Tag: BPO

Can Bangalore Become the Innovation Hub of Asia?

Posted on September 22, 2011

A couple of years ago, the city of Bangalore made global headlines thanks to President Obama. In May 2009, when, in a bid to boost the U.S. job market, Obama removed some tax incentives for U.S. companies that offshored work rather than creating domestic jobs, his rallying call was “Buffalo [New York] before Bangalore.” Obama was reflecting popular public perception when he chose to highlight Bangalore. A few years prior to his speech, the term “Bangalored” — meaning to be laid off due to outsourcing — entered the lexicon.

Indeed, over the past few decades, Bangalore has been seeing a steady makeover. Riding on the success of its booming information technology and business process outsourcing (BPO) industry, the city has become the “IT capital of India” and has even been called the “back-office to the world.”

Bangalore now has another aspiration: to become the innovation hub of Asia. This was the theme of the recently-held India Innovation Summit 2011 organized by the Confederation of Indian Industry (CII) in the city. Various speakers at the event pointed out that this goal is grounded in current realities. Bangalore is already home to a large number of technology professionals, both from within the country and many who have relocated there from across the world, and some of the world’s leading edge technology work is being done from there. For many of the multinational companies, be it GE, Cisco, Intel, Yahoo, 3M and others, their research and development centers in Bangalore are among the largest in their network. With India being one of the fastest-growing economies of the world and with a huge market, many global innovations by multinationals are now happening in the country.

According to Praveen Vishakantaiah, president of Intel Technology India, “the research and innovation capability is present in the DNA of Bangalore. Over the past decade, the development work from there has ramped up significantly. It is now time to push the research element.” But Ajay Nanavati, managing director of 3M India, pointed out that, for innovation to grow, there needs to be a lot more interaction between the different companies. “What we have at present is a very silo-ed mindset,” he said. “Everyone is working in their own little universe.” Stronger industry-academia interactions, well-defined IP protection policies and a wider and deeper talent pool are other aspects that need to be explored, he added.

But that’s not all that Bangalore needs if it wants to don the mantle of Asia’s innovation hub. The city’s infrastructure — its roads, power supply and transportation system — all need a massive and urgent overhaul. For example, take the city’s power supply constraints. Vivek Mansingh, president of the collaboration and communication group at Cisco Systems, noted that “we have thousands of square feet of lab space, but we don’t have enough power to bring in more work here.” In terms of transportation gridlock, Bangalore ranked sixth in IBM’s most recent global Commuter Pain Index, which was conducted across 20 cities.

Sridhar Mitta, IT industry veteran and founder of NextWealth Entrepreneurs, said that in 2000, researchers from Stanford University concluded that “what distinguishes the Silicon Valley is not its scientific advances or technological breakthroughs, but the overall habitat or environment that is tuned up to turn ideas into products and take them rapidly to market by creating start-ups.”

So what does the government have to say? Addressing the audience at the CII conference, D.V. Sadananda Gowda, chief minister of Karnataka (Bangalore is the capital of the state of Karnataka) was categorical that, “The government is committed to supporting all initiatives needed to foster innovation.”

Now it remains to be seen if the government and other stakeholders will walk the talk.

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Can Rural BPOs Solve India’s Supply Constraint?

Posted on September 6, 2011

One of the pillars of the Indian BPO industry has been the country’s large, educated, and English-speaking population. But it is an advantage that has been steadily eroding in recent years. One of the biggest challenges that industry players now face is supply constraint. Lack of trained manpower has led to wage escalation and high attrition. That, in turn, now threatens India’s dominant position as an outsourcing destination.

To counter this trend, Indian BPO firms have been adopting various measures. One of them has been to cast their net wider into tier 2 and tier 3 cities (defined as cities with a population of 5 million or less) to tap the talent pool available there. Now, they are going deeper into the hinterland to the rural locales.

First among the large IT & BPO players to set up a company-owned rural BPO center is Wipro Technologies, a Bangalore-based IT services firm. The company recently opened its first rural BPO center at Manjakuddi village in the southern state of Tamil Nadu. This center, which is working for an international client, has an employee pool of 60 people. Wipro plans to increase this to 120 by March next year and to around 300-500 over the next two to three years.

Pointing out that within a 40 km radius from the Manjakuddi center there is an annual pool of 14,000 graduates and that typically only 25% of the graduates from villages migrate to the cities, Manish Dugar, senior vice-president and global head, Wipro BPO, says: “This [the rural BPO center] is not a cost play for us. This is an innovation in our delivery model. If we can successfully create a model that allows us to tap into the talent pool in the rural areas, we would have created a sustainable labor supply going forward. We expect a fair share of our future growth to come from the rural centers.”

Rural BPOs have in fact been gaining momentum in recent years. But typically these have been captive back-office centers of large organizations such as the Tata Group or the HDFC Bank. Others have been small centers (employing between 20 and 100 people), set up by small third party players and NGOs. The larger IT and BPO players, while they have been exploring the options, have yet to make a significant mark in this space. Some, like Infosys BPO, have made a tentative beginning by partnering with others.

The critical issue is the business model. The big players typically operate a few large centers. To run a large number of small centers across the country would need a shift in mindset and policies. It would also require huge management bandwidth. Take Wipro BPO. It currently has a total of 30 centers; nine in India and 21 outside. In each of its India centers it has an employee pool of around 2,500 people. In its rural centers it is looking at a maximum of 300-500 people per location.

Kumar R. Parakala, partner and head of IT Advisory at KPMG in Europe, Middle East and Africa, believes that “as long as players are not considering a large-scale operation, the rural BPO is a viable option for organizations seeking to cut costs and attrition rates and gain access to untapped talent.” Scalability, he says, will depend upon a number of factors including socio-cultural constraints, sales and marketing effectiveness, infrastructure availability and quality. “In the rural context, each of these has its limitations,” he notes.

According to Parakala, the hub-and-spoke model could be an optimal format to deliver international non-voice processes out of rural centers. “The critical success criteria of this model running seamlessly are smart break-up of process, clarity on what can effectively be done out of the rural BPO center and stringent quality control measures,” he notes.

Sridhar Mitta, a former Wipro veteran and founder of NextWealth Entrepreneurs, an IT services company with a distributed delivery model, offers another view. He believes that large IT and BPO organizations will find it tough to run their own operations in rural locations because of inherent internal conflicts around compensation, career trajectory, management bandwidth and so on. NextWealth follows an entrepreneur-led model and Mitta believes that having a local front end is imperative to deal with the challenges of rural India. “The large players will be more effective in the rural space if they adopt the entrepreneur-led, franchisee-based, distributed network model or partner with others who have adopted this model,” he says.

Wipro’s Dugar, meanwhile, is open to all possibilities. He notes that the Manjakuddi center is a pilot project, and Wipro’s future strategy around rural BPOs will depend on its success. “But we are already evaluating other possible locations where we can set up our own centers. We are also talking to other players,” he says. “Anyone who wants to be relevant and survive in the BPO industry has to innovate in the talent supply chain. That is what we are working towards.”

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Can India Make a Global Impact with Its Innovations in Services?

Posted on July 29, 2011

For the past 10 years, Indian cardiac surgeon Devi Shetty has been working relentlessly to drive down the cost of quality cardiac care in India and to make it accessible to the masses. At his Narayana Hrudayalaya chain of cardiac care hospitals, Shetty offers heart surgeries at a fraction of what it costs across the world. The cost savings have been achieved through what he terms “process innovation.”

Shetty is now looking to take this service model outside India with a 300-bed hospital in the Cayman Islands. Over time, the facility is expected to expand to a 2,000-bed multi-specialty hospital. Talking recently to economic daily, Business Standard, Shetty said: “The Cayman Islands is an hour’s flight from the U.S. We intend to offer cost-effective treatment for the citizens of the U.S. and also for those who are under-insured. We will also cater to the local population.” Shetty is now looking at creating a presence in Malaysia.

With spiraling health care costs a matter of serious concern across the world, Shetty’s model could be a game changer for the global health care industry. Rana Mehta, executive director PricewaterhouseCoopers, notes: “The Indian model of health care is a very cost-effective one and is attractive to both developed and developing countries.” Rana says that, within the health care sector, services like diagnostics could also be an area where Indian companies can make a significant mark worldwide.

K. Raman, practice head (infocomm, media & education) at the Tata Strategic Management Group, an independent management consulting firm, points out that health care spending is high all over the world both at the individual and government level. “Any solution that brings down the cost of health care delivery can have a large scale impact,” he adds.

But this is not about health care alone. Shetty’s move needs to be seen in the larger perspective of services from India having the potential to be game changers and redefining various sectors across the globe. It has already happened in the information technology and business process outsourcing (BPO) industry. Not only are Indian IT and BPO companies servicing their global clients from India, they are increasingly taking their model outside the country and setting up centers in different parts of the world. Other global players have had to follow suit.

In the telecom industry, Bharti Airtel, India’s largest telecom player, is seen as a pioneer in introducing a new, low-cost business model. Last year, the company took its learning from the Indian market to tap African consumers through its acquisition of Zain Africa. Bharti plans to look at other markets, too.

According to Raman, services from India that are built around innovations to cater to the unique needs of the Indian market have global potential. Education, he says, could be another sector where India could make a mark. He points out that education, like health care, involves significant spending at the government and individual levels. The sector has a large nation-level impact; needs to be delivered over a wide area and can leverage technology in a big way. “If India is able to address its own internal challenges in this sector, particularly in terms of quality and reach, it could be replicated across many countries,” Raman notes.

He goes on to add: “As a concept, frugal innovation has been there for some time. The whole idea is around innovating for developing countries and then taking the same innovations to developed countries. Until now, this has primarily been on the product side. Taking low-cost service methodology to other countries is a logical extension.”

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