BPO profits need time to show
The Nineties belonged to the software services companies. The first decade of the 21st century will surely go to the business process outsourcing (BPO) companies. If one were to follow the evolutionary theory in the strictest sense of the term, it should have been the other way around. After all, software services requires higher skill sets than BPO.
But in India, nothing ever works to a pattern or formula. The software revolution happened almost surreptitiously. By the time the light dawned, it was too big and too entrenched and a source of major chest thumping for Indians collectively for anyone to disturb its momentum. BPO, in contrast, has been a structured entry decision by most players with fresh investment in the industry touching $800 million by the end of 2002.
A culmination of factors -- dramatic improvement in connectivity from India, huge investments in telecom infrastructure, and an economic slump in the US which forced companies to look at every cost cutting option -- has today resulted in the BPO sector growing at a faster pace than software services, albeit on a smaller base. ( Does smaller Indian metros have enough infrastructure to support smooth functioning of BPO firms? )
Though software services and BPO are spoken in almost the same breath, they are fundamentally different businesses. Though a lot of software services companies are quickly ramping up their BPO operations, success in the former is no guarantee of a repeat performance in the latter. Sales cycles, for example, are much longer. Sanjay Joshi, vice chairman, sales, marketing & business development of Wipro Spectramind (WSM), likens the BPO business to “agricultural business.” “You sow the seed but see the fruits only nine to 12 months down the line when you close the deal. It takes another three months to actually start work. There is a huge delay in booking and yield,” he says.
But that hasn’t stopped anybody. WSM already employs 8500 people and very soon might equal Wipro Technologies which has 16,000 people on its rolls.
