A focused approach to outsourcing services marketing
Abhishek Saxena, Senior Manager, Satyam BPO

As markets mature, the buzz word everywhere is ‘customization’. So much so that the most ‘mass product’ ever - the newspaper - will one day be customized to each individual reader’s tastes! With such predictions being made, it is but obvious that companies worldwide are in a hurry to deliver ‘customized services, products and solutions’ to customers.

Account Based Marketing (ABM) is a widely-recognized concept in helping companies customize their offerings better. The IT Services Marketing Association (ITSMA) defines ABM as ‘a strategic approach that helps companies bring greater business value to their most important accounts’. The need for ABM in outsourcing services marketing stems from the inherent characteristics of outsourcing engagements - high-value, long-term, strategic relationships involving customized services to each customer. This makes it imperative for a service provider to customize its marketing initiatives.

Account Based Marketing takes place across the following phases:
Identification of key accounts ---> Program Planning and Design ---> Account-specific Program Implementation ---> Program Management and Evaluation

The success of an ABM initiative depends on a range of factors:

Specifically in the world of process outsourcing, it is important to understand the various aspects that matter to the customer - range of offerings, delivery framework, operational excellence initiatives, customer engagement initiatives, etc. It is thus important that the marketer ‘spend time on the floor’ and understand the process in-depth. It is perhaps an apt example to compare this process to learning painting. One can surely learn painting online, but it is a wholly different experience to sit in front of a canvas with a range of oil colors and sketch a masterpiece! Put simply, there is nothing that can substitute time spent on-the-floor with Associates undertaking transactions for ‘the customer’s customers’.

Satyam BPO is one of the leading BPO majors undertaking ABM initiatives proactively. It has a dedicated ABM team that actively engages with the sales and delivery leads to understand their specific accounts and come up with customized initiatives. Be it creation of customized collaterals to share with the customer, organizing webinars on key trends/issues, enhancing the client visit experience or suggesting ways and means to strengthen the relationship, Satyam BPO adopts a holistic approach to ABM.

As the BPO industry moves on from low-end, voice services to high-end, core services of strategic importance to the customer, Account Based Marketing will become even more important. Global majors across industries such as Hewlett-Packard, Accenture and Xerox have successfully adopted Account Based Marketing. It is now time for BPO companies to travel down the same road and benefit from it.

Worldtech, a pioneer in the Andhra Pradesh ITES/BPO scenario, through its sister concern, Doctus Software Solutions, started a new chapter with its first RBPO at Kavur, Guntur, being launched on April 21, 2008, with a workforce of 30. Ramakrishna Tummala, Managing Director of Worldtech, hopes to have a workforce of 100 by the end of the year and 200 within a year’s time.

Ramakrishna, himself an entrepreneur who was born and did much of his studies in Kavur village, sees this as a small step towards fulfilling a longstanding dream of his to do something that will energize and boost the village economy. It took a lot of groundwork to bring this project to implementation stage. Through the dedication of his team and the innovative thinking of the managers, and a lot of support from the local community leaders, each obstacle, from power and connectivity to recruitment and training, was confronted and worked on till it was overcome. The Doctus team brought down the entry level requirement to the barest minimum. To be considered for recruitment all that is required of the candidate is Intermediate level education or above, typing at 35 word per minute in English, and the ability to read English. Even the training cycles was reduced to as short as possible. Further, Doctus did away with mandatory service agreements, one aspect of RBPOs that often keeps people away from them, or deprives them of better opportunities when they do arise. At every step, care was taken to ensure adherence to security and quality standards. Though Doctus RBPO is not yet CMM or Six Sigma certified, its clientele demand and receive comparable processes and systems.

The results have been encouraging. The skill level among the recruits is surprisingly high and comparable in every way to that available in urban centers, thereby allowing the project to go online earlier than envisaged. But what was more heartening was the commitment and industriousness of the rural workforce. For many of them this is an opportunity they would not have imagined would come their way.

Worldtech, one of the leading medical transcription businesses in the country, started in 1998, even before the term BPO gained common currency, and has successfully created a brand presence in the healthcare documentation segment. Even at that time, the vision was to evolve mechanisms that would empower workers with relatively limited technical and educational qualifications to earn more than they would have otherwise been able to.

With over 500 employees, Worldtech is a success story. Doctus, a company offering a wide range of services such as training, financial services, data entry, claims adjustments and processing. With more than 150 people on its staff at the Hyderabad center, and now with the Kavur operation with a targeted 200 workers within the next one year, Doctus and Worldtech are contributing to reverse the trend of people migrating to the cities, thereby reviving the cultural and economic life-force of the villages.

While most of the present business is offshore outsourcing from the US, RBPO’s look towards its peers in the IT and ITES segments to come forward and support this initiative by outsourcing domestic processes that are easily and effectively outsource-able and helping generate higher volumes of employment at rural locations.

Neti Srinivasan, Brigade Corporation

Background

A decade ago, the concept of business process outsourcing took off in a big way, supported by the promise of substantial cost savings and increased efficiency. The fact that the Business Process Outsourcing (BPO) concept has been largely successful in living up to its promises becomes quite evident when you look at the large number of multinational companies that have turned to business process outsourcing and are deriving the benefits associated with it. By outsourcing their non-core business processes to outsourcing companies, businesses were able to concentrate more on their core areas, which impacted their bottom lines positively.

Today India has become a preferred destination for IT/BPO services evident from the fact that exports of Indian IT Services and BPO services grew by 28 percent over the past year to reach $34 billion. The industry directly employs about 2 million people and is expected to sustain an export growth rate of 18 to 20% annually for the next five years.

Industry Structure

BPO services accounted for $10.9 billion of annual exports (Year – 2007-08), of which the major segments were customer interaction and support (43.5% of BPO exports), finance and accounting (22.1%), verticals-specific (travel, utilities etc.) services (17.7%) and others (16.7%).

While the United States and United Kingdom remain the largest export markets (61 per cent and 18 per cent respectively), India’s IT services industry is steadily increasing its presence in other geographies. Continental Europe now accounts for 12.3 % and Asia-Pacific 6.4% of industry exports. (Source: NASSCOM (National Association of Software and Services Companies).

India’s Competitive Proposition

The foremost competitive advantage of India’s BPO services industry is a highly skilled workforce that offers a 3:1 cost differential compared to service providers in the United States and Western Europe. India’s system of higher education annually produces nearly 2.8 million graduates (of whom 495,000 possess technical degrees) and over 300,000 post-graduates. This large, technically proficient, linguistically capable labor pool enables Indian ITES service companies to deliver a compelling economic proposition to clients worldwide.

Business Challenges

While the growth of the industry has been spectacular to say the least, it will need to contend with the challenges which face the industry today. Some of the potential challenges are given below –

Market dependency

The sector is heavily dependent on the United States and is thus vulnerable to the ups and downs of the American economy. The obvious key to overcoming this for the Indian industry is to spread out to other markets geographically and move up the value chain within their current markets. Another area to look at is to develop the non-English segments in BPO. Countries like Japan offer a good opportunity for expansion.

Furthermore, Indian IT service providers are diversifying their customer bases to other markets such as U.K., Australia and Middle East.

Talent Crunch

This has received widespread coverage in the media and it is accepted facts that while the number of potential candidates for employment remains substantial, their ‘employability’ (typical acceptance ratio is 5% to 7%) is an issue. In addition, retention of middle and senior management teams is a critical success factor for the BPO service companies. Added to this is the bugbear of all BPO firms – high attrition rates. Attrition eats into the quality of service delivery and entails creation of additional ‘bench’ staff which impacts profitability directly. The key to solving the talent crunch is to expand the pool of employable candidates substantially via effective industry-academia interfaces.

Macro-economic factors

There are several factors which affect the industry over which individual organizations have limited control.

The current oil prices scenario is one of such. The transportation costs of BPO organizations will increase apart from the impact it has on the overall economy. The long term solution is to improve the public transportation system. Depreciation of US Dollar against Indian Rupee has impacted the profitability of many export-led BPO organizations though of late, the US Dollar has become stronger against the Rupee.

Some Indian companies are heading offshore to maintain their cost effectiveness or provide ‘near shore’ solutions. Investments in process improvement would help the organizations combat these situations.

One more significant issue is of the ever ballooning wage bill. With the talent crunch being faced by the industry and the specter of inflation, the cost of talent is spiraling upwards, thus reducing the very platform of the BPO industry – that of cost arbitrage. Some of the strategies include hiring freshers and students with non-engineering backgrounds, establishment of operations in tier-II and tier-III cities, increased billing and employee utilization rates, and improving the business mix to increase productivity to beat the heat of the rising salaries. Industry analysts believe that with these strategies, coupled with an indexed wage differential, the BPO firms should be able to retain their competitive edge in outsourcing for at least another 10-15 years.

Policy Issues

Yet another challenge facing India’s IT-BPO industry is the expiration of the income tax holiday period for Software Technology Park (STP) Units in 2010. While the 15 year tax break (100% for first 5 years and 50% for next 10 years) would be available to units located in Special Economic Zones (SEZs), the benefit will not be available to STP units. This will reduce India’s attractiveness as certain competing countries offer tax breaks.

The tax sops make India attractive among other things. SEZs will provide continuity of tax breaks till 2014, but there are issues regarding land and infrastructure there. SEZ’s are typically located far from the city and transporting large employee bases to such locations becomes a challenge. Besides the cost, there is also the commute time. Companies will have to build new pricing models once the sops are withdrawn. The industry will have to look at automation, process efficiency and also get into high-end processes. Other countries are an option, but the depth, breadth and quality of manpower is limited outside India. Increasing challenges from countries like China & Philippines need to be acknowledged and combated. BPO services in China have also been growing significantly with their BPO Revenues touching US $ 1.6 billion.

In conclusion

It is a well established fact that BPO industry has the potential to create a very large base of direct employment across a broad range of disciplines. We need to protect this competitive advantage to allow the Indian BPO industry to flourish and contribute to the economy and in the years continue to build on its global leadership.