Bpos and Kpos

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Executive summary

This study is about the globalization and its effect on the Indian economy. Its gives

a brief review of what is globalization actually means and what are its effects i.e.

its advantages and disadvantages on India. The topic the effects of globalization on

Indian economy with reference to BPO and KPO gives you a brief review of how

globalization came to India its history and different practices practiced in India

after the globalization came into existing in India. It also states the entry of BPO‘s

in India and its different reforms or features and how it changed the scenario of the

Indian economy. Is gives a small review of KPO‘s as well and the difference

between these two (BPO and KPO). The change from only government business to

privatization and liberalization changed the perspective of the way people looked

at India.



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Introduction to globalization

Historical development

Trade in goods and services

Movement of capital

The important reform measures

The impact of globalization on Indian economy

The dark side of globalization

Introduction to business process outsourcing (BPO’s)

History of BPO’s

Importance of outsourcing

Recruitment

BPO’s security

Process

Impact of globalization on developing countries (with ref. to India)

Outsourcing

Introduction to KPO’s

What is KPO

Scope and future of KPO

Why KPO

Accenture case study

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The objective of this study:-



Is to show how India was before the globalization and what was its

position and when India went into globalization and the BPO‘s and the

KPO‘s entr ance in the Indian changed the perspective of people and the

businesses.

Introduction:-



Globalization has become an expression of common usage. While to some, itrepresents a brave new world with no barriers, for some others, it spells doom anddestruction. It is, therefore, necessary to have a clear understanding of whatglobalization means and what it stands for, if we have to deal with a phenomenonthat is willy-nilly gathering momentum. Broadly speaking, the term ‗globalization‘

means integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people.Cross border integration can have several dimensions – cultural, social, politicaland economic. Indian economy had experienced major policy changes in early1990s. The new economic reform, popularly known as, Liberalization,Privatization and Globalization (LPG model) aimed at making the Indianeconomy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financialsector aimed at making the economy more efficient. With the onset of reforms to

globalization the Indian economy in July of 1991, a new chapter has dawned for India and her billion plus population. This period of economic transition has had atremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly beoverlooked. Besides, it also marks the advent of the real integration of the Indianeconomy into the global economy.

This era of reforms has also ushered in a remarkable change in the Indian mindset,as it deviates from the traditional values held since Independence in 1947, such asself reliance and socialistic policies of economic development, which mainly dueto the inward looking restrictive form of governance, resulted in the isolation,overall backwardness and inefficiency of the economy, amongst a host of other

problems. This, despite the fact that India has always had the potential to be on thefast track to prosperity. Now that India is in the process of restructuring her economy, with aspirations of elevating herself from her present desolate position inthe world, the need to speed up her economic development is even moreimperative. And having witnessed the positive role that Foreign Direct Investment(FDI) has played in the rapid economic growth of most of the Southeast Asiancountries and most notably China, India has embarked on an ambitious plan to

emulate the successes of her neighbors to the east and is trying to sell herself as asafe and profitable destination for FDI.

Globalization has many meanings depending on the context and on the person who

is talking about. Though the precise definition of globalization is still unavailable a



few definitions are worth viewing, Guy Brainbant: says that the process of

globalization not only includes opening up of world trade, development of

advanced means of communication, internationalization of financial markets,

growing importance of MNCs, population migrations and more generally increased

mobility of persons, goods, capital, data and ideas but also infections, diseases and

pollution. The term globalization refers to the integration of economies of the

world through uninhibited trade and financial flows, as also through mutual

exchange of technology and knowledge. Ideally, it also contains free inter-country

movement of labor. In context to India, this implies opening up the economy to

foreign direct investment by providing facilities to foreign companies to invest in

different fields of economic activity in India, removing constraints and obstacles to

the entry of MNCs in India, allowing Indian companies to enter into foreign

collaborations and also encouraging them to set up joint ventures abroad; carrying

out massive import liberalization programs by switching over from quantitative

restrictions to tariffs and import duties, therefore globalization has been identified

with the policy reforms of 1991 in India. As a new participant in the globalization

wave, India went through several structural and policy changes only in early

1990s, even if the awareness of need for opening up country‘s borders was started

in late 1980s, when Mr. Rajiv Gandhi was at the helm of policy design. With

almost 20% devaluation of the Indian rupee in 1991, the process began that for a



while slowed down a little but rarely anyone was in doubt about its existence. The

recent reports show that Indian economy grew at the record breaking and

astonishing pace of 8% growth in real GDP in 2003-2004. The real question is

how did the economy that was an ―almost autarky‖ from 1950 to 1985 period,

reached to such a realization that gains from trade are there to reap and the

economic transition necessary for globalization is a pre-condition for wider

economic growth? if globalization is a cause of India‘s economic growth and if the

new culture of trade policy change in India is there permanently or temporarily.

Historical Development:-

Globalization has been a historical process with ebbs and flows. During the Pre-World War I period of 1870 to 1914, there was rapid integration of the economiesin terms of trade flows, movement of capital and migration of people. The growthof globalization was mainly led by the technological forces in the fields of

transport and communication. There were less barriers to flow of trade and peopleacross the geographical boundaries. Indeed there were no passports and visarequirements and very few non-tariff barriers and restrictions on fund flows. The

pace of globalization, however, decelerated between the First and the SecondWorld War. The inter-war period witnessed the erection of various barriers torestrict free movement of goods and services. Most economies thought that theycould thrive better under high protective walls. After World War II, all the leadingcountries resolved not to repeat the mistakes they had committed previously byopting for isolation. Although after 1945, there was a drive to increased

integration; it took a long time to reach the Pre-World War I level. In terms of percentage of exports and imports to total output, the US could reach the pre-World War level of 11 per cent only around 1970. Most of the developingcountries which gained Independence from the colonial rule in the immediate Post-World War II period followed an import substitution industrialization regime. TheSoviet bloc countries were also shielded from the process of global economicintegration. However, times have changed. In the last two decades, the process of



globalization has proceeded with greater vigor. The former Soviet bloc countriesare getting integrated with the global economy. More and more developingcountries are turning towards outward oriented policy of growth. Yet, studies

point out that trade and capital markets are no more globalized today than theywere at the end of the 19

thcentury. Nevertheless, there are more concerns about

globalization now than before because of the nature and speed of transformation.What is striking in the current episode is not only the rapid pace but also theenormous impact of new information technologies on market integration,efficiency and industrial organization.

Trade in Goods and Services:-

According to the standard theory, international trade leads to allocation of

resources that is consistent with comparative advantage. This results inspecialization which enhances productivity. It is accepted that international trade,

in general, is beneficial and that restrictive trade practices impede growth. That is

the reason why many of the emerging economies, which originally depended on a

growth model of import substitution, have moved over to a policy of outward

orientation. However, in relation to trade in goods and services, there is one

major concern. Emerging economies will reap the benefits of international trade

only if they reach the full potential of their resource availability. This will

probably require time. That is why international trade agreements make

exceptions by allowing longer time to developing economies in terms of reduction

in tariff and non-tariff barriers. “Special and differentiated treatment”, as it is very

often called has become an accepted principle.

Movement of Capital:-

Capital flows across countries have played an important role in enhancing the production base. This was very much true in 19th and 20th centuries. Capitalmobility enables the total savings of the world to be distributed among countrieswhich have the highest investment potential. Under these circumstances, one

country‘s growth is not constrained by its own domestic savings. The inflow of foreign capital has played a significant role in the development in the recent periodof the East Asian countries. The current account deficit of some of these countrieshad exceeded 5 per cent of the GDP in most of the period when growth was rapid.Capital flows can take either the form of foreign direct investment or portfolioinvestment. For developing countries the preferred alternative is foreign directinvestment. Portfolio investment does not directly lead to expansion of productive



capacity. It may do so, however, at one step removed. Portfolio investment can bevolatile particularly in times of loss of confidence. That is why countries want to

put restrictions on portfolio investment. However, in an open system suchrestrictions cannot work easily.

The Important Reform Measures (Step Towards liberalization pri vatization and Globalization)

Indian economy was in deep crisis in July 1991, when foreign currency reserveshad plummeted to almost $1 billion; Inflation had roared to an annual rate of 17

percent; fiscal deficit was very high and had become unsustainable; foreigninvestors and NRIs had lost confidence in Indian Economy. Capital was flying outof the country and we were close to defaulting on loans. Along with these

bottlenecks at home, many unforeseeable changes swept the economies of nations

in Western and Eastern Europe, South East Asia, Latin America and elsewhere,around the same time. These were the economic compulsions at home and abroadthat called for a complete overhauling of our economic policies and programs.Major measures initiated as a part of the liberalization and globalization strategy inthe early nineties included the following:

Devaluation: The first step towards globalization was taken with theannouncement of the devaluation of Indian currency by 18-19 percent againstmajor currencies in the international foreign exchange market. In fact, this measure

was taken in order to resolve the BOP crisis

Disinvestment : In order to make the process of globalization smooth, privatization and liberalization policies are moving along as well. Under the privatization scheme, most of the public sector undertakings have been/ are beingsold to private sector.

Allowing Foreign Direct Investment (FDI) across a wide spectrum of industries and encouraging non-debt flows. The Department has put in place a

liberal and transparent foreign investment regime where most activities are openedto foreign investment on automatic route without any limit on the extent of foreignownership. Some of the recent initiatives taken to further globalize the FDIregime, inter alias, include opening up of sectors such as Insurance (upto 26%);development of integrated townships (upto 100%); defense industry (upto 26%);tea plantation (upto 100% subject to divestment of 26% within five years to FDI);enhancement of FDI limits in private sector banking, allowing FDI up to 100%



under the automatic route for most manufacturing activities in SEZs; opening upB2B e-commerce; Internet Service Providers (ISPs) without Gateways; electronicmail and voice mail to 100% foreign investment subject to 26% divestmentcondition; etc. The Department has also strengthened investment facilitationmeasures through Foreign Investment Implementation Authority (FIIA).

Non Resident I ndian Scheme the general policy and facilities for foreigndirect investment as available to foreign investors/ Companies are fully applicableto NRIs as well. In addition, Government has extended some concessionsespecially for NRIs and overseas corporate bodies having more than 60% stake by

NRIs. Throwing Open Industries Reserved For The Public Sector to Private

Participation. Now there are only three industries reserved for the public sector

Abolition of the (MRTP) Act, which necessitated prior approval for capacity

expansion the removal of quantitative restrictions on imports. The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that applies

now.Wide-ranging financial sector reforms in the banking, capital markets, andinsurance sectors, including the deregulation of interest rates, strong regulation andsupervisory systems, and the introduction of foreign/private sector competition.

Financial Flows:-

The rapid development of the capital market has been one of the important featuresof the current process of globalization. While the growth in capital and foreignexchange markets have facilitated the transfer of resources across borders, thegross turnover in foreign exchange markets has been extremely large. It isestimated that the gross turnover is around $ 1.5 trillion per day worldwide(Frankel, 2000). This is of the order of hundred times greater than the volume of trade in goods and services. Currency trade has become an end in itself. Theexpansion in foreign exchange markets and capital markets is a necessary pre-requisite for international transfer of capital. However, the volatility in the foreignexchange market and the ease with which funds can be withdrawn from countrieshave created often times panic situations. The most recent example of this was the

East Asian crisis. Contagion of financial crises is a worrying phenomenon. Whenone country faces a crisis, it affects others. It is not as if financial crises are solelycaused by foreign exchange traders. What the financial markets tend to do is toexaggerate weaknesses.Herd instinct is not uncommon in financial markets. Whenan economy becomes more open to capital and financial flows, there is evengreater compulsion to ensure that factors relating to macro-economic stability arenot ignored. This is a lesson all developing countries have to learn from East



Asian crisis. As one commentator aptly said ―The trigger was sentiment, but

vulnerability was due to fundamentals‖.

There are different sections made for effect of globalization on on trade

policies they are as follows:-

Section 1 makes the survey of trade policy in period 1950 to 1985, Section 2summarizes the economic changes in period 1985 to 2005 with special focus on theliberalization attempt in 1991 and its aftereffects. Section 3 summarizes resultsand makes a conclusion. In general it is not very hard to prove that even a limitedattempt of globalization has benefited Indian economy in the best possible way.

Table 1

Merchandise Services Merchandise Services Trade

Exports Exports Imports Imports Balance

1965 129. 62.1 125.3 57.5 4.9

1966 139.3 69.1 146.5 66.2 -8.6

1967 98.9 74.8 152.1 73.2 -57.3

1968 82.5 67.0 130.6 63.0 -51.2

1969 107.1 69.3 107.0 56.8 .9

1970 146.2 85.1 143.5 71.3 2.1



1971 150.8 97.2 200.6 85.0 -49.0

1972 191.7 99.8 215.5 84.0 -25.8

1973 291.0 118.9 326.0 93.2 -16.2

1974 329.4 140.7 476.7 125.3 -160.4

1975 306.5 182.5 441.9 118.3 -102.7

1976 402.0 172.5 427.9 117.2 -22.8

1977 512.6 212.1 564.7 149.8 -48.3

1978 640.3 262.0 618.4 192.1 18.9

1979 779.6 2 92.8 754.1 253.5 -21.2

1980 919.8 279.8 899.9 262.8 -79.1

1981 896.4 302.8 925.5 282.0 -147.9

1982 685.5 340.6 837.6 308.5 -263.2

1983 742.0 342.5 721.6 280.7 -56.9

1984 743.2 347.1 756.6 310.9 -131.3

One of the reasons for this retarded growth in Indian trade was the disoriented

trade policy. There was even a problem of assigning priority to industries for

importing necessary parts and raw materials.

Section 1: The Big Move Toward Protectionist Posture:-



The Indian independence movement in 1940s, led by Mahatma Gandhi, was based

on the general dislike of anything and everything ―foreign‖, especially the one

originating from Britain. The public rallies to burn imported goods were famous.

There was a strong belief that India can produce everything at home, can be ―self

reliant‖ and ―self dependent‖ (popularly called ―Swadeshi movement‖).

Moreover, it was believed by strong nationalist movement that the import of any

good was there to bring the ―foreign dominance‖. As a result foreign direct

investment was seen to be a curse rather than blessing or a means of attracting

higher investment. As a consequence, multi-national corporations were seen as

the exploitative entities that merely benefit from cheap labor in the country, and

were believed to be the ones that take the profits back home to better their lavish

living and conspicuous standard of living. Naturally, it was hard to convince the

policy makers that import substitution was an expensive policy action in economic

sense, even if politically it seemed to be a ―patriotic‖ thing to do. This ―extreme

nationalism‖ was evident in blindly carried out economic planning process of early

days. an influence on each economic plan which increased tariffs on almost all

imports, and economy resulted into almost ―autarky‖ stage. Table 1 makes the

point clear. The export and import were so low that they formed less than one

percent of the total world trade. These low figures of trade were by the country that

has had roughly 15% of world population. The highest merchandise export figure



was reached in 1980 (of $919.8 million) and they declined significantly in 1981

and 1982. For 6 years in a row (from 1979 to 1985) the merchandise exports were

stagnant at roughly $700 to $800 million. The services sector did not fair any

better. While the services exports were steadily increasing in this period the

figures were less that $400.00 million. This was a period when computer

technology services were unheard of and services sector in India was poorly

developed so exports were not that attractive. Merchandise imports were highest in

1981 (at $925.5 million) and with that exceptional year they were steadily

increasing. One can see the giant jump in imports of merchandise in year 1974,

thanks to the first oil price increase by the OPEC. India had not found any

indigenous source of oil then and was primarily dependent upon the foreign oil.

Nonetheless the total merchandise import bill never crossed $1 billion, one of the

primary reasons for that was the tremendous tariff rates and strict quotas on major

imports. In 1974, the policy makers, when they were pointed out the tremendous

increase in trade (im) balance from $16.2 million (1973) to $160.4 million (1974),

efficiently blamed the oil price rise. In general 1965 to 1985 was a turbulent time

period. It witnessed the stagnation of the economy as well as that of Indian trade.

The hardship experienced by this virtual ―closed economy‖ was no more evident

than in early 1970s when the economy went through numerous shocks. The poor

monsoons created agricultural production short-fall leading to severe droughts in



some parts of the country. This put pressure on the industrial production which

was not progressing very well in the first place. Due to the additional burden

exerted by the Indo-Pakistan War of 1971, the economy started suffering

miserably. Rationing of necessities was common and criminal elements made a

heyday by hoarding. The political opposition parties made life miserable for Indira

Gandhi government which had a little choice but to blame all starvation on foreign

elements. In 1973, came the OPEC oil price shock and the things really went out

of control. While country had no reserves to pay for imported oil, the import bill

was growing very fast and export earnings were sluggish. In 1973 when imports

increased from $191.7 million to $291 million and again in 1976 went up to $402

million. Political parties were extremely active. But economically there was no

way out. The protectionism was to the highest level. Consider the 350% import

tariff rate on automobiles and average tariff rate of 152%. Domestic industries

were well protected that they loved being monopolists and had no inclination for

technological innovation. The maturity stage, that was supposed to have taken

place according to the famous (?) Infant Industry Argument has never arrived.

Strict foreign exchange controls were not only required but were very necessary to

stop illegal foreign currency and gold smuggling transactions. It was an

administrative nightmare where rent seeker made merry and black market

constituted half of the official economy. Academicians learned several lessons of



how protectionism can ruin the economy and policy makers watched economy

reaching to a real low point while they searched for the solutions. To top the

political chaos, the ruling party (Indira Congress) declared emergency restricting

many a freedoms and ruthlessly putting anyone in jail, who gave even a hint of

―anti-governmental activity‖. The country definitely needed a magic for rapid

economic growth which could have silenced the political ―trouble makers‖. In

early 1980s the monsoon god was nice to India. While agricultural sector that was

in desperate need to prosper, received a big boost, the industrial sector invented

few new technological advances and grew much more rapidly than before. India

also realized that she can do much better in service sector. All in all, the economy

started prospering at a slow rate but definitely much better than in 1970s. The need

for opening up the economy was felt more keenly by Rajiv Gandhi‘s government

and some reductions in tariff rates were activated in early 1980s. But the real

support for globalization, liberalization and reduction in protectionism came in late

1980s.



Section 2: The Wave of Globalization Arrived

In 1980s there were some signs of policy change in Rajiv Gandhi‘s Prime Minister

ship, but the Macro-economy was already damaged by earlier faults. ―The

Macroeconomic crisis reached its peak in 1990 with combined fiscal deficit of

Centre and State governments standing at 10% as percentage of GDP, current

account balance at 3.3% of GDP back ed by a rate of inflation 9.9% despite India‘s

record economic performance measured in terms of rate of growth of GDP, 6.0

percent, due to high rates of industrial growth of 5.9% and domestic saving ratio of

21.9% of the GDP.‖ Nonetheless this growth was accompanied by strange macro-

imbalances that resulted into tremendous external borrowing, leading to heavy

external debt of 28.7%. ―For the first time in her history, India was nearly forced to

the prospect of defaulting on her international financial commitment‖. Added

burden of oil price shock due to Gulf War of 1991 put the country in such a

precarious condition that foreign reserves of worth ―only 3 weeks of imports‖ were

left in the treasury. In June of 1991, when the current Prime Minister Dr.

Manmohan Singh was the Finance Minister (and Mr. Narasinha Rao was the Prime

Minister), country received first significant shock of globalization and

liberalization. This was also the product of strong demand by some well known

economists and policy planners for significantly changing the policy structure.

While the declared plan reduced the Rupee value significantly by devaluating it by



21% in one day, it also made it abundantly clear that the old ways of high tariff

rates were almost completely over. The tariff rates were slashed, more foreign

direct investment (FDI) was invited and import quotas were demolished. There

were essentially 2 parts of the liberalization program: Structural and Stabilization.

Stabilization measures were supposed to be of short-term nature, including such

policies as the ―austerity in governmental budgets‖, which was supposed to bring

about the decline in aggregate demand and therefore lower the inflation rate. The

structural adjustment was to be of a long-term nature with such measures as the

convertibility on current account of the balance of payment, lower restrictions on

domestic business and export promotion. These steps not only made a complete

switch in the policy moves heretofore, but also showed policy makers‘ inclination

to move to market oriented economy as the blunders of governmental controls

were becoming more and more visible. All in all, these reforms aimed to achieve

stability, curb the inflationary pressure and release the breaks on production and

productivity. The post reform years showed quick and efficient recovery from the

acute macroeconomic crisis of 1991. The real GDP in 1990s increased at an

annual rate of 6% which is even more impressive because the rest of the world was

going through a minor recession. The highest increase in real GDP was

experienced in 1996-1997 with 7.8% (expected to be surpassed in 2004) Increased

production had its effect on the prices. Inflation rate of 13.6 percent in 1991 was



reduced to 1.3 percent in 2001-2002, a remarkable achievement by any standard.

The monetary policy was carried out responsibly and the fiscal pressures were

negative but much more manageable than earlier years. However the fiscal policy

austerity program was not totally effective, thanks to the crisis created by Iraq war

as well as political troubles all over the country. In first 3 years of 1990s the

economic hardships continued partly due to the increased oil price and overall

recessionary forces, coupled with political instability, lack of technological

innovation, and poor monsoon. The recessionary trend did not last for along time

however. The increased international trade freer economy technological

improvements prompted by tremendous growth in information technology

combined to show the positive effects from 1994. Liberalization at least partially

has become effective in attracting foreign direct investment, positive outlook for

the Indian economy and overall excitement amongst producers and investors.

Indian economy was on the move in a serious way. As Table 2 shows, in 1994

while the real GDP increased by 5.9%, the inflation rate declined from 13.7% in

1992 to 8.4%. While the interest was still very high, it had some downward

pressure. The official unemployment number was very high (36.69 million) but it

remained steady, a mild achievement in an increasing population. But as it is

evident for several years, the Indian unemployment is beyond the reported figures

of unemployed labor. It consists of heavy under-employment, it is marred by



extreme poverty partly due to illiteracy. The so called ―full-time employment‖ in

India is concentrated mainly in urban sector with very limited industrialization in

rural or semi-rural areas of extreme backwardness. Added to those problems are

the imperfections of labor market, the complications in collecting the data, the

Indian labor employment (or unemployment) is as hard to report as its population

survey results.



Table 2

Macroeconomic Performance in Post 1991 Years

Year Real GDP Inflation Interest Unemployment Money Supply

Growth Rate Rate No. in Millions Billions of Rs

1991 .96 8.9 17.88 36.3 1046.1

1992 2.3 13.7 18.92 36.75 1120.9

1993 1.5 10.1 16.25 36.27 1330.2

1994 5.9 8.4 14.75 36.69 1695.0

1995 7.3 10.9 15.46 36.74 1883.5

1996 7.3 7.7 15.96 37.43 2148.9

1997 7.8 6.4 13.83 39.14 2419.3

1998 6.5 4.8 13.54 40.01 2703.5

1999 6.5 6.9 12.54 40.37 3161.2

2000 6.1 3.3 12.29 40.34 3495.9



2001 4.0 7.1 12.08 41.99 3846.0

2002 6.2 4.7 11.92 42.36 4318.6

2003 5.5 5.1 11.50 43.10 4822.3

2004 8.0 4.5 10.60 42.50 5402.3

It appeared that policy makers by 1995 were convinced that globalization is what is

needed for faster economic growth. Success sometimes breeds upon itself, and policy

makers usually are fast learners especially when political benefits are high. However the

growth of 1994-1997 was not perfectly matched by accelerated growth in 1997-2000

periods. As Chitre (2003) points out, this sluggishness was due to the slow growth in

agricultural sector, not because of industrial slowdown. The international trade as

witnessed in Table 3 did not perform poorly either. Better monsoons of years 2000 to

2004 helped not only the agricultural sector grow faster but also the manufacturing, trade

and services sectors moved admirably. In 2004 it became official that Indian economy

was second fastest growing in the world, second only to the Chinese economy. In fact,

the Chinese economy‘s growth is also primarily explained by her newly found affection

for openness. The Indian economy, much like the world economy, went through



technological change. While the computer mega cities such as Bangalore (that now has

1500 foreign company offices), Hyderabad and Pune grew at a unprecedented rates, the

repercussions of this industrial growth was felt in many of the adjacent rural areas. In

fact in April 2005, it was confirmed that India officially achieved 8 percent growth in

2004 (Times of India, April 28, 2005)



Table 3

International Trade Performance Post 1991 Years

Exports Imports BOT Exchange rate

In billions of US dollars for 3 columns Rs/SDR

1991 18.09 21.08 4.01 36.95

1992 20.01 22.93 4.71 36.02

1993 22.01 24.1 3.48 43.10

1994 25.52 29.67 6.31 45.81

1995 31.23 37.95 10.21 52.29

1996 33.73 43.78 13.98 51.66

1997 35.20 45.73 13.36 52.99

1998 34.07 44.82 13.60 59.81

1999 36.87 45.55 11.44 59.69

2000 43.13 55.32 13.77 60.91



Table 3 shows the drastic turn around of the economy in 1990s in terms of

international trade patterns. While the exports increased drastically, the opening of the

borders and reduction in tariff rates also allowed the imports to go up. The balance of

trade figures were in a manageable amount (almost always less that $14 billion). What

is interesting to point out is that the ―non-oil‖ imports and exports showed a positive

balance of trade for the Indian economy since year 2000. Hence oil imports formed

the major drain on the foreign reserves and constituted the main reason for balance of

trade deficit. While the Services sector picked the exports considerably, important raw

material imports have also grown significantly. One of the major developments

reported in April 2005 was that software exports from India‘s hi-tech hub, Bangalore

rose more than 52 percent to $6 billion. (Times of India, April 28, 2005). However

any economic spurt is not without a political controversy and Indian economic growth

is not an exception. Political skeptics have pointed out the increased inequality of

2001 43.82 50.53 5.97 60.54

2002 52.71 51.41 7.58 65.29

2003 63.45 61.42 8.69 67.27

2004 65.09 77.03 13.37 68.88



income as an unwanted result of the globalization. Some politicians (especially leftists

and socialists) have also complained about the increased salaries of computer scientists

and information technologists. The ―great digital divide‖ has become somewhat of a

worry for some researchers. However, it has recently shown the globalization process

has more benefits than costs and therefore needs to be supported to the fullest extent.

In fact the ―free trade for the whole world‖ scenario is based on the validity of

globalization by all policy makers. India‘s economic growth has received a strong

impetus in post 1991 era. This increased economic growth is mainly and directly is a

result of country‘s better monsoons and the free trade movement that started in that

year. Clearly the lethargic economic development was associated with greater

protectionism and policy makers seemed to have learned an important lesson from

1950 to 1990 era. The data show that the free trade movement of 1990s has shown

positive results in economic terms. The future economic growth therefore depends

heavily on the speed of privatization and globalization. As pointed out, the country is

ready to have a firm plan to get ready for the second wave of free-trade and

liberalization movement.



Impact of Globalization of Indian Economy:-

The novel Tale of Two Cities of Charles Dickens begins with a piquant descriptionof the contradictions of the times: It was the best of times, it was the worst of

times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; we had everything before us, we hadnothing before us At the present, we can also say about the tale of two Indians: Wehave the best of times; we have the worst of times. There is sparkling prosperity,there is stinking poverty. We have dazzling five star hotels side by side withdarkened ill-starred hovels. We have everything by globalization, we have nothing by globalization. Though some economic reforms were introduced by the RajivGandhi government (1985-89), it was the Narasimha Rao Government that gave adefinite shape and start to the new economic reforms of globalization in India.Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said: After

four decades of planning for industrialization, we have now reached a stage wherewe should welcome, rather fear, foreign investment. Direct foreign investmentwould provide access to capital, technology and market. In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Minister submitted in the concluding paragraph: The Government of India believes that the

policies set forth in the Memorandum are adequate to achieve the objectives of the program, but will take any additional measures appropriate for this purpose. Inaddition, the Government will consult with the Fund on the adoption of anymeasures that may be appropriate in accordance with the policies of the Fund on

such consultations. The Government of India affirmed to implement the economicreforms in consultation with the international bank and in accordance of its

policies. Successive coalition governments from 1996 to 2004, led by the JanataDal and BJP, adopted faithfully the economic policy of liberalization. WithManmohan Singh returned to power as the Prime Minister in 2004, the economic

policy initiated by him has become the lodestar of the fiscal outlook of thegovernment.

The Dark Side of Globalization:-

On the other side of the medal, there is a long list of the worst of the times, theforemost casualty being the agriculture sector. Agriculture has been and stillremains the backbone of the Indian economy. It plays a vital role not only in

providing food and nutrition to the people, but also in the supply of raw material toindustries and to export trade. In 1951, agriculture provided employment to 72 per cent of the population and contributed 59 per cent of the gross domestic product.However, by 2001 the population depending upon agriculture came to 58 per cent



whereas the share of agriculture in the GDP went down drastically to 24 per centand further to 22 per cent in 2006-07. This has resulted in a lowering the per capitaincome of the farmers and increasing the rural indebtedness. The agriculturalgrowth of 3.2 per cent observed from 1980 to 1997 decelerated to two per centsubsequently. The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate of agricultural GDP including forestry and fishingis likely to be below two per cent in the Tenth Plan period. The reasons for thedeceleration of the growth of agriculture are given in the Economic Survey 2006-07: Low investment, imbalance in fertilizer use, low seeds replacement rate, adistorted incentive system and lo post-harvest value addition continued to be a dragon the sectors performance. With more than half the population directly dependingon this sector, low agricultural growth has serious implications for theinclusiveness of growth. The number of rural landless families increased from 35

per cent in 1987 to 45 per cent in 1999, further to 55 per cent in 2005. The farmers

are destined to die of starvation or suicide. Replying to the Short DurationDiscussion on Import of Wheat and Agrarian Distress on May 18, 2006,Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1,00,000 farmers committed suicide during the period 1993-2003 mainly due toindebtedness. In his interview to The Indian Express on November 15, 2005,Sharad Pawar said: The farming community has been ignored in this country andespecially so over the last eight to ten years. The total investment in the agriculturesector is going down. In the last few years, the average budgetary provision fromthe Indian Government for irrigation is less than 0.35 percent. During the post-reform period, India has been shining brilliantly with a growing number of

billionaires. Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand farmers. Further, the proportion of peopledepending in India on agriculture is about 60 % whereas the same for the UK is 2%, USA 2 %and Japan 3 %. The developed countries, having a low proportion of

population in agriculture, have readily adopted globalization which favors more thegrowth of the manufacturing and service sectors.

About the plight of agriculture in developing countries, Nobel Prize-winningeconomist Joseph Stiglitz said: Trade agreements now forbid most subsidies

excepted for agricultural goods. This depresses incomes of those farmers in thedeveloping countries who do not get subsidies. And since 70 per cent of those inthe developing countries depend directly or indirectly on agriculture, this meansthat the incomes of the developing countries are depressed. But by whatever standard one uses, today‘s international trading regime is unfair to developing

countries. He also pointed out: The average European cow gets a subsidy of $ 2 aday (the World Bank measure of poverty); more than half the people in the



developing world live on less than that. It appears that it is better to be a cow inEurope than to be a poor person in a developing country.

Demoting Agriculture:-

In the Economic Survey 1991-92, Finance Minister Manmohan Singh recast theChapters in the following order: (1) Introduction, (2) Public Finance, (3) Moneyand Credit, (4) Prices and Distribution, (5) Balance of Payments, (6) Industry, (7)Agriculture, (8) Infrastructure and (9) Social Sectors. It is not known as to why theFinance Minister demoted the importance of agriculture that has about 90 per cent

population from the second place to the seventh in the annual Economic Survey of the country. In a way does it symbolize the low importance deliberately given tothe growth of the agriculture sector in the scheme of globalization?

Strategy of Globalization:-

In the Report (2006) East Asian Renaissance, World Bank Advisor Dr IndermitGill stated: Cities are at the core of a development strategy based on internationalintegration, investment and innovation. East Asia is witnessing the largest rural-to-urban shift of population in history. Two million new urban dwellers are expectedin East Asian cities every month for the next 20 years. This will mean planning for and building dynamic, connected cities that are linked both domestically and to theoutside world so that economic growth continues and social cohesion is

strengthened. The market economy seems to be more concerned with the growth of consumerism to attract the high income groups who are mostly in the cities in thedeveloping countries. Rural economy and the agricultural sector were out of focusin the strategy of globalization.

Growth of Unemployment Poverty:-

The proportion of the unemployed to the total labor force has been increasing from2.62 per cent (1993-94) to 2.78 per cent (1999-2000) and 3.06 per cent (2004-05).

In absolute figures, the number of unemployed had been in those years 9.02million, 10.51 million and 13.10 million respectively. (Economic Survey 2006-07,.In reply to a question, the Minister for Labor and Employment informed theLok Sabha on March 19, 2007, that the enrolment of the unemployed in theEmployment Exchanges in 2006-07 was 79 lakhs against the average of 58 lakhs inthe past ten years. About the impact of globalization, in particular on thedevelopment of India, the ILO Report (2004) stated: In India, there had been



winners and losers. The lives of the educated and the rich had been enriched byglobalization. The information technology (IT) sector was a particular beneficiary.But the benefits had not yet reached the majority, and new risks had cropped up for the losers the socially deprived and the rural poor. Significant numbers of non-

perennial poor, who had worked hard to escape poverty, were finding their gainsreversed. Power was shifting from elected local institutions to unaccountable trans-national bodies. Western perceptions, which dominated the globe media, were notaligned with local perspectives; they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural and linguistic diversity.

Social Services:-

About the quality of education given to children, the Approach to the EleventhFive Year Plan stated: A recent study has found that 38 per cent of the children

who have completed four years of schooling cannot read a small paragraph withshort sentences meant to be read by a student of Class II. About 55 per cent of suchchildren cannot divide a three digit number by a one digit number. These areindicators of serious learning problems which must be addressed. The Approach

paper added further: Universalization of education will not suffice in theknowledge economy. A person with a mere eight years of schooling will be asdisadvantaged in a knowledge economy by ICT as an illiterate person in modernindustry an services. The less said about the achievements in health the better. TheApproach to the Eleventh Plan concedes that progress implementing the objectivesof health have been slow. The Report gave the particulars of the rates of infantmortality (per 1000 live births) for India as 60 against Sri Lanka (13), China (30)and Vietnam (19). The rate of maternal mortality (per 1, 00,000 deliveries) of Indiais 407 against Sri Lanka (92), China (56) and Vietnam (130).

Growth of Slum Capitals:-

In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth a proposal to promote Mumbai as a world class financial centre and to makefinancial services the next growth engine of India Of its 13 million population,

Mumbai city has 54 per cent in slums. It is estimated that 100 to 300 new familiescome to Mumbai every day and most land up in a slum colony. Prof R. N. Sharmaof the Tata Institute of Social Science says that Mumbai is disintegrating intoslums. From being known as the slum capital of India and the biggest slum of Asia,Mumbai is all set to become the slum capital of the world. The population of Delhiis about 14 million of which nearly 45 per cent population lives in slums,unauthorized colonies, JJ clusters and undeveloped rural parts. During dry weather



these slum dwellers use open areas around their units for defecation and the entirehuman waste generated from the slums along with the additional wastewater fromtheir households is discharged untreated into the river Yamuna.The cumulative FDI inflow (until September 2006) to the New Delhi region was of Rs. 27,369 crores and to Mumbai Rs. 24,545 crores. The two spots of New Delhiand Mumbai received 46 per cent of the total FDI inflows into India. The FDIinflows have in no way assisted in improving the health and environmentconditions of the people. On the other hand, the financial capital of India and the

political capital of India are set to become the topmost slum cities of the world.

Victims of Globalization:-

IN his Making Globalization Work, Nobel Laureate Stieglitz wrote: Tradeliberalization opening up markets to the free flow of goods and services was

supposed to lead to growth. The evidence is at best mixed. Part of the reason thatinternational trade agreements have been so unsuccessful in promoting growth in

poor countries is that they were often unbalanced. The advanced industrialcountries were allowed to levy tariffs on goods produced by developing countriesthat were, on average, four times higher than those on goods produced by other advanced industrial countries. In his foreword to The Dynamics and Impact of Globalization by Dr. M. V. Louis Anthuvan, Justice V. R. Krishna Iyer pointed out

pithily: The New World Order is the product of what is now familiarly describedas globalization, liberalization and privatization. The weaker sectors like the Asian

and African countries are victims, whose economic welfare is slavery, at thedisposal of the White world. When World War II came to a close, commercialconquest and trade triumph became the major goal of the United States and theother giant trade powers. Indeed, these mighty countries and companies even madeworld hunger as Big Business. The poorer countries with natural resources have

been made banana r epublic‘s and cucumber vassals.The Human Development Report 2006 recorded: Globalization has given rise to a

protracted debate over the precise direction of trends in global income distribution.What is sometimes lost sight of is the sheer depth of inequality and the associated

potential for greater equity to accelerate poverty reduction. Measured in the 2000

purchasing power parity (PPP) terms, the gap between the incomes of the poorest20 per cent of the world‘s population and the $ 1 a day poverty line amounts toabout $ 300 billion. That figure appears large, but it is less than two per cent of theincome of the world‘s wealthiest 10 per cent.



To make Globalization Work:-

Under the phenomenal growth of information technology which has shrunk spaceand time and reduced the cost of moving information, goods and capital across theglobe, the globalization has brought unprecedented opportunities for humandevelopment for all, in developing as well as developed countries. Under thecommercial marketing forces, globalization has been used more to promoteeconomic growth to yield profits to some countries and to some groups within acountry. India should pay immediate attention to ensure rapid development ineducation, health, water and sanitation, labor and employment so that under time- bound programmers‘ the targets are completed without delay. A strong foundation

of human development of all people is essential for the social, political andeconomic development of the country. Though at present India appears to bedominant in some fields of development as in IT-ITES, this prosperity may be

challenged by other competing countries which are equipping themselves with better standards of higher education. As detailed earlier, our progress in educationhas been slow and superficial, without depth and quality, to compete theinternational standards .The government should take immediate steps to increaseagricultural production and create additional employment opportunities in the rural

parts, to reduce the growing inequality between urban and rural areas and todecentralize powers and resources to the panchayati raj institutions for implementing all works of rural development. Steps should be taken for earlylinking of the rivers, especially in the south-bound ones, for supply of the much-needed water for irrigation.

It should be remembered that without a sustainable and productive growth of theagricultural sector, the other types of development in any sphere will be unstable

and illusory. Despite the concerted development in manufacturing and service

sectors, despite the remarkable inflow and overflow of foreign reserves,

agriculture is still the largest industry providing employment to about 60 per cent of the workforce in the country.

Mere growth of the GDP and others at the macro level in billions does not solvethe chronic poverty and backward level of living norms of the people at the microlevel. The growth should be sustainable with human development and decentemployment potential. The welfare of a country does not percolate from the top,

but should be built upon development from the bottom.



4. Highly skilled, English-speaking workforce

5. Abundant manpower

6. Cheaper workforce than their Western counterparts According to Nasscom,

The wage difference is as high as 70-80 percent when compared to their

Western parts.7. Lower attrition rates than in the West.

8. Dedicated workforce aiming at making a long-term career in the field

9. Round-the-clock advantage for Western companies due to the huge time

difference.

10. Lower response time with efficient and effective service

11. Operational excellence

12. Conducive business environment

Weaknesses

Recent months have seen a rise in the level of attrition rates among outsourcing

workers who are quitting their jobs to pursue higher studies. Of late workers have

shown a tendency not to pursue BPO as a full-time career. The cost of telecom and

network infrastructure is much higher in India than in the US.

Opportunities

1) To work closely with associations like Nasscom to portray India as the mostfavoured BPO destination in the world.

2) India can be branded as a quality outsourcing destination.

3) $69 billion ITES business by 2010

4) $97.5 billion IT (consulting, software solutions) market by 2010

Threats

1. The anti-outsourcing legislation in the US state of New Jersey. Three more

states in the United States are planning legislation against outsourcingConnecticut, Missouri and Wisconsin.

2. Workers in British Telecom have protested against outsourcing of work to

Indian BPO companies.

3. Other BPO destinations such as China, Philippines and South Africa could have

an edge on the cost factor.



Revenue

\ Year

2002

2003

2004

2005

2006

2007

2008

CAGR Offshore

BPO Revenue

1,322

1,825

3,017

6,439

12,563

24,230

78.91

Total BPO Market

110,167

121,687

131,171

143,090

157,033

173,070

9.45

CAGR in % 2002-07

Figures in $ million

Source: Gartner Dataquest

Gartner: $173 billion in 2007, of which

$24.23 billion would be outsourced to

offshore contractors

Industry size:-

India has revenues of US$10.9 billion from offshore BPO and US$30 billion from

IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the

total BPO Industry, but a commanding 63% share of the offshore component. This63% is a drop from the 70% offshore share that India enjoyed last year: despite the

industry growing 38% in India last year, other locations like Philippines, and South

Africa have emerged to take a share of the market, China is also trying to grow

from a very small base in this industry. However, while the BPO industry is

expected to continue to grow in India, its market share of the offshore piece is

expected to decline. Important centers in India are Bangalore, Hyderabad,

Chennai, Kolkata, Mumbai, Pune, Patna and New Delhi. The top five Indian BPO

exporters for 2009-2010 according to NASSCOM are Genpact, TCS BPO, WNS

Global Services, Wipro BPO, and Aegis Ltd.



Banking business process outsourcing or banking BPO

Is a highly specialized sourcing strategy used by banks and lending institutions to

support the business acquisition and account servicing activities associated with

the customer lending lifecycle? These specific BPO services are usually offeredthrough multi-year service-level agreements for all or portions of the credit card

lending, consumer lending or commercial lending segments of the financial

services market. Some larger financial services organizations choose to extend

their sourcing strategy to include other outsourced services such as ITO systems

and software, human resources outsourcing and benefits services, finance and

accounting outsourcing (FAO) services, procurement BPO‘sor training

outsourcing.

New customer acquisition services include telemarketing activities, application processing, underwriting, customer or merchant credit evaluation and verification,

credit approval, document processing, account opening and customer care and on-

boarding. Account servicing processes for credit cards or consumer loans. These

most commonly include payment processing systems and services, customer

service or call center support operations (voice, digital, email and mail services),

product renewals, and loan disbursement; document management services such as

printing and mailing of statements, networked printing and storage solutions;

collections, recoveries processing, default management, risk management andforeclosure. Consumer and commercial lending post origination transaction

processing services, such as check processing, clearance and settlement services,

remittance, and records management .Back office transaction process management

for loans or credit card portfolios, including custody services, fraud mitigation and

detection, regulatory and program compliance, portfolio analytics, reporting,

conversions, management of technology platforms, interface for customer data and

custom development.



Recruitment:-

Refers to the process of attracting, screening, and selecting qualified people for a

job. For some components of the recruitment process, mid- and large-size

organizations often retain professional recruiters or outsource some of the processto recruitment agencies. The recruitment industry has four main types of agencies:

employment agencies, recruitment websites and job search engines, "headhunters"

for executive and professional recruitment, and niche agencies which specialize in

a particular area of staffing. Some organizations use employer branding strategy

and in-house recruitment instead of agencies. Recruitment-related functions are

generally carried out by an organization's human resources staff. The stages in

recruitment include sourcing candidates by advertising or other methods, screening

potential candidates using tests and/or interviews, selecting candidates based on the

results of the tests and/or interviews, and on-boarding to ensure the candidate is

able to fulfill their new role effectively.

Traditional agency:-

Also known as employment agencies, recruitment agencies have historically had a

physical location. A candidate visits a local branch for a short interview and an

assessment before being taken onto the agency‘s books. Recruitment consultants

then work to match their pool of candidates to their clients' open positions. Suitable

candidates are short-listed and put forward for an interview with potential

employers on a contract or direct basis. Compensation to agencies takes several

forms, the most popular are:

A contingency fee paid by the company when a recommended candidate accepts a

job with the client company (typically 20%-30% based and calculated on the

candidates first-year base salary (though fees as low as 12.5% can be found online,

and which usually has some form of guarantee (30 – 90 days standard), should the

candidate fail to perform and is terminated within a set period of time (refundablefully or prorated).

An advance payment that serves as a retainer, also paid by the company, non-

refundable paid in full depending on outcome and success (e.g. 40% up front, 30%

in 90 days and the remainder once a search is completed). This form of

compensation is generally reserved for high level executive search/headhunters



management and executive level roles. Headhunters are also used to recruit very

specialized individuals; for example, in some fields, such as emerging scientific

research areas, there may only be a handful of top-level professionals who are

active in the field. In this case, since there are so few qualified candidates, it makes

more sense to directly recruit them one-by-one, rather than advertiseinternationally for candidates. While in-house recruiters tend to attract candidates

for specific jobs, headhunters will attract both candidates and actively seek them

out as well. To do so, they may network, cultivate relationships with various

companies, and maintain large databases, purchase company directories or

candidate lists and cold call prospective recruits. Headhunters are increasingly

using social media to find and research candidates. This approach is often called

social recruiting.

Niche recruiters:-

Specialized recruiters exist to seek staff with a very narrow specialty. Because of

their focus, these firms can very often produce superior results due to their ability

to channel all of their resources into networking for a very specific skill set. This

specialization in staffing allows them to offer more jobs for their specific

demographic which in turn attracts more specialized candidates from that specific

demographic over time building large proprietary databases. These niche firms

tend to be more focused on building ongoing relationships with their candidates asis very common the same candidates are placed many times throughout their

careers. Niche firms also develop knowledge on specific employment trends within

their industry of focus (e.g. The energy industry) and are able to identify

demographic shifts such as aging and its impact on the industry.

In-house recruitment:-

Under pressure to reduce costs, both large- and medium-sized employers tend to

undertake their own in-house recruitment, using their human resources department,front-line hiring managers and recruitment personnel who handle targeted

functions and populations. In addition to coordinating with the agencies mentioned

above, in-house recruiters may advertise job vacancies on their own websites,

coordinate internal employee referrals, work with external associations, trade

groups and/or focus on campus graduate recruitment. Some large employers



that will provide the most benefit to their clients. Cost - The cost of engaging an

BPO provider may be more than the cost of the internal recruitment department, as

an BPO provider is likely to have higher business overheads. Effectiveness -

Improperly implemented BPO could reduce the effectiveness of recruitment,

should an BPO provider not understand or seek to understand the recruitmentsolution that they will be providing. Failure to Deliver - BPO service providers

may fail to provide the quality or volume of staff required by their clients,

especially when finding candidates in industry sectors where there are staff

shortages. Lack of Competition - Placing all recruitment in the hands of a single

outside provider may discourage the competition that would arise if multiple

recruitment providers were used. Pre-Existing Issues - An BPO solution may not

work if the company's existing recruitment processes are performing poorly, or if

the service provider lacks appropriate recruitment processes or procedures to work with the client. In this situation, it is better for the company to undergo a

recruitment optimization programmer.



BPO security:-

Information security has emerged as a significant concern for banks, mobile phone

companies and other businesses that use call centers or business processoutsourcing, or BPO. There have been instances of theft of personal data reported

from call centers. Britain's Financial Service Authority examined standards in

India in April 2005 and the Banking Code Standards Board audited eight Indian

call centre‘s in 2006, handling more than a million calls per month from the UK.

The BCSB report stated that "Customer data is subject to the same level of security

as in the UK. High risk and more complex processes are subject to higher levels of

scrutiny than similar activities onshore." India's NASSCOM has said that they take

breach in security extremely seriously and will assist the police in their probe. Employer Branding - BPO providers do not necessarily act as custodians of their

clients' employer brand in the way that a strongly aligned retained search firm or

internal recruiting resource would. Engagement - Many BPO organizations

perform their staffing functions and service offsite or offshore, disconnecting the

provider from the client company's growth and recruiting strategy. While this

effect can be mitigated through strong relationship management, some of the

momentum and energy associated with the rapid up scaling of a workforce through

recruitment may dissipate.



Third party BPO's:-

Until G.E most of the work was being done by "captives"- a term used for in house

work being done for the parent organization. In 2000 Raman Roy and some team

members from GECIS quit, and with VC funding from Chrysalis Capital startedSpectra mind. At the same time an organization called EFunds started in Mumbai

and Gurgaon, and Daksh in Gurgaon. However, recently most of the Indian BPO's

even smaller and mid-sized ones are actually setting-up their onshore presence.

Most of the serious players are actually improving the outsourced business

processes by leveraging on years of experience and now some of them are directly

competing with their own old Client base by marking this transition to KPO's.

Entry of IT majors:-

In 2002 Spectra mind was bought by software major Wipro, and BPO by then had

become mainstream like the IT Industry in India. The team that had set up Spectra

mind went on to start Quattro in 2006, a BPO specializing in high end BPO/KPO

services. By 2002 all major Indian software organizations were into BPO,

including Infosys (Progeon), Inforlinx, HCL, Satyam (Nipuna) and Patni. By 2003

Daksh was bought out by IBM, and later in 2006 MphasiS was acquired by EDS.

Even international 3rd party BPO players like Convergys and SITEL had set up

shop in India, swelling the BPO movement to India. Then service arms of

organizations like Accenture, IBM, Hewlett Packard, Dell also set up shop in

India.

Emergence of Rural BPOs:-

Booming India Inc has led to skyrocketing real estate and infrastructure costs in

Tier-1 cities. BPO industry has thrived all these years because of its ability to

deliver services at a low cost. Increasing infrastructure costs, real estate costs, and

salaries have raised BPO costs significantly and as a result Indian BPOs in Tier-1

cities are looking at Tier-2 and Tier-3 cities for operation.

Few entrepreneurs who had a vision of bringing the rural India into the mainstream

of knowledge economy have found an opportunity here - setting Rural BPOs. The

transformation of rural India started with the emergence of these Rural BPOs.



Future of outsourcing services to India:-

Analysts believe that India remains a vital destination for outsourcing and expect

its annual GDP to grow at 8-10% for the next decade. In addition, outsourcing

efforts to India are held up as an effective remedy for concerns about both Chinesegovernment policy and labor force issues, such as increasing costs and shortages.

Size of industry:-

The industry has been growing rapidly. It grew at a rate of 38% over 2005. For the

FY06 financial year the projections is of US$7.2 billion worth of services provided

by this industry. The base in terms of headcount being roughly 400,000 people

directly employed in this Industry. The global BPO Industry is estimated to be

worth 120-150 billion dollars, of this the offshore BPO is estimated to be someUS$11.4 billion. India thus has some 5-6% share of the total Industry, but a

commanding 63% share of the offshore component. The U.S $7.2 billion also

represents some 20% of the IT and BPO Industry which is in total expected to have

revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of

the approximate one million workers estimated to be directly employees in the IT

and BPO Sector. The related Industry dependent on this are Catering, BPO training

and recruitment, transport vendors, (home pick up and drops for night shifts being

the norm in the industry). Security agencies, Facilities management companies.

Nearly 75% of US and European multinational companies now use outsourcing or

shared services to support their financial functions. 72% of European multinational

companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use

these services in the next 12 – 24 months. Overall, 29% of US and European

companies expect to increase their use of outsourcing of financial functions, with

spending expected to be nearly 16% higher than current levels. Growth in this

sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While

earlier there were varying quality standards on this aspect, today there is focus on

standardization of security, such as data and IP security.



The following is a list of notable call centre companies:

1. Accenture.

2. Access Worldwide Communications Inc.

3.

Aditya Birla Minacs.4. Affiliated Computer Services.

5. APAC Customer Services.

6. Answernet

7. APAC Customer Services

8. Buw Holding

9. Convergys CoBPOration.

10. Cognizant Technology Solutions

11. Computer Sciences CoBPOration

12. Convergys

13. Etech, Inc.

14. Firstsource

15. Global Email Company

16. Headstrong (company).

17. Home Shopping Network.

18. Headstrong (company)

19. Home Shopping Network

20. InfoCision Management CoBPOration.21. Inktel Direct.

22. Innodata Isogen.

23. IQor.

24. IDT Global Israel

25. InfoCision Management CoBPOration

26. Mindpearl.

27. Maximus Inc.

28. NCO Group.29. NuComm International

30. Offshoring Inc.

31. One World Direct

32. Response Handling Call Centre – Ibrox

33. SITEL.



34. StarTek.

35. Sellbytel Group

36. SmartAction

37. Sykes Enterprises

38. Stream Global Services.39. Teleperformance.

40. TeleTech.

41. TELUS.

42. Transcom Worldwide.

43. TeleTech

44. User:Nathan.harman/ZettaServe

45. VADS (IT company)

Executive research firms and sourcing firms:-

These firms are the new hybrid firms in the recruitment world able to combine the

research aspects (discovering passive candidates) of recruiting and combine them

with the ability to make hires for their clients. These firms provide competitive

passive candidate intelligence to support companies' recruiting efforts. Normally

they will generate varying degrees of candidate information from those people

currently engaged in the position a company is looking to fill. These firms usuallycharge a daily rate or fixed rate. Many times this uncovers names that cannot be

found with other methods and will allow internal recruiters the ability to focus

their efforts solely on recruiting.

Executive Research began as an extension of ‗headhunting‘ or ‗executive search‘

businesses. Initially used to support advertising strategies, executive research

quickly overshadowed advertisements as a much more focused and successful

alternative. The ability of researchers to pinpoint top talent – passive or otherwise

– gave the headhunting businesses a much higher success rate and quicker turnaround time, especially with the harder to fill vacancies. Soon the gap in the

market became apparent, and executive research moved away from ‗in-house‘ to

a more main stream market, although still remaining ‗behind the scenes‘ in the

recruitment industry. More recently, the economic downturn has forced

businesses to review their recruitment practices that have resulted in them



working directly with the research firms. By removing the ‗middleman‘

businesses have direct access to much more cost-effective solutions, and have

been able to retain a firmer grasp on their recruitment drives and processes.

Business also have access to full disclosure on market intelligence which has

proven to be vital for more forward thinking businesses, especially with regardsto succession planning.

Process:-

Job analysis:-

The proper start to a recruitment effort is to perform a job analysis, to document

the actual or intended requirement of the job to be performed. This information is

captured in a job description and provides the recruitment effort with the boundaries and objectives of the search. Oftentimes a company will have job

descriptions that represent a historical collection of tasks performed in the past.

These job descriptions need to be reviewed or updated prior to a recruitment

effort to reflect present day requirements. Starting a recruitment with an accurate

job analysis and job description ensures the recruitment effort starts off on a

proper track for success.

Sourcing:-

Sourcing involves

1) advertising, a common part of the recruiting process, often encompassing

multiple media, such as the Internet, general newspapers, job ad newspapers,

professional publications, window advertisements, job centers, and campus

graduate recruitment programs; and

2) recruiting research, which is the proactive identification of relevant talent who

may not respond to job postings and other recruitment advertising methods done

in #1.

This initial research for so-called passive prospects, also called name-generation,

results in a list of prospects who can then be contacted to solicit interest, obtain a

resume/CV, and be screened.



Screening and selection:-

Suitability for a job is typically assessed by looking for skills, e.g.

communication, typing, and computer skills. Qualifications may be shown

through résumés, job applications, interviews, educational or professionalexperience, the testimony of references, or in-house testing, such as for software

knowledge, typing skills, numeracy, and literacy, through psychological tests or

employment testing. Other resume screening criteria may include length of

service, job titles and length of time at a job. In some countries, employers are

legally mandated to provide equal opportunity in hiring. Business management

software is used by many recruitment agencies to automate the testing process.

Many recruiters and agencies are using an applicant tracking system to perform

many of the filtering tasks, along with software tools for psychometric testing.

On boarding:-

"On boarding" is a term which describes the process of helping new employees

become productive members of an organization. A well-planned introduction

helps new employees become fully operational quickly and is often integrated

with a new company and environment. On boarding is included in the recruitment

process for retention purposes. Many companies have on boarding campaigns in

hopes to retain top talent that is new to the company; campaigns may last

anywhere from 1 week to 6 months.

Internet recruitment and websites:-

Such sites have two main features: job boards and a résumé/curriculum vitae

(CV) database. Job boards allow member companies to post job vacancies.

Alternatively, candidates can upload a résumé to be included in searches by

member companies. Fees are charged for job postings and access to search

resumes. Since the late 1990s, the recruitment website has evolved to encompass

end-to-end recruitment. Websites capture candidate details and then pool them in

client accessed candidate management interfaces (also online). Key players in this

sector provide e-recruitment software and services to organizations of all sizes

and within numerous industry sectors, who want to e-enable entirely or partly

their recruitment process in order to improve business performance. The online

software provided by those who specialize in online recruitment helps



organizations attract, test, recruit, employ and retain quality staff with a minimal

amount of administration. Online recruitment websites can be very helpful to find

candidates that are very actively looking for work and post their resumes online,

but they will not attract the "passive" candidates who might respond favorably to

an opportunity that is presented to them through other means. Also, somecandidates who are actively looking to change jobs are hesitant to put their

resumes on the job boards, for fear that their companies, co-workers, customers or

others might see their resumes.

Job search engines:-

The emergence of meta-search engines allows job-seekers to search across

multiple websites. Some of these new search engines index and list the

advertisements of traditional job boards. These sites tend to aim for providing a"one-stop shop" for job-seekers. However, there are many other job search

engines which index solely from employers' websites, choosing to bypass

traditional job boards entirely. These vertical search engines allow job-seekers to

find new positions that may not be advertised on traditional job boards, and

online recruitment websites.

Impact of Globalization on Developing Countries:-

(With Special Reference To India)

A Comparison with Other Developing Countries

Consider global trade – India‘s share of world merchandise exports increased from

.05% to .07%2. over the past 20 years. Over the same period China‘s share has tripled to almost 4%.

India‘s share of global trade is similar to that of the Philippines an economy 6 times

smaller according to IMF estimates.

Over the past decade FDI flows into India have averaged around 0.5% of GDP against

5% for China and 5.5% for Brazil. FDI inflows to China now exceed US $ 50 billionannually. It is only US $ 4billion in the case of India.



Developed countries:-

The phenomenon seems to be driven by three major forces: globalization of all

product and financial markets, technology and deregulation. Globalization of

product and financial markets refers to an increased economic integration inspecialization and economies of scale, which will result in greater trade in financial

services through both capital flows and cross-border entry activity. The technology

factor, specifically telecommunication and information availability, have facilitated

remote delivery and provided new access and distribution channels while

revamping industrial structures for financial services by allowing entry of non-

bank entities such as telecoms and utilities.

Deregulation pertains to the liberalization of capital account and financial services

in products, markets and geographic locations. It integrated banks by offering a broad array of services, allowed entry of new providers and increased

multinational presence in many markets and more cross-border activities.

In a global economy, power is the ability of a company to command both tangible

and intangible assets that create customer loyalty, regardless of location.

Independent of size or geographic location, a company can meet global standards

and tap into global networks, thrive and act as a world class thinker, maker and

trader, by using its greatest assets: its concepts, competence and connections.

Beneficial Effects:-

Some economists have a positive outlook regarding the net effects of globalization

on economic growth. These effects have been analyzed over the years by several

studies attempting to measure the impact of globalization on various nations'

economies using variables such as trade, capital flows and their openness, GDP per

capita, foreign direct investment (FDI) and more. These studies examined the

effects of several components of globalization on growth using time series cross

sectional data on trade, FDI and portfolio investment. Although they provide an

analysis of individual components of globalization on economic growth, some of

the results are inconclusive or even contradictory. However, overall, the findings

of those studies seem to be supportive of the economists' positive position instead

of the one held by the public and non-economist view.



Trade among nations via the use of comparative advantage promotes growth,

which is attributed to a strong correlation between the openness to trade flows and

the affect on economic growth and economic performance. Additionally there is a

strong positive relation between capital flows and their impact on economic

growth.

Foreign Direct Investment's impact on economic growth has had a positive growth

effect in wealthy countries and an increase in trade and FDI resulted in higher

growth rates. Empirical research examining the effects of several components of

globalization on growth using time series and cross sectional data on trade, FDI

and portfolio investment found that a country tends to have a lower degree of

globalization if it generates higher revenues from trade taxes. Further evidence

indicates that there is a positive growth-effect in countries which are sufficiently

rich as are most of the developed nations.

The World Bank reports that integration with global capital markets can lead to

disastrous effects without sound domestic financial systems in place. Furthermore

globalized countries have lower increases in government outlays, as well as taxes,

and lower levels of corruption in their governments.

One of the potential benefits of globalization is to provide opportunities for

reducing macroeconomic volatility on output and consumption via diversification

of risk.

Harmful Effects:-

Non-economists and the wide public expect the costs associated with globalization

to outweigh the benefits, especially in the short-run. Less wealthy countries from

those among the industrialized nations may not have the same highly-accentuated

beneficial effect from globalization as more wealthy countries measured by GDP

per capita etc. Free trade, although increases opportunities for international trade, it

also increases the risk of failure for smaller companies that cannot competeglobally.

Additionally it may drive up production and labor costs including higher wages for

more skilled workforce. Domestic industries in some countries may be endangered

due to comparative or absolute advantage of other countries in specific industries.



Why off- shoring makes more sense now?

Traditionally, cost rationalization was a compelling reason for corporate to

consider outsourcing/off-shoring in the first place. Post the economic downturn, it

came back to being an important reason for corporate to revisit their strategy for

off-shoring and push it more aggressively.

With green shoots appearing in the economic scenario, proliferation of technology

in various sectors and an increasing number of companies going global, Asia is

witnessing a marked rise in IT spend. While Asia-Pacific constitutes about

10percent share of the total global IT services market, IT spend in the region is

growing at a much faster rate compared to the mature markets. IT spending is a precursor to IT and BPO outsourcing and Asia-Pacific will attract increased

competition, being the fastest growing geography with an estimated growth of 10

percent, according to a NASSCOM* report.



This year 2010, the key trends that will impact the industry going

forward, are:

Markets in newer geographies:-

The U.S. and the UK have been a major revenue source for the BPO industry since

the genesis of this industry. But now service providers are exploring markets in

other global regions such as Europe, Australia, the Middle East and Asia Pacific.

WNS on its part has channelized its initiative into three regions – 1) US 2) UK &

Europe, 3) Asia Pacific thereby reducing its dependency in a single geography.

Such moves by service providers have come at time when potential customer base

in these geographies has also seen a growth in maturity. It is without doubt that this

year will witness aggressive moves by many service providers to tap this client base.

Expanding the global footprint:-

BPO service providers are building delivery centers around the world, often in

newer nations, that provide a plentiful supply of educated but low-cost workers.

WNS recently set up a delivery center in Costa Rica, which is not a conventional

site for off-shoring, however it is strategic in terms of its proximity to the US.

There has also been expansion of WNS's delivery centers in Philippines, Romania,Sri Lanka and India. This footprint provides clients tremendous flexibility in terms

of cost, language capability, real time processing as well as access to Innovation

networks driven by a partner.



Successful outsourcing requires a strong understanding of the organization's

capabilities and future direction. As William R. King explained in Information

Systems Management, "decisions regarding outsourcing significant functions are

among the most strategic that can be made by an organization, because they

address the basic organizational choice of the functions for which internal expertiseis developed and nurtured and those for which such expertise is purchased. These

are basic decisions regarding organizational design." Outsourcing based only upon

a comparison of costs can lead companies to miss opportunities to gain knowledge

that might lead to the development of new products or technologies.

Outsourcing can be undertaken to varying degrees, ranging from total

outsourcing to selective outsourcing. Total outsourcing may involve dismantling

entire departments or divisions and transferring the employees, facilities,

equipment, and complete responsibility for a product or function to an outside

vendor. In contrast, selective outsourcing may target a single, time-consuming

task within a department, such as preparing the payroll or manufacturing a minor

component, that can be handled more efficiently by an outside specialist.

Vendors providing outsourcing services are generally grouped into two models:

Business Process Outsourcing (BPO) and Application Service Provider (ASP). In

the BPO model, major resources and assets are transferred from the company to

the vendor. Under the ASP model, on the other hand, vendors concentrate on providing selected services for multiple clients. But as Osmond told Employee

Benefit News, many variations exist within these two models. "Each vendor has a

particular focus and/or point of entry to the market, particularly in the ASP space,"

Osmond stated. "There is also a wide range of pricing models and option. The

good news is that there is a seemingly endless combination of service, pricing, and

delivery, providing a solution for most situations. The bad news is that it can be

difficult to compare vendors on an apples-to-apples basis.



DISADVANTAGES OF OUTSOURCING:-

Some of the major potential disadvantages to outsourcing include poor quality

control, decreased company loyalty, a lengthy bid process, and a loss of strategic

alignment. All of these concerns can be addressed and minimized, however, bycompanies who go about the outsourcing process in an informed and deliberate

fashion. Info World's Maggie Biggs counsels businesses to define "exactly what

business processes and/or functions it makes sense to maintain via a service

relationship. Unless you have a lot of resources to expend, it may make sense to

prioritize outsourcing projects based on the number of benefits you expect to gain

from the arrangement." There may also be inherent advantages of maintaining

certain functions internally. For example, company employees may have a better

understanding of the industry, and their vested interests may mean they are more

likely to make decisions in accordance with the company's goals. Indeed, most

analysts discourage companies from outsourcing core functions that directly affect

the products or services that the business offers.

Steps in Successful Outsourcing:-

Once a company has made the decision to outsource, there are still a number of

factors it must consider in making a successful transition and forming a partner

relationship with the vendor. First, the company should determine what sort of

outsourcing relationship will best meet its needs. "Decide what's important," urged

the Journal of Accountancy. "If a function is not strategic to your business — for

instance, payroll services or health insurance needs in a recruiting agency with

only ten employees — consider outsourcing it to an expert provider." Some

businesses share strategic decision-making with their vendors, while others only

outsource on a limited, as needed basis.

As Ethel Scully noted in National Underwriter, the company needs to obtain the

support of key personnel during this time. Many companies encounter resistancefrom employees who feel that their jobs are threatened by outsourcing. Scully

suggested forming a team consisting of an outsourcing expert, representatives from

senior management and human resources, and the managers of all affected areas of

the company to help address employee concerns about the decision.



KPO,s (knowledge process outsour cing) …

Introduction to KPO‘s

Definition:- Knowledge process outsourcing (KPO) is a form of outsourcing , in

which knowledge-related and information-related work is carried out by workers in

a different company or by a subsidiary of the same organization, which may be in

the same country or in an offshore location to save cost. Unlike the outsourcing of

manufacturing, this typically involves high-value work carried out by highly

skilled staff. KPO firms, in addition to providing expertise in the processes

themselves, often make many low level business decisions — typically those that

are easily undone if they conflict with higher-level business plans.

Introduction to KPO:-

Knowledge process outsourcing (KPO) is the term used to describe outsourced

support that requires deep domain knowledge and the exercise of judgment and

interpretation. It differs from traditional BPO / ITO outsourcing, which tends to

focus on rules-based processing. KPO typically requires people with higher

education, specific skills, and specialized business experience. As the work entails

decision-making, offshore teams would need to be more closely integrated with the

onshore teams that they support than would be the case in a typical outsourcing

engagement. Process transparency is a major barrier to using KPO services. Many

organizations do not track carefully which decisions are made by whom, and rely

so much on informal social processes (and "soft skills") that it is unclear how much

the use of KPO would disrupt existing operations. However, requirements

like Sarbanes-Oxley and radical transparency movements like full cost

http://en.wikipedia.org/wiki/Outsourcing



http://en.wikipedia.org/wiki/Business_process_outsourcing



http://en.wikipedia.org/wiki/Information_Technology_Outsourcing



http://en.wikipedia.org/wiki/Sarbanes-Oxley



http://en.wikipedia.org/wiki/Radical_transparency



http://en.wikipedia.org/wiki/Full_cost_accounting

http://en.wikipedia.org/wiki/Full_cost_accounting








Process Outsourcing. The success achieved by many overseas companies inoutsourcing business process operations to India has encouraged many of the saidcompanies to start outsourcing their high-end knowledge work as well. Costsavings, operational efficiencies, availability of and access to a highly skilled and

Talented workforce and improved quality are all underlying expectations inoutsourcing high-end processes to India.

The future of KPO has a high potential as it is not restricted to only InformationTechnology (IT) or Information Technology Enabled Services (ITES) sectors andincludes other sectors like Legal Processes, Intellectual Property and Patent relatedservices, Engineering Services, Web Development application, CAD/CAMApplications, Business Research and Analytics, Legal Research, Clinical Research,Publishing, Market Research (Market research KPO ) etc.

In today's competitive environment, focus is to concentrate on core specializationand core-competency areas and outsource the rest of the activities. Manycompanies and organizations have come to realize that by outsourcing non coreactivities, not only cost are minimized and efficiencies improved but the total

business improves because the focus shifts to the key growth areas of the businessactivity.

Scope and Future of KPO:-

According to a report of National Association of Software and Services Companies(NASSCOM), the Indian chamber of commerce that serves as an interface to theIndian Software industry, Knowledge Process Outsourcing industry (KPO) isexpected to reach USD 17 billion by 2010, of which USD 12 billion would beoutsourced to India.

Another report predicts that India will capture more than 70 percent of the KPOsector by 2010. Apart from India, countries such as Russia, China, the Czech

Republic, Ireland, and Israel are also expected to join the KPO industry.

According to a recent study by ―Evalueserve, a Gurgaon based outsourcing

company having service chart for global world‖, the global KPO market is

expected to grow at a cumulative annual growth rate (CAGR) of 46 per cent, from$1.2 billion in 2003 to $17 billion in 2010.



Compare this with the prediction for the low-end outsourcing services market. Thisis expected to have a CAGR of 26 per cent, from $ 7.7 billion to $39.8 billion inthe same period.

Evalueserve says India provided $3.5 billion of BPO and KPO (but non-IT)services in 2003 and is expected to grow at a CAGR of 36 per cent during 2004 to2010. Hence, it is likely to earn $30 billion in 2010 by providing these services.

Country general manager, Kelly Services, Achal Khanna Says ―India still

maintains the competitive advantage for providing, and the combination of themost cost-effective and high quality manpower- this is India's strength in the off-shoring business‖.

In the future, it is envisaged that KPO has a high potential as it is not restrictedonly to Information Technology (IT) or Information Technology Enabled Services(ITES) sectors, and includes other sectors like Intellectual Property relatedservices, Business Research and Analytics, Legal Research, Clinical Research,Publishing, Market Research (Market research KPO), etc.

"Over the past year or two, the outsourcing industry has been throwing up jobs for Doctors, Engineers, CAs, Architects," says Jacob William of the Bangalore-basedOutsource to India, which employs 500 people and offers services in the big-buzz,

big-bucks area of knowledge process outsourcing. "Unlike the first wave whichwas more about entering data and answering phone calls, these jobs involve skilland expertise." Also, of course, the talent is much more affordable. "Law firms inthe US charge an average of $400-450 per hour, and we do the same work for $75to $100 an hour"

In the Indian context, KPO salaries could be 25-50 per cent higher than thoseoffered to the same domain experts such as Engineer, Doctor, CA, Lawyer,Architect, Biotechnologist, Economist, Statistician and MBAs,

In its annual publication Strategic Review 2005, Nasscom has said the high-endactivity of the BPO industry — the KPO or knowledge process outsourcing could beworth $15.5 billion by 2010.

According to earlier estimates, the BPO industry itself was expected to be about$20bn by 2008; hence a very significant portion of the sector — in excess of 50% is



now projected to be knowledge based. This represents significant metamorphosisof call centre sector business to completely different model.

The projections are based on a white paper released by Evalueserve. The paper

cites reasons for a possible KPO boom. It says higher savings by outsourcingknowledge based activities combined with the scarcity of specialized talent indeveloped countries could lead to growth in the KPO sector.

Billing rates for KPO are higher at $30-45 per hour compared to just $10-14 in theBPO business. However, the paper also warns of several challenges like higher quality standards, greater investments and inadequate talent.

The study estimates that while the compounded growth rate of BPO till 2010would be just 26% KPO is expected to be grow at almost 46%.

Bottlenecks in Future Growth:-

A study on Knowledge Process Outsourcing (KPO) sector shows a huge supplygap that threatens to cripple its growth. Research, a UK-based research servicescompany, has gathered evidence suggesting that the KPO market may just aboutreach a size of $5 billion by 2010, manned by 100,000 people instead of

projections of a $12 billion market supported by 250,000 employees.

This accentuates Nasscom's projections of a shortfall of 500,000 workers in ITESand BPO sectors by 2010.

Assuming average revenue per person of $55,000 over the next four years, 100,000knowledge workers point to a $5 billion market. This size, though based on aCAGR of 32%, is still 60% less than the $12 billion potential projected by bigKPOs, like Evalueserve, last year.

Rocsearch COO, Ashish Sinha says the sector is restricted by low employability

despite high graduate turnout, and competing demand from other sectors as jobsgrow faster than the workforce.

For example, all the 2,000-odd IIM and top 10 B-School graduates are employable,while less than half the 84,000 graduates from Tier-II B-Schools would make thegrade.



Does it imply that with the rise of KPO entities, BPO (Business ProcessOutsourcing) become extinct. It is undoubtable that KPO is a step ahead of BPO

but this does not mean the end of BPO. The BPO Industry will exist and continue

to be successful in India . BPO has its own strengths and way to solve a particular problem and the BPO market is long term in nature as compared to the KPOmarket. With every passing day the BPO market expanding and so is the varioussystems and processes through it. The following are various areas in which the BPO presence shall not remain in existence but shall also keep growing.

• Data processing.• Basic data entry.• Department Outsourcing.• Provides technical support.• Provides email support to its customers.

Even after the entry of KPO in the Indian market, the amount of total revenueearned in the outsourcing industry in BPO will be higher as compared to the KPOindustry. The BPO exports will be as higher as $20 billion by the end of 2010 incomparison to KPO projections of $12 billion in the same period. As per a recentstudy done by experts the BPO industry is expected to grow globally at a CAGR of over 26 percent by 2010.

There are a number of notable differences between KPO and BPO. The sixelements that separate these two processes are:

Focus

Process,

Specialization,

Driving force,

Activities, and

Client contacts.

BPO has a process which is much more simple than KPO. While BPO places anemphasis on low level processes, KPO places an emphasis on high level processessuch as patent filing, investment research, and legal issues. When it comes tofocus, KPO focuses on the application of knowledge rather than processes. Thedifferences in specialization between are primary connected to their domains.



Perhaps one of the most powerful advantages of Knowledge Process Outsourcingis the advantages it brings to developing countries. By generating revenues fromthis industry, a country can become more prosperous.

Af ter Conquer ing the BPO Wave, India is Ready to F lour ish in the KPO Sector:-

Outsourcing – this is by large the most uttered word today, right from globalcorporate during their business planning to being the butt of school and household

jokes. The rapid proliferation of globalization and liberalization hasrevolutionalized global business as it is conducted today. Regional market

boundaries have been erased, compelling all closed economies to open their markets for global trade and business. This being viewed as a very healthy sign for the global economy has paved way for the conception and implementation of new

business models such as outsourcing.

Dawn of BPO:-

The sustenance and success of any business is determined by its costcompetitiveness and time-to-market window. Companies across the world areconstantly striving to devise business models that will enhance the efficiency of these two critical parameters. The origin of the outsourcing business model is aculmination to this effort. Companies identified outsourcing a part of their business

functions to cheaper locations overseas that have an abundance of skilled labor andnecessary infrastructure, aided in significantly reducing their operational expensesand in improving their return on investments. It also resulted in a faster turnaroundtime as the outsourcing arrangement resulted in a round-the-clock, 24/7 businessmodel. India, China, Malaysia, The Philippines, Russia, Eastern Europeancountries and a few Latin American countries were identified as ideal targets for outsourcing locations by more developed economies. India with its wealth of English speaking, skilled and talented unemployed youth became the most soughtafter destination for business process outsourcing during the mid and late 90‘s

when the outsourcing industry was gaining pace globally.

I ndia Rules the BPO Roost: -

The late 90‘s witnessed a surge in the services sector of the Indian economy with

numerous BPO centers for global conglomerates emerging in all the metros. Fromtechnical customer support to bill handling to medical transcription services to

banking back-end operations to insurance services, BPO put India on the world



at a CAGR of over 45 percent during the same period. Research also indicates thatthe global KPO industry is expected to be worth over $15 billion by 2009, withIndia expected to account for nearly 70 percent of this revenue. This shows theenormous potential the KPO industry holds for the future of the Indian economy.The emergence of numerous R&D outsourced centers, business research andconsulting firms, firms offering legal services to overseas attorneys and clients anddata analytics centers all indicate the propitious growth of the KPO sector in Indiain the ensuing years.

The immense growth estimated for the KPO industry in India indicates the largevolumes of employment opportunities that the educated mass of the country couldforesee. It also portends the growth in infrastructure and increase in FDI that thecountry will enjoy in the coming years. The continuing boom in the Indian BPOsector is a promising bellwether to what lies ahead for the KPO sector. It is not an

exaggeration to believe that India will surely emerge among the global super powers through the growth of its services sector in the next five to ten years. Thenext few years could well be the golden period of the Indian economy, thanks tothe outsourcing boost!

Accenture case study:-

Accenture is advancing towards high performance with a procurement BPO’s

outsourcing solution that has increased spend under management, reduced

risk and produced performance improvements and innovation — all while

driving bottom-line savings.

―We‘re well on the way to achieving our aggressive target of percentage of spends

under management," says Al Williams, CPO for Accenture, ―a goal to be deliveredover a three-year period. We are confident that, with continued focus on the end-to-end procurement BPO‘s approach from Accenture Procurement BPO‘s BPOServices, we will achieve that goal."

Accenture's journey to achieve high performance through procurement BPO‘s

transformation began in the late 1990s, during a period of rapid global expansion



view us as they would any other service provider; we would relate to them as wewould with any client."

One of Accenture's goals as it began this next phase of outsourcing its procurementBPO‘s was to advance more quickly to a holistic procurement BPO models,expanding the coverage of procurement BPO‘s outsourcing to more spendingcategories and more geography.

According to Al Williams, chief procurement BPO‘s officer for Accenture,"Procurement BPO‘s is best delivered on a comprehensive basis, including demandmanagement, sourcing, negotiations, transaction processing, compliance, helpdesk, reporting and analytics, and more. We believe there is tremendous upside for us in buying a large portion of our procurement BPO‘s capability from Accenture'sown procurement BPO‘s services offering because of its ability to help us advance

toward coverage that is truly global. That outsourcing team is serving a largenumber of clients, so they are able to leverage their advantages across a wide base."

Historically, moving from a local to a global procurement BPO‘s model has beenchallenging for Accenture, which had been a partnership and became a publiccorporation in 2001. It has taken time to reinvent an organizational structure thathad previously been similar to a franchise of hundreds of companies run byindividual partners who oversaw procurement BPO‘s within their responsibilities.

As David Boone says, "Success in procurement BPO‘s transformation comes in part from leveraging volumes across the enterprise through centralizedcoordination. One of the successes we have enjoyed with Accenture, and acornerstone of our future success together, has been in our ability to work with thecompany's procurement BPO‘s team to advance the goal of buying off of centrallynegotiated deals. When we are able to help executive management agree touniform or standardized requirements — rather than each local entity deciding on its

particular brand of laptop computer, office chair or cubicle — we accrue significantsavings for a client."

More rigors in assessment and measurement of business impact has also been agoal of Accenture met by this outsourcing relationship. "Accenture ProcurementBPO Services uses validated external benchmarks of the procurement BPO‘s capability to assess the maturity of a procurement BPO‘s organization. This is acomprehensive assessment of people, processes, technology and organizationstructure."



One of the key reasons for pursuing procurement BPO‘s outsourcing is in reducingrisk and generating greater predictability and speed to value. AccentureProcurement BPO Services can deliver on those goals for Accenture through a"tool box" of subject matter experience, processes and technology enablers. Aglobal delivery network, including Centers of Excellence focused on procurement,help to enable an industrialized, high-quality, global procure-to-pay platform in amulti client environment. Advanced business analytics capabilities and tools, alsoavailable through the Centers of Excellence, help drive additional savings. Theseassets enable Accenture Procurement BPO Services to deliver not only efficiencyand cost savings, but innovation and consulting guidance, as well.

A strong, teaming relationship between Accenture Procurement BPO Services andAccenture's retained procurement BPO‘s team has been another hallmark of thissuccessful outsourcing solution. Accenture maintains a purposely lean global

procurement BPO‘s group with a sharp focus on strategy, policy, process,technology, change management and the customer experience. Williams notes thatit is through this kind of close partnering with their service provider thatorganizations can dramatically improve the business impact of procurement BPO‘s outsourcing. "Accenture Procurement BPO Services can focus on the details theyare good at — improving procurement BPO‘s operational efficiency, for example.Our retained organization can focus on identifying new directions, new areaswhere the outsourcing provider can then apply its skills and resources to improveits impact,"

Access to expertise and deep procurement BPO‘s knowledge is also a benefit of the outsourcing relationship with Accenture Procurement BPO Services. "With anoutsourcing solution," says Williams, "we look to maximize the advantages of having access to intellectual capital, supply market information, sourcingtechniques and tools. Category expertise, for example, is one important area I amlooking to Accenture Procurement BPO Services to provide. Information oncontingent labor is another big value point for us right now, because that isAccenture's single largest category expense. As we move forward together, theseare some of the procurement BPO‘s areas where we are setting the bar even

higher."

Accenture's experience has demonstrated that procurement BPO‘s outsourcing provides organizations with the ability to transform and scale much faster than theycan solely by building up an internal capability.

The gains made by Accenture's procurement BPO‘s organization through atransformational outsourcing arrangement with Accenture Procurement BPO



"The choice facing executives in both the commercial and government sectors is,in one sense, fairly straightforward. When it comes to procurement BPO‘s transformation, you can do it yourself — if you have the time, resources, skills andongoing leadership commitment. Or, you can turn to an organization that hasalready made the investment in time, effort, money and experience in developingadvanced procurement BPO‘s capabilities. For us, this choice remains an easy oneto make. Since procurement BPO‘s must contribute to an organization's overallgoal to achieve and maintain high performance, we owe to our shareholders toconstruct our operations on the best thinking and experience in the marketplace."



Conclusion:

The BPO’s and KPO’s have some benefits and some disadvantages.

The companies should try their best and make such policies and strategies that even the employees remain happy and work with full

satisfaction.

Due to globalization India has made huge progress.

Many people who were not getting a high profile job with low education

due to entrance of BPO’s and KPO’s they got placements.

Over all it gave rise to the Indian economy and even the people of India.

It also changed the views and perspectives of people and made them

realize the importance of standard of living.

Bpos and Kpos

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