India has long been known as a global call center, primarily, for the English-speaking world. Today, the country’s business process outsourcing industry supplies small and large businesses across the globe with not only customer care agents but comprehensive infrastructure and manpower to deal with most challenging business tasks, from sales and marketing to project management and financial audit. As much as the Indian BPO industry has altered the way global business operates, it has affected India’s own socioeconomic realities, exposing the good, the bad, and the ugly outcomes of changes brought by the industry’s rapid growth.
The offshoring story of India began in 1985 when Texas Instruments set up an office in Bangalore. In the 1990s, many airlines and technology companies started outsourcing their back office work to India; soon IT companies followed.
Business process outsourcing (BPO) in India emerged as the largest segment in the outsourcing and offshoring industry, catering to various clients – both in the West and at home – and providing a wide array of services, from information technology enabled services (ITES-BPO) to knowledge process outsourcing (KPO) and legal process outsourcing (LPO), followed by R&D and engineering.
The Indian BPO industry has come a long way from being just back-office outsourcing customer support services – what is known as ‘voice process’ in industry jargon – to becoming a real business partner responsible for business outcomes on the customers’ side. BPOs now take up increasingly complex tasks that include designing marketing campaigns and conducting marketing research, analyzing investment portfolios, advising lenders on collection strategies, optimizing supply chains, and even preparing budget planning.
Another important trend is that the services are no longer delivered from low-cost destinations such as India only. The geography of BPO delivery centers broadened depending on the clients’ requirements and the skills of people in those geographies. Indian BPO giants expanded their business in the US, UK, Europe, and Latin America, as well as in China and other Asian countries, setting up offices and delivery centers there. The outsourcing world has turned upside down.
Today, India accounts for about 38% of the global BPO market, which witnessed growth of 13% in 2014. Represented by 3,500 companies serving clients in more than 78 countries, the industry today provides direct employment to 3.1 million people and indirect employment to 10 million people. These figures are expected to double in next few years. The top 15 companies of the sector, according to India’s IT-ITES and BPO industry body NASSCOM (National Association of Software and Services Companies), account for about 44% of the total industry’s revenue. The list of the industry leaders includes Genpact, Tata Consultancy Service (TCS), Wipro, Infosys, Aegis, First Source, WNS, EXL, and others.
NASSCOM estimates the BPO industry’s revenue at over $26 billion, out of which $23 billion are exports. Assessing its annual growth rate conservatively at 10-11%, NASSCOM expects the industry to reach $32 billion to $35 billion in next three years.
“Matured markets are the largest contributor of BPO spending and will continue to generate significant demand over the next five to seven years. However, the share of ‘emerging’ markets is expected to increase to 18 percent by 2020. Continental Europe is likely to witness an uptick in potential for such services,” K.S. Viswanathan, Vice President – Industry Initiatives, NASSCOM, said in an interview with BRICS Business Magazine.
He adds that APAC is promising too, especially countries like Australia, New Zealand, Malaysia, and Singapore. IT-BPO companies are also increasingly targeting Middle Eastern and African markets that show growth potential.
Devesh Nayel, Head of Manufacturing and Executive Committee Member, Capgemini BPO, believes growth will continue, especially with the Indian government launching its ‘Digital India’ and ‘Make in India’ campaigns. “These campaigns are designed to integrate the people of India with government departments and transform India into a major manufacturing hub,” he told BRICS Business Magazine.
According to Viswanathan, the IT-BPM industry has attracted around seven percent of India’s total FDI in the last 12 years, which is estimated at around $27.4 billion. “Significant investment is flowing as organizations are looking at capacity expansion, innovation, building solutions around automation, artificial intelligence based services,” the NASSCOM vice-president says.
In 2012, industry body NASSCOM decided to bury the acronym that the world had come to associate with India over the past decade by re-branding it with one that it thought was more appropriate for the industry’s maturity level: business process management, or BPM. The re-branding of the industry was supposed to give it the identity of being a full-service value provider rather than an industry that plays only at the lower-end of the services spectrum.
According to Devesh Nayel from Capgemini BPO, if earlier India was associated with call centers, or voice processes, today, India has become a major hub for transaction and value-added services, with finance and accounting outsourcing (FAO) currently dominating the BPO scene in India. Nayel also notes the increase in demand for supply chain, HRO, analytics, application development, infrastructure management and testing services, while digital manufacturing and automation in vertical domains are becoming a reality.
“Brand India and its capability to deliver high-quality outsourcing services has improved exponentially over the past 10 years, and as a result, we’re now expanding into niche domains and delivering next-generation, transformational BPO,” Nayel says.
India is not the only country among its post-colonial peers to take advantage of its inexpensive professional workforce and widespread use of English. In Asia, for example, it is the Philippines that is being seen as an emerging competitor for India. The Philippines, having a historical and cultural proximity to the US, has emerged as another hub of BPO operations, despite the higher workforce cost.
Industry players, however, note that the Philippines remains the ‘voice’ hub, while India has shifted to more complicated processes. “It is very difficult for the Philippines to take over India, at least in next seven years, because India is a bigger country, and education standards here are slightly higher than those of the Philippines,” Ranjan Bandyopadhyay, VP and head of HR for BPS at Tata Consultancy Services, said in an interview with BRICS Business Magazine.
The Philippines may pose competition to India in the voice space, he added, which is a good reason for Indian companies to leverage this country as their corporation hub. “These days we are talking about something like ‘coopetition’ – or competitive cooperation. We are leveraging each county’s strength,” Bandyopadhyay says.
Changing the core
Although the Indian BPO sector has evolved into a widely diversified industry, call centers with agents taking on American names and switching from American to British accents while selling credit cards and insurance policies have not disappeared and are unlikely to do so in near future.
Call centers operate at night because of time zone differences with major client countries, namely the US, Canada, and Europe. Night shifts do not quite suit Indian traditions considering that the majority of BPO employees are fairly young (about 74% of employees are less than 30 years old and 35% are less than 25 years old). The fact that women have started taking up jobs with BPO companies is even more difficult to digest. Though a working woman is no longer uncommon in India’s urban centers, a ‘woman working in the night’ evokes a different connotation.
The average man in India is hardly familiar with BPO and BPM terms, but he knows for sure what call centers are all about: sleepless nights, cigarettes, alcohol, and drugs, plus exposure to sex and indecency.
Those at the top echelon of the BPO industry may feel such call center scenarios are far back in the past, as leading BPO companies own high-tech office spaces, modern campuses, and their employees drive their own cars to work, take out housing loans, and go abroad for vacations. For those outside the top 15 BPO leaders, however, the reality looks much the same as it did a decade ago.
Thousands of small- and medium-sized call centers occupy the office premises of train stations, and some are located in industrial zones or wholesale markets where the rent is cheap. The routine of call center employees is filled with alien names and changing accents, numerous cups of ‘chai’ (Indian sweet milk tea), cigarettes, often weed, and cheap street food.
Such issues as obesity, alcohol and drug addiction problems, depression, and the spread of HIV and AIDS among BPO industry employees are being studied widely by academics and professional associations in India. Some experts point out problems related to breaking India’s traditional family foundations, too, as result of larger exposure to Western values and customs.
Despite worrisome trends which are not specific to India, but rather seen in all countries with booming a BPO industry, from the Philippines to Brazil, there is definitely a positive effect that BPO has on the Indian economy and society.
“The role of BPM in India’s economic growth has been tremendous, especially in the last few years, when the demand for outsourcing work to India has been significant among Western companies,” Viswanathan says.
The BPO industry has contributed to many social, economic, and even cultural changes in India. The outsourcing centers were set up not only in metros but in Tier 2 and Tier 3 cities, giving sections of society previously excluded from the organized sector of the economy access to employment. Today, nearly 58% of the IT-BPO workforce is from these cities, and 56% of employees are the key breadwinners. A NASSCOM study shows that by 2020, four million people will be directly employed by the IT-BPO industry from Tier 2/3 locations, a 20-fold jump in the number of employees operating.
The BPO industry has also played a major part in bridging India’s gender divide by providing equal work opportunities to women. Today, women account for more than 36% of the IT-BPO industry’s total workforce, with over 26% of them being chief wage earners.
“Traditional sectors like manufacturing have historically remained male-dominated. However, with a change in societal perceptions and the influx of attractive career options like BPO, the gender diversity ratio has considerably improved. This development is even more evident in smaller cities,” Devesh Nayel from Capgemini BPO points out.
The development of the IT-BPO industry has led to the transformation of India’s economy from being largely agrarian to service. Today, the IT-BPO industry accounts for nearly 10% of India’s service sector revenue, according to NASSCOM data, and contributes around nine percent of India’s GDP. By 2020, these figures are expected to grow to 14% and 10%, respectively. The per capita GDP contribution of IT-BPO employees is over 80 times that of agriculture, NASSCOM notes. Agriculture accounted for just seven to eight percent of India’s GDP in recent years, despite around 49% of India’s workforce being employed in farming, the New Delhi-based ICRIER (Indian Council for Research on International Economic Relations) estimates.
50 shades of BPO
Highly profitable and rapidly growing, the Indian BPO sector has its own skeleton in the closet. The industry operates sensitive data, and some of it eventually ends up in the wrong hands. Among the millions employed in the BPO industry are those who prefer good and fast cash over a long and successful career.
Since the beginning of the 2000s, India has been gaining a reputation as a country producing telephone and online scams. By that time, Nigerians were already famous for their emails, known as advance-fee fraud or 419 fraud.
Having access to gigabytes of people’s data (labeled as personally identifiable information, or PII, in the US – any data that could potentially identify a specific individual, from names and birthday dates to social security numbers and credit card details), Indian scammers, all products of the BPO industry in one way or another, went far beyond Nigerian colleagues, both technologically and strategically.
Karan K., a BPO veteran in his late 20s who requested that his full name not be disclosed, came to the BPO industry right after graduation, and today owns a company that helps Western clients outsource marketing and sales processes with BPO companies in India. During his decade-long journey from call center agent to business owner, he has seen many good and bad practices in the industry, he claims.
Among the most common and profitable scams conducted from India and targeting Western customers are various tech support scams in which victims’ systems are infected with malicious software, as well as loan scams where people are promised easy loans and requested to transfer money to cover ‘processing fees.’
The most recent one is the IRS (the US’s Internal Revenue Service) scam where people are phoned and threatened to be put behind bars for not paying taxes. Immigrants in the US are the main target of the fraudsters, who threaten people with arrests and deportation.
“The callers ask them to go to Walmart, buy a prepaid card called Moneypack, and tell the callers its number. From that card, the money is transferred to any Visa prepaid card, owned by someone involved in the scam. He can be an Indian, a Pakistani, an American, whoever. The money is then sent to India through hawala [an informal payment transfer system operated in the Middle East, Africa, and the Indian subcontinent]. Within just 24 hours, it reaches India,” Karan explains, adding that such transactions are untraceable.
In July 2015, 36-year old Sahil Patel was sentenced in the United States to 14-and-half years in prison. Patel, who was coordinating the IRS scam, was accused of obtaining ‘leads’ on potential victims and providing them to call centers in India. This sentence came as a powerful message to all those engaged in such scams. However, since the chain involves many people in multiple countries, each responsible for his or her own part, it becomes extremely difficult for law enforcement agencies to break up the chain.
The government officials and industry experts interviewed for this story could not name specific policies implemented by the Indian government for cracking BPO scams. However, Indian police have been raiding call centers with striking frequency, mainly in the state of Gujarat and city of Kolkata, the capital of the West Bengal state. Both are known among industry insiders as main centers of BPO frauds in India.
In one such raid in November 2014, four young techies who had established their own BPO were arrested by Indian police in Kolkata on an Interpol alert. They were scamming people across the globe by luring them with cheap software and stealing money with the help of Teamviewer.
“India used to have such a good name in the industry. Before Pakistan was doing different scams, and Western clients stopped outsourcing to Pakistan. Now India is doing all this,” Karan says. He adds that India has always been known for handling sales processes unlike, for example, the Philippines, which is known mostly for customer care. This explains Indian BPOs’ possession of millions of people’s sensitive data. The cost of data in the black market ranges from 20 to 50 rupees ($0.30 to $0.75), depending on the details available, with credit card details and social security numbers being the most valuable.
“Odd instances of frauds bring a bad name to industry, but NASSCOM-DSCI work proactively with regulators across the globe, and law enforcement agencies to help eradicate such practices,” Nandkumar Saravade, CEO of DSCI, a not-for-profit company setup by NASSCOM as an independent self-regulatory organization (SRO) to promote data protection and develop security and privacy codes and standards for the IT-BPO industry, said in an interview with BRICS Business Magazine.
The survey on the state of data security and privacy practices being adopted by the Indian BPO industry conducted by DSCI and KPMG in India few years ago revealed that more than three-quarters of the organizations faced challenges due to a lack of awareness among employees on liabilities arising from data breaches. However, as industry experts note, people’s personal data available on the international black market is not always the result of BPO employees stealing the company’s data. This happens, but is less common.
“Sometimes a small BPO owner whose business is not performing well or who is not getting paid by the client whose process he is working on, which happens often, has to shut down the call center,” Karan explains. “To recover at least some money, he will sell the data he acquired while performing completely legal processes. Then this data can become available on the black market and may end up in wrong hands.”
He admits that he often gets offers to buy personal data but refuses them since his business reputation is more important. “Even if I would not use this data for my own purposes, I can never be sure that call centers that I am using for my products’ sales will not misuse this data,” he adds.
Not only customers, but outsourcing companies themselves often become victims of fraud. Mona Garg, CEO and MD of MTLK Connect, who worked her way up from a call center employee to an outsourcing company owner, says outsourcing companies, especially smaller ones, may fall victim to scammers without being aware of it.
“Being a small or medium company, you need to do so much of R&D on the clients who come to you with their processes because many of them, irrespective of where they are located, can be involved in bad practices,” she said in an interview with BRICS Business Magazine. “And we always have to be ready for the worst, because even a big and ‘good-looking’ client may turn into a fraud one day – we’ve had such experiences, unfortunately.”
The leaders of the BPO industry are generally reluctant to discuss such issues as fraud in the industry, partly because there is no data to analyze or comment on, and partly because it is commonly believed that data theft and frauds are part of the ‘phony call-center’ world while large and established BPO companies have nothing to do with it.
Ranjan Bandyopadhyay from Tata Consultancy Services admits that frauds are an issue for the industry. “If you look at the dark market, there are people who are buying PII; how it is affecting [the industry], we don’t know. Statistically there is nothing available,” he says, adding there is not any mandatory reporting of incidents and around 89% of the organizations resolve cases internally.
Devesh Nayel of Capgemini BPO feels this aspect of the industry is overplayed and is not specific to any region or domain. “As long as you have a good IT and data control mechanism coupled with a strong organizational work ethic, data security will be ensured,” he says.
DSCI CEO Nandkumar Saravade believes that the Indian BPM industry fully realizes the concern of its end customers regarding their personal data. “They are wary of any bad publicity resulting from a data breach. Realizing the impact of data security threats emerging internally, organizations are focusing on raising awareness among employees, and tightening controls on data accessibility,” he says.
Saravade added that the clients themselves continue to drive information security requirements, helping corporations improve their information security programs and practices. At the same time, he said, in numerous cases, Indian BPOs have gone beyond client requirements and implemented state-of-the-art security controls to improve the security baseline.
At the same time, the small and medium BPO can hardly afford implementing processes and investing in high-tech mechanisms, including expensive software, for ensuring data safety within the company and thus have to rely on common time-tested practices.
Read full article at: BRICS Business Magazine English Edition No.4(12)