Trends & Challenges in Business Process Outsourcing By Amey N Kantak

Executive Summary The paper first traces the evolution of the business process outsourcing industry in India and the various stages, from data entry in the 1990s to transaction processing in 2000s, which it has transitioned thru and discusses the main motivation drivers for outsourcing namely • • • •

Focus on core competence Efforts to reduce cost by converting fixed costs to variable costs Improvement in service quality and delivery Increased management efficiency by shifting from managing resources to managing results

Currently, the Indian Business Process Outsourcing (BPO) industry derives majority of its revenue from outsourcing of IT and low-end IT-enabled services, which are soon going to become an easily replicable commodity. This trend is posing both margin pressure and customer retention challenges with the shrinkage in the magnitude of labor cost arbitrage. A SWOT analysis lists out where India is today as a business outsourcing destination. The business process outsourcing industry in India is very young. A multitude of trends can hence be seen. The major trends include the shift towards transaction processing, gradual rise of knowledge process outsourcing (KPO), the mounting global competition and the rise of newer global delivery models to name a few.

Based on the emerging trends a BCG analysis has been done to find out the various options available to the Indian outsourcing industry for future growth and the various challenges which are currently being faced have been discussed. These include the lack of a strategy, attrition and growth aspirations, customer behind the driving wheel syndrome, data security, social changes and technology convergence.

The paper concludes with a few suggestions and possible solutions to the challenges being posed with respect to the government, the BPO industry and individual BPO providers on countering the threats.

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Trends & Challenges in Business Process Outsourcing

The paper first traces the evolution of the business process outsourcing industry in India and the various stages, from data entry in the 1990s to transaction ...

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