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Article by Mohan Babu


Opportunities in business process outsourcing

A BPO venture is not as easy to set up as assumed by wannabe entrepreneurs. Unlike a software contract where one can take a byte size pilot, prove capabilities, ‘wow’ the customer and ramp-up operations, BPO generally involves an all-or-nothing approach, writes  MOHAN BABU

The ITeS boom, encompassing the IT and BPO sector, is seeing renewed interest among executives at technology companies who see a BPO wing as an add-on to the array of services that they offered to clients. The services being offered range from low-end call centres to high-end processing bureaus that provide seamless 24X7 operations to clients wishing to have their operations, including HR administration, payroll processing, financial analysis, etc, done cheaper. The past few years here also saw the number of operators in the BPO sector in India growing by leaps and bounds. The spate of recent mergers and acquisitions are probably an indication of the vibrancy of this sector.

BPO operations in India, unlike IT operations, have also seen a divergence in location and reach, especially because of the divergent talent pool required to service the industry. Call centres have mushroomed in small towns and cities across South India and in other parts of the country, barriers to entry notwithstanding. What are these barriers to entry? Suitable hardware, software, high-speed networks, etc, alth-ough affordable for small operations, are expensive in the context of setting up a small or mid-sized operation. While conceptualising a BPO centre, entrepreneurs are plagued by two pertinent issues that I will call the ‘Catch-22 issue” and “all the eggs in one basket syndrome.”

The Catch-22 issue

Most large organisations prefer to source their call centre and other business processing jobs to outsourcers who can demonstrate the capability to handle the task, along with access to infrastructure one can directly walk into. They do not expect any significant lead or lag time from the time the deal is inked.

Setting up such infrastructure is not cheap, especially when one does not really have a ready order or client waiting to be serviced. Herein lies the chicken-and-egg problem; and, unlike a software contract, where one can take a byte sized pilot, prove one’s capabilities, ‘wow’ the customer and ramp-up operations, business process outsourcing generally involves an all-or-nothing approach.

All eggs in one basket syndrome

Assuming an entrepreneur crosses the first hurdle by setting up a venture, bagging clients and operating profitably, he is still at risk because he has probably bet the farm on one client. Given the fickle nature of clients and an uncertain economic climate, this strategy can easily backfire if the client pulls the plug. Adding a new client, doubling the capacity, etc, are fraught with the same Catch-22 issue articulated earlier.

Several readers have written to me asking me to help them realise the BPO-entrepreneurial dream. Many wrote after sinking hundreds of thousands of rupees into dead-end ventures. Sometimes I wonder if they haven’t heard of the concept of due-diligence and having a business-plan vetted. If you recall, I had mentioned about a businessman from Satara in Maharashtra who wrote to me a few months ago. With absolutely no knowledge of the medical transcriptions business, he had leased a huge commercial space and bought 50 PCs with all the paraphernalia, including a high-speed Internet connectivity, etc. If I were in a position to help them, it would be a different story.

Holding on to my day-job, juggling my consulting assignments, and writing this column, along with sporadic speaking engagements, keeps my hands full. As I think more about the problems of setting up BPO ventures, I am beginning to think that there may be opportunities for consultants who can step in and advice wannabe entrepreneurs on the intricacies of BPO operations.

Opportunities also exist to assist BPOs streamline their operations, help them in creating scheduling systems, managing the critical paths, identifying and nurturing key talent, people management, etc. Skills in transition management, knowledge management, etc, are bound to be in demand. Any takers?





About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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