For a client in the insurance space

it handles mailroom, data capture, policy issuance,

customer service, lead management and customer

retention services. Most o these services are provided

both by voice and email.

n horzo

Opportunities await BPO frms in providing

specialised services to newly emerging industries like

retail, ashion apparel or automobile components.

Services that have signifcant scope or growth include

Customer Relationship Management (CRM), marketresearch, accounting & inventory and Supply Chain

Management. Domestic BPO opportunities exist

wherever customers want to reach out to consumers

but do not necessarily want to do it themselves. There

are two potential type o customers, or example:

existing global customers, who are looking to

increase their presence in India and require the same

systems and processes they have elsewhere; and

Indian companies with global aspirations, who want

to provide a global experience in the Indian market,

comments Ramesh Gudalur, President, MphasiS BPO.

According to Harpreet Duggal, Head, India Business,

Genpact, The company too is catering to the

outsourcing needs o companies ocused on the local

market. We are involved in a number o projects and

The dmesti BPo mrket is urrently bsed n

speilistin nd exibility. It des nt signifntly

redue sts r the lient, whih ws the USP r the

interntinl BPos when utsuring nd shring frst

strted. at the sme time, the mrket will develp s

Indi is getting glblised. With the telem mpnies

quiring ustmers t rpid pe, vie-bsed press

will ntinue t see helthy grwth.

aniruddh Ry

cEo, Knkei


5/18

i Foc

are in discussions with our client base or supporting

their domestic operations. The business services

we oer will include onsite process re-engineering

and benchmarking, transactional work in insurance

and banking, outcome-based collections, business

analytics, etc. These are already being oered across awide range o business verticals like telecom, banking,

retail, insurance, hospitals, etc.

Facg th chag

Challenges or this segment, albeit similar to the

export segment, can slowdown the growth i not

acted upon by stakeholders. The gap in availability

o an industry-ready workorce, absence o industry

riendly curriculum are ew critical issues.

To address these concerns, companies such asFirstsource have taken innovative measures and

set up operations or the domestic market in

non-metros. In order to source multilingual skills

and take advantage o lower rentals and salaries to

meet our business proftability goals, we have set

up our acilities in Tier-2 and 3 cities. Today, we have

centres in Trichy, Kochi, Vijaywada, Hubli, Indore and

New Bombay. Two additional centres in Jalandhar and

Siliguri are expected to become operational in the

second quarter, inorms Iyer.

MphasiS BPO too has been looking at Tier-2 cities to

grow especially or domestic BPO as these smaller

townships have emerged as the new talent hotspots.

With a bit o eort, the company has been able to

develop a good ecosystem to run successul centres

here. MphasiS is also looking at entering rural

parts o the country to tap the largely unaddressed

workorce in the next three to our years. During the

current year, the company is looking at adding more

acilities in Tier-2 and 3 cites, and growing its current

workorce by 7,000 to 9,000 people, many o whomwill come rom these regions. In Tier-2 cities, Mphasis

is working on both voice and KPO kind o work or the

BFSI and telecom verticals.

Building capabilities in smaller Tier-3 and 4 locations

is on Genpacts agenda as well. Until now, there

has been a ocus on developing the industry around

Tier-1 and 2 cities. We must move away rom this

situation and the domestic market will help us do it.

There is no shortage o people in the smaller locations.

There are gaps however in the skill levels in these

cities which require investments in education, training

as well as inrastructure, states Duggal o Genpact.

Massive public-private partnerships are required

in education and inrastructure or smaller cities to

cater to the domestic market. An entire ecosystem

has to be created, which delivers homes, healthcare,

training, schools to the lesser known destinations on

the Indian map, he adds.

Another challenge or domestic BPO, Gupta o

InoVision says, is moving up the value chain and

breaking out o the low-end o the outsourcing

spectrum. The processes being outsourced rank

very low in the value chain. Complex and analytical

processes are still not being outsourced though the

trend is expected to change as the industry matures,

Gupta states.

improvg th trac bt thgovrmt ad dtry

Domestic BPO players are also concerned about

the lack o communication between the governmentand the industry, which leads to a disconnect at the

policy level.

In order to combat the high rate o attrition and very

limited loyalty o sta, the domestic BPO players

require new and non-conventional thinking on the

part o the government related to benefts such as the

ESI/PF and other statutory obligations, the Maternity

Act, the Contract Labour Act, the Bonus Act and other

statutory compliance requirements, Gupta adds.

The industry sentiment is that the domestic BPOindustry plays an important role in generating

employment, not just in the metros but also

Tier-2 and 3 cities and thereore requires government

Wht dmesti BPos need t d t sueed in

the mrket:

1. udrtad th dyamc o th dtry ..,

th drc bt domtc BPO markt

ad tratoa BPO markt

2. Dvop dp doma xprt copdth proc xprt to dvop rvat

ovatv oto

3. Mata a trog oc o robt proc ad

goba bchmark

4. Dpoy pror tchoogy to rma

compttv

5. Pt pac a trog ad dyamc HR tratgy

bad o mpoy rdy poc to attract

ad rta tat. Dvop a vry trog hrg,

trag ad rtto g

6. Adopt a marktg ad a oc th a

slA-drv approach to r rpat b

7. iovat to ca ad mov p th va cha

8. evov a dvr dvry mod to mt

dtrbtd ad rgoa proc rqrmt

6 Newsline August 2008


6/18

incentives related to employment, year-on-year. The

BPO sector believes that pro-BPO relie policies that

are contemporary and uturistic have not yet been

introduced by the government, and these will greatly

support the growth o the domestic BPO industry.

embracg pop-ctrc poc

At the same time, domestic BPO players agree that

they all need to work on people policies, embrace best

practices in the area o HR and position themselves as

employers o choice, in order to attract and retain the

right kind o talent.

Accepting that employee attrition is a key challenge,

companies like MphasiS are taking steps to retain

their best and brightest. Our people care initiatives

and investments are paying o in a big way.

Over the last two quarters, our oer-to-join ratios

have dramatically improved. We have a number

o HR-related initiatives in place including

Metamorphosis, EDS Learning and the Leadership

Academy, the MphasiS College Connect Programme

and eective Peoples policies to develop our human

resource capital, says Ramesh Gudalur. The company

is also recruiting intelligently to ensure a balanced

talent hire mix, where experienced hires rub shoulders

with reshers. MphasiS depends considerably on its

employee reerral schemes to draw talent, saving onotherwise expensive hiring costs.

Intelenet too is undertaking Employee Retention

Management and has put in place a multi-pronged

retention strategy that includes creating an

organisational culture that is value-driven and inuses

a sense o ownership. The company has put in place

an Employee Appreciation Programme, evolved

career development plans as well as an accelerated

career path or critical resources and laid emphasis on

employee communication.

skg domtc markt groth throghrra BPO

Companies are also entering the rural BPO domain, in

an attempt to gain traction in the market and expand

i Foc

the umbrella o the domestic BPO services. Some

existing niche players in this space are Fostera, Trayee,

AP Tech Services, Sai Seva, HOV services and Vinites.

According to Verghese Jacob, Chie Integrator and

Lead Partner, the Byrraju Foundation, Rural BPOs are

an emerging option, and have the potential to become

viable in the next fve years. At that point, work will

migrate rom Indian cities, (which are already becoming

cost ineective) to Indian villages, he says.

The Byrraju Foundation has been playing a pioneering

role in setting up globally competitive BPOs in rural

markets. So ar, our large centres have been set

up in our villages in the state o Andhra Pradesh.

These centres employ nearly 600 people and cater

to 10 leading corporate and government clients.

Both transaction and voice processes are handled atthese acilities.

Jacob adds that while educated manpower is

available in the hinterland, intensive training or

at least six months is needed. There are no policy

level special benefts to set up a rural BPO. At the

same time, developing the rural markets requires a

huge eort.

On the positive side, attrition is low. It is less than

three per cent in our our units employing nearly

600 people, Jacob inorms. Raju Bhatnagar, VP,NASSCOM eels at the end o the day, there is a

growing realisation that domestic BPO is here to stay.

Companies that are not yet part o this segment are

rapidly evaluating and re-looking at their domestic

market strategies and taking necessary steps to

address the emerging opportunities in this vast

segment. On the growth prospects, notwithstanding

recent currency uctuations, the domestic market is

estimated to grow handsomely in FY2009.

Verticals that will see sustained growth and

maturity within domestic BPO are BFSI,

manuacturing, telecom, retail and government

in a huge way. Education and healthcare are a ew

emerging areas expected to drive additional growth.

The biggest challenge that service providers will need

to address is creating a value proposition that is

relevant to their domestic clients requirements. With

maturity o the market, its requirements are very

dierent and will need a great degree o customisation

and understanding. Vendors will also need to think

ahead o the curve even on business models, pricing

and have to build in capabilities that cater to the Indian

market. Proftability is the other area, which will be

determined on the vendors eectiveness in delivering

by way o cost structure, people management and

value creation, he concludes.

I smething n be dne t imprve the

inrstruture in terms telem nd internet

nnetivity, then, rurl BPo is vible mrket. We re

urrently wrking with ther mpnies t jintly mke

n ering nd re plnning t mke n nnunement

in the weeks hed. our im will be t tp the insurnend telem vertils, whih will present signifnt

business pprtunities in the rurl BPo setr.

Shym Sunder

Diretr, Mgus custmer Dilg Pvt Ltd



7/18

nAssCOM Rarch

In order to understand the strides India has made in

the sotware products space and defne the uture

opportunities or the countrys sotware and services

companies within this realm, NASSCOM has come out

with a Business Intelligence Study on the topic.

According to the NASSCOM Sotware Product Study ,

the Indian sotware product business is set to grow

rapidly and is now approaching an inection point

in its evolution. The annual revenue aggregate o

the Indian sotware product businesses is expected

to touch USD 9.5-12 billion by FY2015, up romUSD 1.4 billion in FY2008. The ollowing acts and

trends support this assessment:

In the past two decades, India has emerged as a

global hub or product Research and Development

(R&D) activity, especially in the technology industry

Today, there are over 600 Multinational

Companies (MNCs) undertaking product R&D

through their subsidiaries in India

Several Indian third party service providers

have also adapted the oshore model to oer

outsourced product development services toassist clients in developing their IP

While the top 10 companies still dominate,

accounting or 84 per cent o the segment

revenues, there are over 200 mid-sized

companies and start-ups that have started

generating revenues and are contributing to this

segments growth

Leading Indian sotware product frms have

strengthened their product portolio with oerings

in areas such as Business Intelligence (BI),

engineering, security, content and collaboration

applications, etc., besides the fnancial and

accounting domains

Chagg adcap

Growth o the products market is receiving impetus

rom the evolving incubation and unding support

ecosystem or sotware product entrepreneurs in India.

Today there are 38 incubation centres spread across

the country that are actively ocused on assisting

technology start-ups with unding and mentorship.

The past ew years have also witnessed an increase

in Venture Capital interest in Indian sotware product

businesses. Funds invested in the sotware products

segment have grown at a CAGR o 43 per cent, rom

USD 76 million in 2005 to USD 156 million in 2007.

what

Within the products realm, what will gain in

popularity is enterprise application sotware,

which will remain the largest opportunity with its

Business Intelligence (BI), Enterprise Resource

Management (ERM), storage and security

ocus. While global demand or BI sotware is

expected to grow rom USD 7.8 billion in 2008 to

USD 15 billion in 2015, the global market or ERM

sotware products driven by SMEs, is expected

to increase rom USD 33.2 billion in 2008 to

USD 59.8 billion in 2015. The global as well as domestic

spending on storage sotware is orecast to increase

rom USD 13.9 billion in 2008 to USD 26.2 billion in

2015, while the security market is expected to grow

to USD 17.3 billion by 2015.

India is well-positioned to address these segments,

drawing on the domain expertise available in

home-grown product start-ups as well as quality

talent nurtured in the subsidiary centres o several top

MNC players.

Forayg th sotar Prodct spacida iT otar ad rvc compa ar yg th bg otar prodctopportty, both ovra ad o hom grod.

T purhse the mplete reprt, write t

[email protected], r visit www.nssm.in



8/18

nAssCOM Rarch


lcko: Ftr Potvit may ot m th prct dtato or th iT-BPO dtry a o o, btlcko, provdd t tak cary proactv tp, ha th potta to gro to

a trog iT-BPO dtry bato.

NASSCOM-A.T. Kearneys Study, Location Roadmap

or IT-BPO Growth Assessment o 50 Leading Cities,

which evaluates important locations across India that

can be nurtured as uture IT-BPO hubs, states that

Lucknow, the capital o Uttar Pradesh, can aspire or a

place on the country s IT-BPO map.

While currently the city has a low presence o

IT frms and virtually non-existent BPO industry, the

expectation is that the situation can change, withrelevant government support in a host o areas.

The positive indicators or the city include the act

that the state government has outlined a vision to

leverage IT, alongside biotechnology, as a vehicle

or economic development. It has also committed

to creating a Lucknow-Kanpur corridor or the

IT-BPO sector, on similar lines as the immensely

successul Noida-Greater Noida track.

Rcommdato or traormglcko to a iT-BPO dtato

According to the NASSCOM-A.T. Kearney Report,

Lucknow needs to leverage its existing strengths and

tune them to the requirements o the IT-BPO sector:

Prevent mnpwer migrtin: The study suggests

that Lucknow needs to retain its pool o rightly

skilled manpower. While around 3,500 engineers

graduate per annum in Lucknow, and around 18,000

graduates, most o them employable, join the

resource pool, a large number migrate to other cities

due to low career opportunities. The aim should be

to create awareness about the BPO industry and its

benefts, and encourage youth to stay back and join

the existing IT-BPO players.

align edutinl urriulum t industry

requirements: According to the study, currently

outdated educational curriculum needs to be aligned

with the industry requirements. At the same time,

since there is a smaller talent pool with profciency in

English, Lucknow can look at training youth in English

to equip them or international voice BPO activities.

The city can also leverage its adequate number o

commerce graduates available or employment

or fnance and accounting and back ofce unctions

within BPOs.

Imprve nnetivity: The report suggests that at

the local level, the city must improve its roads to avoid

congestion. While national connectivity is adequate,

with Lucknow linked to Kanpur and other Indian

cities through rail and air, international connectivity

is limited. Flights to international destinations, other

than a ew Middle East locations are not operational

and need to be introduced.

Further develp inrstruture: There is need

or Lucknow to improve space availability, power

and hotel accommodation. The good news is that

Lucknows quality o telecom connectivity and

bandwidth availability is comparable to other key

IT-BPO locations in India.

Imprve sil nd living envirnment: The study

recommends that Lucknow improves its educational,

medical and recreational acilities, besides its social

inrastructure, security and hygiene and cost o

living. The city is currently ranked 44th on the cost

o living index.

T purhse the mplete reprt, write t

[email protected], r visit www.nssm.in


9/18

Aay

Engineering represents a large opportunity or India,

which is at the cusp o becoming a major Engineering,

Research & Development (ERD) centre or the globe.

Contrary to the oten held belie that India is the centre

or low-end and mundane work, Indian engineers are

key cogs in the engineering wheels o technology

leaders ranging rom Cisco to Microsot.

The market or oshoring o ERD in India is rapidly

expanding and is likely to hit USD 35-40 billion by2020. Unlike IT, a signifcant share o the growth in

ERD oshoring is being driven by the captive centres

o the global companies and relatively smaller-ocused

engineering vendors.

The growth in ERD oshoring is not just a result o

global companies seeking a low cost source, as is

the case or IT, or more recently, business processes.

Organisations are looking at India to optimise the

equation hinged on the 3Cs (Cost-Capability-Capacity).

A combination o a low cost base, talent pool and

capacity is helping India build a position in the global

technical network o the major corporations and

become part o the global ERD value chain.

Cost, once the primary actor, is becoming secondary

and oten, or sectors such as Telecom-hi-tech,

a tertiary actor. For instance, sectors such as

automotive and industrials are looking at India as

a location or technical resources and to accelerate

product and technology development. Companies,

especially the ones in longer cycle time industries

such as aerospace and automotive are struggling to

fnd technical capacity and capability to shit their

product-technology portolios at the same pace as

customers are shiting their taste. India is among the

ew potential locations that oer a solution.

A Pune-based vendor, or instance, with less thanUSD 20 million in engineering revenue, is driving

an eort o USD 50 billion company to build

environmental-riendly technology.

Going orward, those intending to play in either

demand or the supply side o the market, as

providers or consumers o ERD services need to

modulate their business models and strategies to

resonate with the markets. Cost arbitrage-based

models, oten dominant or unctions such as call

centres or IT, dont work or ERD. ERD demands anapproach that accounts or longer time horizons or

skills development, higher investments in hardware,

sotware and liveware. Vendors operating in, or

aspiring to, eectively operate in the space are likely

to beneft by demonstrating exibility or alternate

business models, value-based pricing structure and

shared governance and operating models.

Booz & Compay: Byod Arbtrag:Ohorg o egrg, Rarch

ad Dvopmt



10/18

Pocy watch

seZ: A wdo or th iT sctorThe concept o Special Economic Zones (SEZs),

which are specifed delineated duty ree territories

and deemed to be oreign territories or the purposeo trade is not new to India. The SEZ policy was

frst introduced in April 2000, as a part o the

export-import policy o the country. To provide a

long-term and stable policy, and signal the

governments commitment to increase economic

activity in the country, a comprehensive SEZ

legislation, the Special Economic Zone Act, 2005

(SEZ Act) was passed in June 2005.

Under the umbrella o the SEZs, sotware

services companies can provide inormation-enabled services such as back ofce operations,

call centres, content development or animation,

data processing, engineering and design, graphic

inormation system services, human resources

services, insurance claim processing, legal data

bases, medical transcription, payroll, remote

maintenance, revenue accounting, support centres

and website services.

iormato Tchoogy seZ (iT seZ)

In recognition o the potential o the IT sector totransorm the Indian economy, and to provide the

requisite impetus, special concessions have been

aorded under the SEZ policy or this sector.

Pggg th oopho

While the new SEZ Act has defnitely won thehearts o many in the IT industry, there are certain

shortcomings/grey areas in the legislation that need

to be addressed.

One o the key gaps in the new SEZ legislation is that,

while the existing section 10A o the Act provides or

computing the deduction on the basis o the total

turnover o the unit, the newly introduced section

10AA o the Act provides or computing the deduction

on the basis o total turnover o the business o

the assessee. In this regard, clarifcation rom the

government is required on what constitutes business

o the assessee, since in its current orm a lower

deduction/exemption is available to SEZ units, based

on the ormula provided.

With a view to promote greenfeld investment and

catalyse employment generation, the policy makers

have fnally indicated that conversion/relocation o

existing STP/EOU/EHTP units into SEZ units would

not be permitted under the SEZ policy. However, the

industry is o the opinion that the mere creation o

SEZs without extending similar advantages to unitsregistered under the Sotware Technology Parks o

India Scheme would be detrimental to the interests

o companies located in the latter.

Tax BftSection 10AA introduced under the Indian Income Tax Act, 1961 (the Act) to provide or deduction to SEZ units commencing manuacturingor producing articles or things or which started providing services rom April 1, 2005 states the ollowing:

Quantum o deduction SEZ units set up on or ater April 1, 2002 butbeore March 31, 2005

SEZ units set up on or ater April 1, 2005

100 per cent o export profts First fve years starting rom the year inwhich manuacture/provision o services

commences

First fve years starting rom the year inwhich manuacture/provision o services

commences50 per cent o export profts Next two years Next fve years

Upto 50 per cent o export proftstranserred to SEZ Reinvestment ReserveAccount, subject to conditions

Next three years Next fve years

The other fscal incentives contemplated by the SEZ Act are as ollows:

Indirect tax Developers and units Direct tax SEZ developers Direct tax SEZ units

Exemption rom customs duty 10-year tax holiday to SEZ developers Phased tax holiday to units operating inSEZs and earning export profts over aperiod o 15 years

Exemption rom excise duty Exemption rom levy o minimum alternatetax at 8.42 per cent (on book profts)

Exemption rom levy o minimum alternatetax at 8.42 per cent (on book profts)

Exemption rom service tax subject toexport o services rules Exemption rom levy o dividend distributiontax at 14.03 per cent

Exemption rom central sales tax

Drawback o duties paid on goods/servicesbought rom outside the SEZ area

Exemption on income earned by investors rominvestments made in developer company


cntributed by Ernst & Yung


11/18

ey o th idtry

what Kp th ida iT-BPOladr at th TopToday, it is not surprising to see an Indian IT-BPO

company being eatured in a global ranking or

survey and almost always emerge as a top contender in

the fndings. From being virtually absent in this space

to almost touching the pinnacle when a recent survey

announced TCS, Inosys and Wipro as Next generation

IT Service Megavendors by 2011 globally, the Indian IT-

BPO industry has come a long way. NASSCOM Newsline

spoke to industry players and observers about frms

that have led several rankings consistently over the

past ew years on what sets them apart.

Vo, adrhp, ovato Ho mcho a mpratv?

Ten years ago, when we were still a part o GE, we had

an idea and a dream, says Pramod Bhasin, President

and CEO, Genpact which has led the NASSCOM BPO

exporters rankings over the past our years. The

Business Process Outsourcing industry was unheard o

in India. Phone lines did not work, and the only ofce

buildings available were old-ashioned and certainly

not equipped or our needs. But, we knew it was a great

idea, and with the backing o a great company, and

our energy and commitment, we knew we would fnd

a way.

Sid Pai, Partner and Managing Director, TPI India eels

that vision sets the context or the strategic direction o

a company and helps to ensure that its business plansand other strategic decisions are aligned with what the

company wants to be. It provides much needed ocus.

It is almost imperative to have a clear, shared and

well-communicated vision or any company beginning

its journey, even as a start-up. There is nothing that

prevents a start-up company rom dreaming big.

As thought precedes action and action precedes

achievement, even a start-up company will need to

think big in order to actually become big one day.

One does not have to be a large organisation or

an established leader. One has to have a burning,

and all consuming desire to stretch the limit o the

organisational capability. Companies that win are

those who have the hunger to win, and win in a Global

landscape. When Mr Premji joined Wipro, he was 21.



12/18

ey o th idtry

I you ask me whether he knew that Wipro would

grow so large, the honest answer he says is that he

did not. But he also did not think, it would not become

either. We constantly stretched ourselves to higher

and higher targets. Sometimes, it seemed possible,

sometimes imaginative and sometimes plain insane,

says K R Lakshminarayana, Chie Strategy Ofcer,

Wipro Technologies.

Fire in the belly, leadership, innovation and clarity

o service oerings are some o the other aspects

that industry observers identifed as critical enablers

inuencing a companys climb to the top.

Nearly our decades ater its ounding, Tata Consultancy

Services is one o the largest tech services company in

the world. Every quarter, the company clocks revenue o

more than USD 1 billion and new hires by the thousands.

It has become one o the largest divisions o the Tata

group. It has consistently ranked as the top IT Services

exporter in NASSCOMs annual rankings.

Leadership in a business can be viewed rom multiple

dimensions. It can be based on revenue, proftability,

innovation, quality o products or services, customer

satisaction and brand value, scale and depth o

industry expertise, etc. Innovation and leadership do

have a strong relationship especially in an increasingly

knowledge-oriented world. Innovation can help you

not only to achieve a leadership position but also to

sustain it. Even i an organisation accidentally achieves

leadership without innovation, it will fnd it very hardto sustain, without the support o a robust innovation

engine. There is also a potential or unknown companies

or start-ups to quickly achieve leadership (by upstaging

strong incumbents) through innovation, comments

Pai o TPI.

Genpacts Bhasin says, We probably had more

success than we thought, we would, in terms o

acquiring new customers. The quality o growth too

has been outstanding. When we started doing things

independently, a lot o people were asking how

will a captive transorm itsel into an independentcompetitive entity? He adds, Our challenge today

is managing growth as the demand is very good. The

biggest learning in all this was going to the market

competitively and understanding how this market

worked. We were new to the industry and didnt

ever think about competitors or where the industry

was heading to or consulting companies that were

involved. O course, we had to learn how to build a

brand, which under GE we had never thought about.

As Kris Gopalakrishnan o Inosys encapsulates

I think o 1981 through 1991 as the surviving ascent

company, surviving to establish a viable business. In

1991, the economy opened up. That was the period o

building the oundation o the company, o a stable

organisation working systems, processes, lots

o things we did to create a strong oundation or

growth. And then in 1999 helped by the Y2K boom,

the telecom boom and the Internet boom we began

growing more than 100 per cent year over year. Thats

been our period o accelerated growth. It took us

23 years to get to the frst billion, 23 months orthe second billion, 12 months or the third billion and

so on.

exhbtg adrhp

The ideal company has the economy o scale and

elasticity o size. At Wipro, we recognised this early

and in 1999, when our revenues were less than

USD 250 million, we created a scalable, verticalised

organisation structure. Today, each SBU is a

sel-contained business which generates about

USD 300 million in annual revenues. To get beneftso scale, resources such as fnance, HR, quality

and marketing in each vertical have linkage to a

central unctional leadership as well. So, in eect,

each vertical is like a separate company, eels

Wipros Lakshminarayana.

IT mjrs Insys, TcS nd Wipr hve emerged

s the three mst dmired mpnies in Indi,

llwed by Sunil Mittl led telem gint Bhrti

airtel nd nther Tt grup mpny Tt Steel in

the tp fve, rding t list prepred by the

Wll Street Jurnl asi.


*Third Prty BPo Plyers NaSScoM Rnking

FY2005 FY2006 FY2007 FY2008

Rank 1 WNS Genpact Genpact Genpact India Pvt Ltd

Rank 2 Wipro BPO Solutions WNS WNS Global Services WNS Global Services Ltd

Rank 3 HCL Technologies BPOServices

Wipro BPO TransworksInormation Services

IBM-Daksh Business ProcessServices Pvt Ltd

Rank 4 IBM Daksh HCL BPO Services IBM-Daksh Aditya Birla Minacs

Rank 5 ICICI OneSource ICICI OneSource TCS BPO Tata Consultancy Services BPO

*The name o the company has b een displayed as it was in the year the rankings were announced.


13/18

ey o th idtry

Sid Pai however says Market leadership is only

partly about watching your back. You certainly need

to be paranoid to implement the change proactively,

reinvent, innovate and so on, but market leadership is

as much about looking ahead and moving orward.

For entrepreneurs, Pai advises, Have a strong

business idea, clearly articulated vision and business

plans, resources tied up to meet the business plan

and most importantly, a team o people who share the

chemistry and passion and have the complementary

skills and capabilities to make it happen.

Chagg goba vromt

Lakshminarayana eels During tough times

leaders need to basically do two things stand by

your customer and look to create opportunities.

The ormer, sometimes, may entail sharing the

pain in the short term but i you want to be

partners with your customers you need to be

there or the long haul. The return on these

investments will be enormous. The latter will, almost

invariably, mean reinventing yoursel sometimes

slightly, sometimes substantially. But these changes,

i executed well, will open up newer, proftable avenues

and dierentiate you rom the crowd, apart rom

keeping you relevant to the customer in a changed

business context.

The leaders have learnt to survive and thrive in tough

times. They have leveraged such turbulent cycles to

re-enorce and consolidate their businesses. They

have unveiled several strategically important activities

such as hiring good people in the market, inwardly

ocusing to become leaner, piloting innovations in

business delivery mechanisms and reecting on

past experience to inorm uture direction. Tactically,

leaders have ocused more on the middle line (cost

structures) than the top line during such times,

concludes Pai.

29 Indi-bsed mpnies hve been listed mng

the best 100 IT servie prviders in new survey

rried ut with view t ssist business heds.

Mjr utsurers identiy relible, innvtive

nd teh svvy prtners inluded Indis Tt

cnsultny Servies, HcL Tehnlgies, Genpt,

WNS Glbl Servies rding t survey by

cyberMedi nd Glbl Servies Mgzine.


a truly glbl tprint will require investments hed

visible results. The ulturl hllenges re intensiyings new nsulttive pprh reples the erlier

tehnlgil pth twrds grwth. The sheer sle

pertins nd emerging bureury is hindrne t

times, s yunger emplyees re inresingly distnt.

Investments in nn-liner grwth re impertive, but

nly smll minrity mngers mentined this.

Severl dmitted tht they lgged glbl inumbents in

terms enggement with lients. as we nluded in

ur Nvember 2007 crystl bll reprt, we believe the

next ew yers will be trnsitin perid r the industry.

While stk returns my mderte, NextGen ledersexuded nfdene tht Indin ITs glbl sle nd brnd

n nly imprve urther.

Exerpt rm cLSa Prjet NextGen

hllenges hed r the Indin IT industry


14/18

Factbox

GDPIndias GDP at 9.4 per ent was the second

astest growing GDP ater China in 2007-08

FDi As per the RBI, Indias actual outbound ForeignDirect Investment (FDI) in 2007-08 was an

estimated USD 17,436 millin, an increase o

29.6 per ent over USD 13,454 millin in the

previous fscal

FdgGovernment unding or research and

development in the nano technology sector

is mere USD 7 millin even while smaller

countries such as South Korea is spendingaround USD 233.5 millin

Da TrackrAs per the latest TPI index, the number o

deals touched a 10-year high in H1 2008. This

is attributed to the 282 contracts valued at

nearly USD 49 billin in Total Contract Value

(TCV), and nearly USD 10 billin in Annualised

Contract Value (ACV)

iT ad GDPAccording to Evalueserve, the booming

IT industry is expected to account or

8.05 per ent o the countrys GDP by 2015-16,

compared to 2.86 per ent in 2007-08

M&A ad Pe DaThe total value o deals (M&A and PE)

announced in the frst hal o 2008 was

USD 24.62billin as against USD 50.75 billin

and USD 19.4 billin during the frst andsecond hal o 2007 respectively. Average

Indian M&A deal size was USD 64.4 millin,

while the average Indian PE deal size was

USD 38.17 millin during the frst hal o 2008,

according to a study by Grant Thornton Deal

Tracker July, 2008

Gr iTAbout 85 per ent o IT proessionals surveyed

or a Forrester report stated that environmental

actors were important in planning IT

operations, but only one-quarter o these

had put the green criteria in their companys

purchasing processes. Only 15 per ent o the

IT proessionals have a high level o awareness

about their vendors green initiatives, which

points at the lack o awareness among the

entire community

iCT PtratoThe penetration o ICT is between 17-20 perent in the MSME segment, the total size

o which is estimated to be 35 millin units

spread across the country

Rp VaThe value o the Indian Rupee against the

US dollar has uctuated rom Rs 39.13 on

February 1, 2008, to touch Rs 39.88 on

April 1, 2008, risen to Rs 43.08 in July 1, 2008 to

Rs 42.49 on July 31, 2008 and was at Rs 43.68

as o August 25, 2008

B itgcIndias market or Business Intelligence (BI)

platorms grew by 35.6 per ent in 2005-06,

making it Asias astest growing BI geography

iT ad HathcarThe Indian healthcare IT market is the astest

growing in Asia with an expected growth rate

o 22 per ent

Grog ecoomyAccording to a PriceWaterhouseCoopers report,

India could grow to almost 90 per ent o the

size o the US economy by 2050

e-commrcIndias e-commerce market is expected to touch

USD 2.33 billion by FY2007-08, as per a survey

M&AIndia has recorded a 126 per ent jump in the

amount spent on Merger & Acquisition (M&A)

deals outside the Asia Pacifc region

itrt urIndias Internet user base grew by over 40 per

ent to touch 46 millin in September 2007

rom 32.2 millin in the same month last year

FDi CofdcIndia at second place in A.T. Kearneys 2007 FDI

Confdence Index, continues to attract investors

in the high value added services industries like

fnancial services and inormation technology



15/18

nAssCOM spotght

Th natoa sk Rgtry: spgscrty or th ida iT-BPO idtryOver the past ew years, there has been a growing

recognition o the act that Indian IT-BPO companies,

though secure, continuously need to review and revise

the standards or maintaining a secure environment

or their employees and customers.

Against this backdrop, NASSCOM and the industry

conceptualised and launched the National Skills

Registry (NSR) under NASSCOMs Trusted Sourcing

Initiative. The NSR a verifed database listing

employee o this industry, along with their proessional

and educational background data, aims to provide a

secure abric to the Indian IT-BPO industry.

Since its launch in January 2006, the NSR has crossed

several milestones. Today, the registry has 3,30,000

registered individuals, and 65 companies accountingor almost 70 per cent o the industries workorce

have joined. This frst-o-its-kind, industry eort led

by NASSCOM is independently managed and executed

by NDML, a ully-owned subsidiary o the National

Securities Depository Limited.

Speaking about the implementation o the NSR, Vijay

Gupta, Senior Manager, NSDL said NSR is a unique

initiative, which brings users with divergent processes,

practices, size and strengths together and agree

to share their data work as per common processes

and practices. All this is done without a regulatory

mandate based only on concept selling. This has been

a tough job or companies to change rom their

existing processes, convince the employees to register

and or us as well to roll it out at such a scale.

Talking about the advantages that NSR brings to

Indian IT-BPO companies, T Sridhar, Chie People

Ofcer, Cognizant says, We are sure that the

NSR initiative will enhance the Indian IT sectors

brand equity globally. Not just that, it will add tothe comort our customers enjoy in working with us.

This will create urther opportunities or growth in

our business. With the participation o all NASSCOM

member companies, this will become the IT industrys

equivalent o the Social Security Number. Eventually,

employers will reer to these details beore taking an

employee on board.

The NSR is a national, authentic, verifed online

database containing third party verifed personal,

qualifcation and career-related inormation o IT-BPO

proessionals and is touching all the stakeholdersin the IT-BPO equation employees, hirers and

enorcement agencies.

Bft to takhodr

The NSR is creating a database o potential

employees and weeding out undeserving

candidates who ake resumes or employment

Employers save time on background checks

enabling aster completion o HR processes

Companies are reducing HR sourcing costs

Improved recruitment practices in IT-BPO industry

With NSR gaining momentum, background checks

are becoming easier to implement or IT-BPO

organisations with a number o these companies

mandating it or existing and new employees.



16/18

lookg Ahad

Forthcomg evt

nAssCOM Qaty smmtDte: October 15-16, 2008

Venue: Hotel Leela Palace, Bangalore

NASSCOMs Quality Summit will ocus on how process excellence has

become the hallmark o the Indian IT-BPO industry and a key element o

its success story. Globally renowned speakers at the summit will discussissues related to quality including benchmarking sotware cost, quality and

productivity, going beyond certifcations and measuring the technical quality o sotware at the systems level,

essentials o the sotware process, predicting quality through testing, changing role o quality proessionals in

the knowledge era and the next generation o quality proessionals, at this years summit.

Register now at www.nasscom.in

nAssCOM-CnBC iT ur AardDte: October 31, 2008

Venue: Taj Landsend, Mumbai

NASSCOM-CNBC TV 18 IT User Awards 2008 will recognise companies at the

oreront o IT deployment in India. The event, a key element o NASSCOMs

initiative to catalyse the growth o the domestic IT-BPO market, will ocus

on 14 vertical industries in the country, and the manner in which they have

deployed IT to achieve signifcant business benefts.

The awards are centred around the theme o Enterprise Value, and will honour enterprises where technology

implementation has brought value to the actual user in the enterprise.

The goal, as in the past years, will be to spotlight the companies that have innovatively harnessed the power otechnology to create a catalytic impact within their organisations and industries. The awards will cover verticals

such as banking, fnancial services, insurance, manuacturing, egovernance, healthcare, travel and tourism, real

estate, retail and logistics among others.

To apply or nominate an organisation or the awards, please write to [email protected]

Th emrg Ot

CorcDte: September 29, 2008Venue: The Shangri La Hotel, New Delhi

High on NASSCOMs agenda or emerging

companies, the Emerge Out Conerence will provide a national platorm or small and medium enterprises to

deliberate on technology and business trends, and gain insights on the new opportunities opening out beore

them. A culmination o the numerous activities NASSCOM has been organising in the Emerging space, the

event will witness brainstorming, mentoring, networking and experience sharing among companies, which will

result in creating a strategic vision or emerging organisations. While at the one end, successul SMEs will talk

about what they did right to rank among the high perormers, at the other end, leading entrepreneurs will

provide tips and tricks to help the emerge bunch make a mark within their chosen niches.

Visit www.nasscom.in to register or write to [email protected] or urther details



17/18

Markt Pac

Cotract ad Aardwns aoc mt-yar usD 1 bo BPO cotract th Avva

WNS (Holdings) Limited, a leading provider o global Business Process Outsourcing

(BPO) services, has entered into a transaction with Aviva, the worlds fth largest

insurance group with USd 95 billion revenue in 2007. The WNS-managed acility

in Pune will remain with WNS.

TCs rcv iovato Aard rom Frrar

Tata Consultancy Services, the leading IT services, business solutions and

outsourcing frm announced it has received the Innovation Award rom Ferrari,

or its ability to use technology services to spur innovation in one o the most

competitive and technologically advanced arenas o automobile engineering. The

seven-time F1 World Champion Michael Schumacher presented the Innovation

Award to TCS ofcials

ng sotar th emrgg ida Aard

Newgen Sotware Technologies limited, a leader in the feld o Business Process

Management (BPM) and Enterprise Content Management (ECM) has announced

that it has won the CNBC-TV 18 and ICICI Bank Emerging India Awards. The award was

elicitated in a grand ceremony in London by the Honourable Commerce Minister,

Kamal Nath and Indias steel tycoon, L N Mittal to Diwakar Nigam, Managing

Director, Newgen Sotware in the Inormation Technology, Communications and

Entertainment (ICE) and IT-enabled Services (ITeS) category.

Rakg ad Pattl&T rak frt Qaty wa strt Jora Aa srvy

In a survey conducted by Wall Street Journal Asia, L&T has ranked No. 1 in Quality

among its Indian peers. In the overall listing o Indias Top 10, L&T has claimed

the sixth position.

satyam BPO rakd no 2 BPO vdor gobay

Satyam Computer Services Limited has announced that Satyam BPO, its Business

Process Outsourcing (BPO) arm, has been ranked second among the worldsleading BPO vendors in Brown-Wilson Groups Black Book o Outsourcing.

wpro rakd orth th Top Compa or ladr ida, fth Aa Pacfc rgo ad 20th gobay

Wipro participated in the Top Companies or Leaders 2007 Survey conducted by

Hewitt Associates, Fortune Magazine, and The RBL Group, and were amongst

563 companies globally to participate. Wipro was ranked ourth on the Top

Companies or Leaders in India, fth in Asia Pacifc region and 20th globally.

ioy aardd to patt by th utd stat Patt

ad Tradmark ofc patt gratd Hoography adMob Commcato

Inosys Technologies Limited, today announced that it has been granted two

patents by the US Patent and Trademark Ofce. These patents are in the areas

o holography and mobile communications.

Disclaimer: This inormation has been collected through secondary research and NASSCOM is not responsible or any errors

in the same.20 Newsline August 2008


18/18

Markt Pac

Goba expaoMdtr pa arhor prc ad aoc Mxcodvopmt ctr

MindTree Limited, a global IT and R&D services company announced its intentionto open a new development centre in Monterrey, Mexico later this year. The new

development centre will help the company strengthen its nearshore operations in

the United States and Latin America.

skta d eropa ootprt th Facfrt aac

Skelta Sotware, a leader in BPM and Workow solutions recently announced

a partnership with Financefrst as their Value Added Reseller or the European

market. Financefrst provides an array o fnancial services in accounting, fnance,

tax preparation, cash ow planning, reporting and controls to customers in Europe.

Financefrst supports CFOs by streamlining back ofce, improve efciency, and get

better insight in their day-to-day operations

Ctomr AocmtHyatt hard rvc ctr, llC ct Gpact or fac adaccotg rvc

Genpact, which manages business processes or companies around the world, has

announced that it has signed a fve-year contract to provide fnance and accounting

services to Hyatt Shared Service Centre, LLC. The decision to reengineer and globalise

these services is part o Hyatts global competitive improvement initiative.

edcato ad sk BdgMphas ach Cog Coct or egrg Cog;partrhp th acadma to hp bd dtry rady tat

MphasiS, an EDS company today ormally launched its College Connect

programme. The company will partner with Engineering Colleges to help bridge

the gap between academics and industry needs thereby creating talent that

can be deployed on real time project work immediately. College Connect is

being undertaken with Birla Institute o Technology Ranchi, MIT Pune,MSEC Chennai, New Horizon Bangalore, NIST Berhampur, Orissa and

Sathyabama University Chennai.

Gdr icvtyitratoa ho ad Mrr lych cot to prpar om oradrhp poto

Merrill Lynch, one o the worlds leading fnancial management and

advisory companies, has awarded a USD 50,000 grant to renew or the ourth

year, its support o the Womens International Leadership (WIL) Programme at

International House. 18 women rom 13 countries were chosen to participate in the

2007-08 WIL Programme. Since its inception in 1990, more than 200 women rom

a variety o cultures and disciplines have participated in this merit-based

scholarship programme

Domestic BPO Scoring a Home Run

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