British Telecom:  Manager Compares Indian And British BPO’s

The NASSCOM Summit in June had many interesting presentations.  British Telecom (BT) Managing Director for Retail Customer Service, Duncan Ingram, made a very candid speech.   British Telecom has four Divisions – BT Retail, BT Global Services, BT Wholesale and Openreach -  and massive investments in India.

British Telecom managers had the foresight to see the potential in India and moved quickly to set up a number of operations.  Tech Mahindra in Pune has been operating since 1987, and has 6,500 employees dedicated to BT.  BT Wholesale and Openreach in Pune have 300 employees.  BT Global Services in Pune has 224 full-time employees.  BT Retail has 1500 employees in Noida, 1100 workers in Bangalore and another 800 in Chennai. 

 BT MD Duncan Ingram then compared the productivity between Indian and British employees.  In his speech he spoke about how BT Retail found Indian BPO productivity equal to UK; Quality at or above UK standards and Customer Satisfaction was equal to UK.

BT Wholesale found Indian BPO employees to have quality consistently at or above UK standards.  And the performance was above target

BT Global Services had the same experience with Indian employees.  Quality was at or above UK standards.  All productivity Service Level Agreements were being met.

Duncan then made the point that cost was the prime driver for offshoring.  He quoted a study which stated  70 percent of the companies outsourced to reduce labout cost.  Reduce other costs was a close second criterion.

Duncan was the gracious guest.  While stressing that everyone needed to become more efficient and effective, he praised the Indian team for knowing the strength and weakness of their British clients.  He praised his hosts for having skills, process, systems, IT and ‘Good People’ (his emphasis).  He also spoke about the need for pricing models to vary to suit customer requirement, and the need to move to utility pricing.

Britsh Telecom has invested 10 billion pounds in a global IP network.  It employees 33 thousand people in 50 countries.   So, a happy customer means more business for Indians.

(Techgoss ran the following story about the conference earlier in the month)

NASSCOM  Summit:  Call Centre Business Stopped Dead In Tracks

NASSCOM held an ITES-BPO Strategy Summit in June, 2006 in Bangalore.  One of the most interesting presentations was made by Forrester Research, Vice President, Asia-Pacific, John C. McCarthy

The theme of the talk given by John McCarthy was ‘Future BPO success will require serious technology and marketing investments’.   And then he launched into a very insightful, interesting presentation.

John quoted  Business Technographics research which surveyed 588 North American and European IT Decision makers last year.  When posed the question ‘Which best describes your interest in BPO?’, only 14 percent of these senior executives in North America were engaged in leveraging BPOs or having pilot processes for BPO.  European Union was only slightly higher at 15 percent.  Remaining 85 percent of executives have not taken any concrete steps to use BPOs.  The interest in BPO’s was greatest in finance, utilities, telecom, media and entertainment.   Predictably, the public sector was the least interested in outsourcing to BPO’s.

To the question ‘What is your company’s interest in BPO?’,   ‘payroll’ was 27 percent and ‘HR benefits’ were 22 of all the processes ‘currently in production’.   ‘Times and expense accounting’ and ‘Inbound Customer Services’ were the most popular processes to be deployed within next year. 

Indian BPOs are giving impressive returns,  but  the managers in US and EU are more realistic these days.  In 2004,  7 percent said that savings exceeded their expectations,  in 2006 it had dropped to 3 percent.  In 2004,  13 percent said they had seen savings they expected,  in 2006,  this figure rose to 21 percent.   Surprisingly, in 2004, 11 percent of these senior executives said they had not seen savings,  in 2006,  this figure rose to 17 percent. 

Next, John spoke about how western clients were still questioning the cost effectiveness of outsourcing.  When asked about the issues that were cause of most concern, 64 percent said that cost-effectiveness of outsourcing was worrying.  The other areas of apprehension were quality of the available service providers, and concerns over security and loss of data.

But American and European companies were quite happy with what they had outsourced.  23 percent were very satisfied and 60 percent were somewhat satisfied.  4 percent were very dissatisfied.

91 IT Service executives were surveyed in North American companies about  how the recent security breaches impacted their offshore BPO plans.  23 percent said they had extended investigation of vendor security processes before contract signing,  and 10 percent said they were re-examine commitment to take work offshore.   As many as 19 percent had increased oversight of suppliers.  13 percent of the respondents were not affected by the security breaches in offshore BPOs.

John McCarthy of Forrester then listed the current BPO market trends as listed below

-	BPO market remains highly fragmented
-	Industry momentum growing:  CAGR=10%-15%
-	HR and F&A will grow > 15%CAGR
-	Call Centre business has stopped dead in tracks.  Vendors were retreating to transaction processing
-	Maturation, standardization of offering is increasing slowly. HR players finally gain scale and breath of skills through consolidation
-	Delivery models were in flux
-	Market Consolidation accelerating.  But high valuation limits consolidation of Indian firms and acquisition of Indian firms by US entities
-	Amidst growth, where is the profit?  Suppliers that “bought” the business now seek more profitable, sustainable business models.  Emphasis on multi-tower deals by major multinationals signals a lack of faith in profitability of individual BPO offering.
-	Vendor/user disconnect.  SI’s chase big deals while Indians lack scale.  Users are very sceptical of vendors outsourcing and BPO savings claims.  Clients think captive approach will save the day
-	Vendors doing deals to build momentum
-	Smart players focusing on vertical processes

He showed a graph about how a client saved money over a 10 year BPO Contract.  If the base client costs were $100 in the first year,  after 3 years of ‘offshore and standardisation’  they fell to $62.  After ‘re-engineering’ the costs fell to $36 in the seventh year.  By year 10, technology had eroded processes and the pricing had fallen to $29.

Finally,  John listed the new offshore success criteria for BPO vendors.  They were product marketing (not just branding), real account management (not just promoting onsite programmers),  making strategic choices (not every service to every vertical to every client),  saying no to clients (not acting as a glorified captive centre) and investing in a common technology platform for BPO (not relying on cheap bodies).

(Techgoss thanks the senior BPO executive who has shared his notes with our readers.  He prefers to remain anonymous.  Parts of John McCarthys  presentation have been reported before,  but Techgoss feels that the full speech is worth a read.)