BPO: The Boon with a Twist Essay

The India business process outsourcing (BPO) ‘success story’ needs to be tempered with a strong dose of caution. The two issues that this paper seeks to raise viz. employees’ welfare and working at the lower end of the value chain, need to be addressed if indeed the BPO phenomenon is to be called a ‘boon’ for India. The paper discusses the state of the industry in India and the reasons why BPO is the ‘Big Wave’. However, the emphasis of the paper is on another aspect of the story that at best ignored and at worst completely discounted. Some vital questions have been raised like- what is the impact that this newly spawned industry is having on the millions that is now employs? Also, it is not just about the health of the individual that is of concern here. It is about the entire social, physical and psychological fabric of a nation that is slowly changing. From the perspective of the companies also, the high staff turnover must makes it increasingly expensive for India based operations to maintain and improve their quality of service. Another dark side of the story is that India is still working on the low end of the value chain of the business-processes. Over time India’s success will depend on moving up the value chain and make the competitiveness non-replicable by other low cost countries. Read more:  BPO Management System The paper concludes with some solutions to the above-mentioned problems, concentrating primarily on the employee welfare and moving up the value chain. This requires the concerted efforts of both the industry and the government. BPO: The Boon with a Twist â€Å"Yesterday upon the stair I met a man who wasn’t there He wasn’t there again today I wish that man would go away† The Sunrise Sector: An Introduction There have been various studies and papers highlighting how the BPO is the best thing to happen to the Indian youth since the Internet. And not without reason. McKinsey and Co. tell us that by 2008 India will have a whooping 5 million people employed in the BPO sector and will be able to boast of additional revenues in excess of $57 billion. We need this opportunity like never before. However, there is another aspect of the story that is relatively ignored by both, the industry captains and the popular press alike. This paper looks into that aspect of the BPO industry in India and attempts to question the ‘blind faith’ in the sector. It raises some vital questions like- what is the impact that this newly spawned industry is having on the millions that is now employs? Are the reports that we keep hearing, about over-stressed 22-somethings leaving their jobs and the irritable alienated-from-friends-and-family youngsters true? It is not just about the health of the individual that is of concern here. The entire social fabric of a nation that is slowly changing as fresh graduates suddenly find themselves with lots of money due to these sunrise sector jobs, but no time or energy to spend it. The Bright Side The major driving force in the BPO sector is money. In his or her first job, an Indian back-office recruit can easily earn between Rs.15, 000 and Rs.20, 000 a month, which may only be a tenth of what their US counterparts earn, but considering that in terms of the World Bank-calculated purchasing-power parity, $1 can buy four times as much in India as it can in the US, Rs.15,000 per month is certainly a lot more than pocket change to an average youngster. Competition, sense of achievement, and financial freedom are the other driving forces, say BPO professionals. A brief snapshot of how the BPO industry operates puts forth some very interesting facts. The BPO industry is built around the raison d’ etre of efficiency and cost-effectiveness. With the current focus on core business capabilities, many companies in the Western world are outsourcing select business functions to expert partners. BPO takes a set of activities and takes on the responsibility of reengineering the entire way the operation is done. The most popular BPO activity currently outsourced to India is Call Centre operations. Companies selling products or services very often promise 24Ãâ€"7 support through telephones, email or the Internet for their wares. These require a large workforce to constantly be ready at helpdesks with answers to questions customers may call in with. The cost of setting up a call center in the US combined with the cost of wages is 10 to 20 times the cost of setting up a center in a developing nation like India. Hence, these companies re-route the calls made to helpdesks for their products to Indian call centres. These calls are handled by Indians sitting in India and donning an identity (and an accent) similar to their US counterparts. In pure economic terms it is much more sensible to run cost centres like these out of India. The average savings are in the region of 20-30%. And in an age when a penny saved is a penny earned these savings can be used to fuel further growth. The Not So Bright Side: The Human Face One of the reasons that provides India this opportunity is that Indians have readily adapted to – and are working entirely in the US time zone. This phenomenon has only increased over the past few years, popularly known as working the ‘Graveyard Shift’. In its eagerness to pave the way for the BPO boom, the government is infringing on protections bitterly fought for, like the eight-hour day.1 Labor legislation governing employment of workers in this sector is being amended to allow for night-shift work, work during notified holidays in India, staggering of weekends off and the like. Registered trade unions already struggling against this onslaught. Various researches on this darker aspect present some hard facts: * There is an increasing number of BPO employees who leave because they can’t handle the pressure and schedule of jobs * For most of them stress at work is their biggest source of discomfort * Most of these stressed-out employees suffer from sleep-related disorders and have digestive disorders. * Women who work the night shift face an increased risk of breast cancer of up to 60 percent2. * Stress is leading to impairment of conventional social and family life. Difficulties are particularly acute for women with child-care responsibilities. The high stress and irregular hours are taking their toll on many of the mostly just-out-of-college employees. Nutritionists, doctors and psychiatrists say there has been a dramatic increase in call center employees coming to them with problems like hair loss, ear infections from contaminated head phones, ulcers and digestion problems, piles and sleeplessness. All this is having far reaching consequences on the lives of the individuals who are working in this industry. The Not So Bright Side: The Value Chain Outsourcing – a job that no graduate or educated person in the US wants to do is shifted to low wage developing countries like India where there are ‘high quality’ graduates to do the job. In fact that’s the main USP of India – English speaking, ‘high quality’ people being employed for work that may not require half their potential. If we take our best and brightest and put them in dead end outsourcing jobs, where is this country headed? NASSCOM is touting the BPO industry as the new wave. There is no denying that it creates jobs. However the real question is for how long and what kinds of jobs? The government is spending huge resources to educate the highly talented young people only to relegate them to mindless transaction processing. The lucre of these jobs can be ascertained from the disinterest shown the educated people in Europe and US. In these ‘sending countries’ its seen as a part time job – something a college dropout or housewife with time to kill would do. India needs to worry about her youth. The best and brightest go to the US and work there which is an intellectual drain for India. The others – and undoubtedly a lot of bright ones do remain – seem to be sucked by into this BPO machine. India cannot afford continue working at the lowest end of the value chain. Sooner or later Indian companies will have to realize – and fight for – the fact we need to do a little more of the ‘value-added work’. In the long run, the business model of Indian BPOs will become unsustainable and unless they re-engineer a transformation the entire sector will fail to exist as an industry3. Taking a Moment As BPO employees soon find out, money and the college-like ambience is not everything. Cultural shifts, loss of identity, stress due to continuous night shifts and adverse effect on health were only some of the problems that cropped up in several interviews with employees of BPOs. For youngsters it’s a trade-off between what they gain in poise and confidence, and what they lose out in family life and social circle of friends who were not part of this field. Suffering severe sleep disturbances, headaches and even blackouts, most spend all their time away from the job sleeping. And the only long-term solution they can suggest is to quit. Hence, it is of serious concern not only for the employees but also for the companies. The issue of quality of service is raised by the very high staff turnover rates in India, especially at call centres, where annual turnover is said to exceed 50 per cent. High staff turnover is reported even amongst the more established, employee friendly IT companies, some of whom offer stock options and residential accommodations to entice employees to stay on. High staff turnover must make it increasingly expensive for India based operations to maintain and improve their quality of service. This is due to the rising costs for hiring and training and the higher wages needed to attract quality employees. It costs an average of Rs.20,000 to train every Call Center employee4. With the attrition rate so high this is hitting the bottom line for these companies very hard. Moreover high dropout rates have much larger implications for maintaining consistent quality standards. It is impossible to maintain a high quality of service when the entire workforce turns over every 3 years.5 The Road Ahead This section deals with some proposed solutions to fight the two challenges. Improving Employee Welfare: In some countries where the call center industry has been there for a while, e.g. UK and Australia a lot of understanding on what this unique workplace entails and what needs to be done about it, has evolved. For instance, in the UK, the government intervened a while ago with a local authority circular called ‘Advice Regarding Call Center Working Practices’. This circular lists in detail the stress factors and ailments peculiar to this industry, and has various measures to deal with them. However in India, no understanding of the problem exists. This is a serious concern not only from the employee’s end but also from the company’s perspective. The employers incur huge costs of agent attrition due to stress. It’s high time that the Indian government and the industry made some concerted effort on the lines of the above-mentioned countries and brought forth proactive measures of dealing with employee issues in call centers. Role of Companies Companies need to get their act together quickly if they have to arrest the high rate of inflation and avoid the high burnout rate among employees. One of the things to be understood is that the BPO sector is not yet being looked at as a career but rather as a stop-gap arrangement till a better job comes up. Unfortunately as is turns out the next ‘non-bpo’ sector job for most of these individuals turns out to be a fairly less paying one as well. Towards this end taking care of the employees well being becomes a priority for the companies. Most companies are already moving in this direction with well established programs that take care of the all round well-being of the employees with regular health checkups, reduced work hours, adequate training programs and a concern for the employees growth in the organization. Employee welfare will work on three factors each of which need to be understood by organization. Towards this goal an integrated strategy for employee welfare can be developed. Some specific recommendations regarding ensuring employee well being can include regular mental and physical check-ups for employees, periodic counseling on career regulating the number of night shifts worked in a row etc. More importantly, such programs wherein certain employees can avail of funding to aid further studies should be introduced. Role of Government An important part needs to be played by the government in regulating the industry with regards to labour laws. Although the government’s provisions to make it easier for the industry to grow at the pace it has are commendable, this growth cannot be had at the expense of human capital. It is necessary to safeguard the interests of the employees through enforced regulations to ensure sustenance. Specifically the government needs to re-look at * Specific regulations monitoring night-shift work * Monitoring work during notified holidays and weekends * Review of policies regarding food arrangements at workplaces * Policies regarding working of women at night – ensuring safety Moving up the value chain: Despite the fact that the world’s athletic shoes are produced in low-wage environments, their design remains firmly rooted in developed nations. Even today, despite all of the electronics manufacturing located in developing nations, the bulk of the value-added design remains in the developed nations. Taking on the ‘risks’ of the business-processes instead of simply reengineering them is one of the surest ways of convincing outsourcing companies to give greater value added work to the Indian firms. Similarly, it is important to forge alliances and partnerships of the outsourcing companies to convince them to trust us with their core processes instead on taking on fringe work. To summarize, in the end there are only two sustainable end-game models for companies in the BPO segment – the first is insight driven and the other is a platform model. Both of them leverage on proprietary capabilities of individual companies. Over time, a country’s competitiveness will eventually be commoditized and therefore become replicable. India is at that stage. For further growth a company will have to differentiate itself from the labor arbitrage and country competitiveness gamut and build on in-house capabilities that sets it apart. When Indian BPOs move away from the ‘replication’ model and start providing specialized value-added services for clients, they have a far greater chance of surviving, he said. The issue of differential time zones that forces Indian employees to take on jobs with permanent night shifts seems to be completely non-negotiable. However, by shifting the nature of work away from real time to delayed time, this too can be man aged in some companies over a period of time.    1 The Karnataka government has â€Å"simplified† labor legislations: Several barriers, including employment of women at night, flexible working hours, mandatory weekly offs have all been removed by necessary amendments to relevant laws to create an â€Å"optimal environment† for the growth of the BPO sector in the State. 2 A study (2001) by the Seattle based Fred Hutchinson Cancer Research Center, in association with the National Cancer Institute 3 Presentation on the BPO landscape and possible end-game models at the NASSCOM ITES-BPO Summit in Bangalore in June 2003. 4 McKinsey-Nasscom study 2002 5 Went for Cost, Stayed for Quality: Moving the Back Office to India, paper by Rafiq Dossani, Senior Research Scholar, Asia/Pacific Research Center, Stanford University