BPO or Business Process Outsourcing is an entire industry in itself wherein businesses in a certain country outsource some of their operations (usually back office) to other locations in the world to cut costs by using the cheap labor in these countries. This helps them to increase their profits as well as concentrate on their core operations. The Business Process Outsourcing industry in India caters mostly to Western operations of multinational corporations. Annual revenues from BPOs are around $11 billion, around 1% of GDP.
Outsourcing to India began in the early 1980s when many European airlines started using Delhi as a base for back office operations. Later, American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into New Delhi. This center was headed by Raman Roy. In the 1990s, Jack Welch of GE was persuaded to consider Gurgaon as a base for back office operations.
Pramod Bhasin, the India head of GE. Hired Raman Roy and several of his people from American Express to start GE Capital International Services. It was Raman who first introduced voice operations out of India. In 2004, GECIS became a separate legal entity called Genpact.
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Initially, most of the work was being done by captive BPOs. It meant that work was done in house for the parent organization. In 2000, Raman Roy and some team members from GECIS quit to start Spectra mind, heralding the advent of third party BPOs. In 2002, Spectra mind was acquired by Wipro.
By 2002, all major Indian software organizations were into BPO, including Infosys, HCL, Satyam, TCS and Patni. The entry of international 3rd party BPO players like Convergys and SITEL also strengthened the BPO movement in India. Service arms of organizations like Accenture, IBM, Hewlett Packard and Dell also set up shop in India.
The BPO industry flourished in India because it could deliver services at a low cost. But increases in infrastructure costs, real estate costs, and salaries raised BPO costs significantly. So Indian BPOs began shifting their operations from Tier-1 cities like Chennai, Bangalore, Hyderabad, Delhi and Mumbai to Tier-2 and Tier-3 cities like Mysore, Trivandrum, Kochi, Chandigarh, Mohali, etc.
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The transformation of rural India kicked off with the emergence of rural BPOs. The global BPO Industry is estimated to be worth 120-150 billion dollars. India enjoys 5-6% share of the total industry, and 63% share of the offshore component. BPOs have spawned many industries which depend on them like Catering, BPO training and recruitment, transport vendors, (for home pick up and drops for night shifts), Security agencies, Facilities management companies, etc.
Some controversies have erupted around the industry. BPO employees are scornfully described as cyber coolies. Also, the rape and murder of a few female employees by car drivers raised safety issues. Despite all this, there is no doubt that the BPO industry has raised the standard of life for many young Indians thereby swelling the ranks of the Indian middle class and creating an economic boom.
However the recent global economic downturn has impacted the industry negatively as new contracts from the US and other client nations might dry up in the wake of demands that jobs in these countries should remain within their borders.