Description
WIPRO's initiative of taking BPO rural.
Table of Contents
Introduction ............................................................................................................2 The Company: Wipro Ltd........................................................................................2 Vision....................................................................................................................3 Value Proposition of Wipro BPO......................................................................4 Details about Wipro BPO.................................................................................5 Achievements and awards...................................................................................6 Porter’s Five Forces analysis of the Indian BPO Industry......................................9 Rationale for going Rural .....................................................................................12 Rural infrastructure: New thrust areas ..............................................................13 Rationale for Wipro BPO going Rural ..................................................................16 Objectives for “PRAYAAS”.................................................................................17 SWOT analysis of Wipro BPO..............................................................................17 Key Success Factors (KSF’s)...............................................................................20 Competitors ..........................................................................................................21 Consumers............................................................................................................23 Key drivers behind “PRAYAAS” - A Wipro BPO initiative ...................................23 Key Challenges.....................................................................................................24 .............................................................................................................................24 Benefits and Challenges in a nutshell .................................................................25 Business models/ Viable Strategic Alternatives ..................................................26 Public Private Partnership Model.......................................................................26 Franchisee model/Business Associate model...................................................26 Stand Alone model.............................................................................................26 Build Own Operate Franchise (BOOF) model...................................................27 Value Proposition for PRAYAAS..........................................................................28 Business Model ....................................................................................................28 Rural Marketing Mix..............................................................................................30 Plan for Implementation........................................................................................31 Rationale for the alternative...............................................................................32 Contingency Plans................................................................................................33 Conclusion............................................................................................................34
Introduction
"We don't feel the cost pressure now. So this is a good time to experiment. We have the time to make the mistakes, correct them and refine the model." This is what we at Wipro BPO believe. With huge wage costs and high attrition in urban India, the IT enabled services industry is slowly turning to rural India for salvation. Indeed, we believe that business process outsourcing (BPO) players who have initiated low-end transaction processing units say manpower in Tier III townships and this could prove to be the answer to the sectors problem1. Hence we at Wipro BPO believe that the next growth engine would be from the rural areas. Hence we have named this initiative as “PRAYAAS”
The Company: Wipro Ltd
Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of clients across the world. Wipro has 40+ ‘Centers of Excellence’ that create solutions around specific needs of industries. It delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. The major initiatives of Wipro Limited include: 1. Wipro Technologies Ltd. 2. Wipro InfoTech 3. Wipro BPO Apart from these, Wipro also has interests in consumer goods and white goods.
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http://www.offshoringtimes.com/Pages/2007/BPO_news1711.html
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Vision
Wipro has achieved the pinnacles of process and quality credentials (through ISO 9000, SEI CMM, PCMM and Six Sigma). The company’s Vision is focused on attaining leadership in the areas of business, customer and people. Business Leadership: Among the top 10 Information Technology Services companies globally and the No.1 Information Technology company in India. Customer Leadership: The No.1 choice of customers through innovative solutions and Six Sigma processes. People Leadership: Among the top 10 most preferred employers globally by creating an environment of empowerment, intellectual challenge and wealth sharing. Brand Leadership: Wipro to be among the 5 most admired brand in India.
Wipro BPO
Wipro BPO is one of the leading BPO’s in the country offering expert services in across industry vertical’s using a highly process driven culture. Wipro BPO is about delivering long-term benefits & measurable value to our customers through:
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Business process re-engineering Integrating technology with BPO Knowledge services
Wipro BPO is uniquely positioned to service customer requirements by leveraging its tenets of quality and innovation, the best people talent, self sustaining process framework and domain knowledge. Wipro BPO offers customized service offerings; translating into the most flexible and cost effective services of the highest quality for customers. The BPO operations came into existence in 2002 when Wipro took a quantum jump by acquiring Spectramind, which was one of leading BPO in the country. Wipro BPO Solutions
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complements the services offered by Wipro Technologies, making it one of the largest BPO service players. Wipro BPO has over 19,000 people, operating out of 9 different locations (India and Eastern Europe). The company has been a critical partner to all its customers in achieving their business goals. Wipro BPO services customers in various industries including Banking & Capital Markets, Insurance, Travel & Hospitality, HiTech Manufacturing, Telecom & Healthcare sectors. Wipro BPO also has deep expertise in delivering process specific solutions in areas like Finance & Accounting, Procurement, HR Services, Loyalty Services and Knowledge Services.
Value Proposition of Wipro BPO
Wipro BPO provides its customers with services required to keep the business operating as efficiently and as cost effectively as possible, so all that the customers need to concentrate on is their core business.
The three pillars on which the entire organization works are: 1. Standardization 2. Simplification 3. Optimization
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Details about Wipro BPO
Offices The organization has offices in the following cities: New Delhi, Mumbai, Belapur, Chennai, Pune, Kolkata, Bangalore, Hyderabad, Bucharest (Romania), Shanghai (China), Cebu (Philippines)
BPO Verticals: 1. Banking and Financial Services 2. Insurance 3. Health and life sciences 4. Telecom 5. Travel and transportation BPO Horizontals: 1. Finance and Accounting 2. Procurement 3. Loyalty services 4. HR Services 5. Knowledge services.
Financials of Wipro Limited
Wipro BPO contributes about 20% to the total revenues of the company. The total revenue for the 3rd quarter in 2007-08 stood at Rs. 2.998 billion, which was a growth of about Rs. 600 million in comparison to the same period in 2006-07. The company has 19,907 employees in the BPO Services business. During the first quarter ended June 5
2007, Wipro BPO recorded a Y-O-Y growth of 34.8% in operating margins, while revenue grew by 19.9%.2 The BPO has 84.2% of their revenues coming from the American market while the remaining almost 16% comes from the EU. Wipro BPO won a won a multi-tier end to end engagement covering Payroll/HR services, F&A services and Procurement services from a leading US based retail giant. The engagement also includes Product Warranty management and Insurance claims administration. 2007-08 Revenues of BPO Services Cost of revenue in BPO 2,372 1,529 2006-07 2,998 (figures in Rs. Million) 2,063 (figures in Rs. Million)
The figures are for the quarter ending 31st December in both the years.
Achievements and awards
• Wipro BPO has won International Quality and Productivity Center’s (IQPC) 2007 Global BPO Standard Bearer 2007 award. Wipro BPO made a clean sweep at the awards ceremony winning awards in all the major categories at a ceremony held recently in Hyderabad. • • • • • T K Kurien, CEO, Wipro BPO won the 2007 Global BPO Industry Leader award. The 2007 Global KPO Excellence Award The 2007 Global F&A Excellence Award The 2007 Global Standard Bearer for Talent Management. Wipro BPO was chosen for the award based on sustained organizational performance, market leadership, profitability and revenue growth.
SWOT analysis of Indian BPO Industry
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www.wipro.com/investors/pdf_files/Indian_GAAP_Press_Release_Q3_FY07_08.pdf
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Strengths ? ?
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Large no. of talented graduates and skilled workforce Affordable and quality education as compared to developed countries English language proficiency Well-developed IT industry Strong customer base of well known companies Powerful venture capital interest in investing in growth opportunity Focus on process quality of Indian BPO industry Government SOPS and tax benefits Existing long-term relationships with other nation
? ? ? ? ? ? Weakness ? ? ? ? ? ?
Scarce foreign language skills other than English. Lack of customer service culture Expensive and poor quality telecom infrastructure Poor electricity supply Cultural differences High attrition rates, therefore less no. of people with extensive call centre experience
Opportunities
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Horizontal and vertical expansion of existing customer base into new markets Time zone difference between India and target markets Increasing awareness of outsourcing services
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Creation of global brands
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? ? ? ? Threats ? ? ? ?
Call center offerings Chinese domestic & export market Develop relationships in West to access APAC/Middle East markets Indian domestic-market growth
High Billing rates Political instability India's competitors in Eastern Europe, Latin America and the Asia Pacific regions offering cheap BPO services Increasing technology automation
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Internal competition for resources
? ? ? ? ? ?
Over-promise / Under-deliver Regional geopolitical uncertainty Government blocking reform/deals Corruption/piracy/distrust Political & religious instability -war Spiraling costs of labour and ever increasing monthly salaries
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Porter’s Five Forces analysis of the Indian BPO Industry
Bargaining power of Buyer 1. Costs advantage offered by BPO in other countries offers high bargaining power to the buyers. 2. In some cases, large organizations are responsible for a major share of the BPO revenues. In such a situation, the Buyer can have a lot of bargaining power. 3. Even though the switching costs of the buyer would be high, he can always bargain on the basis of services provided by other organizations. 4. Over-dependence on the voice business — the mainstay of BPO companies currently —can actually be a recipe for disaster. At the moment, upwards of 60% of the BPO business coming to India is voice-related. Barring transcription, voice has the lowest margins among BPO businesses. So, companies need to graduate to more value-added businesses like transactions processing, HR and consulting to get better margins. Till then, they have to maintain a healthy balance between voice and non-voice work. Bargaining power of suppliers Most Suppliers focus on three points: technology strength, scale and experience. However, three other points: quality, success record and communications are what truly differentiate superior suppliers.
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Technology strength: If a vendor has reliable voice, data and power systems, and is competent at CRM, it gives it substantial bargaining power. Scale: The most important question is whether the vendor is prepared to meet the growth requirements of the organization. The factors which need to be considered include its access to capital and how to compete with other clients for the outsourcer’s internal resources. In the long run, only companies that successfully deliver quality service will have the access to capital required to be scalable.
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It is not necessary that the vendor have experience with the exact product or function in question. It is more important that it has experience with analogous programs, programs that require similar technology, training and quality management to the program that is to be outsourced. This will help the vendor in its bargaining power.
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It is important to carefully evaluate total costs, including both the upfront costs and the ongoing costs. Upfront costs include training, program design and IT setup. Often overlooked are the hidden costs, such as attrition, telecommunications charges, reporting and call handling. Consider also the savings (or costs) that come from an outsourcer’s efficiency and effectiveness, including reductions (or increases) in Average Handle Time and First Time Call Resolution. The lower these costs, the more is the bargaining power of the supplier.
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Quality. Vendor quality is extremely important to success. Good execution improves customer satisfaction, reduces average handle times and improves the rate at which callers’ issues are resolved on the first try, all of which save money in the long run. A vendor that is committed to quality will have stringent quality monitoring and continuous improvement practices in place before you ask for them.
Threat of new entrants • A few years back, the threat of a new entrant was substantially low due to high costs of infrastructure, hardware and few outsourcing undertakings being done by organizations. However, in recent years this threat has increased due to lowering in fixed costs of the fixed costs of the voice business like dialer running and 10
maintenance, bandwidth costs, employee wages and related expenses. Moreover, cheap labour in available due to good quality manpower who are unemployed. This manpower can be used to serve the high levels of outsourcing that is being done in the current world. Real estate costs are still a hindrance, but this is being countered by going to smaller towns and cities. Rivalry among existing firms There is high competition between the existing firms 1. Most of the BPO offer similar types of services, which are not too different from those offered by competitors. 2. A lot of importance is given to brand recognition and brand value in the market. 3. The value proposition shown by most of the BPO is of low cost and high efficiencies. With spiraling costs of workforce etc, there is tremendous pressure on the BPO. 4. Shortage of skilled manpower is also a reason for the existing firms to compete with one another. The high attrition rates also contribute to this factor. 5. There is high competition between the firms to move up the value chain by offering better services and more comprehensive solutions. 6. The competition also comes from the fact that the existing players are trying to setup base in countries where costs are low. This puts additional pressure on them to manage their operations in a cost effective manner. Threat of substitutes 1. New counties are ready to replicate the success model of India by offering cheap manpower to do these jobs. The threat is such that work is now being outsourced out of India.
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2. Countries like Philippines, Mexico etc have the same advantages which India has which include cheap qualified manpower, time zone difference, familiarity with American culture etc.
3. There is also a small amount threat from direct customer information
centers which can carry out a lot of the work done by BPO’s.
Rationale for going Rural
Literacy in India3
Table Rural-Urban 1951-2001 Year 1991 Rural Urban Total 2001 Rural Urban Total 10.13 Rates Persons 44.70 73.10 52.21 59.40 80.30 65.38
Literacy Male 57.90 81.10 64.13 71.40 86.70 75.85 Female 30.60 64.00 39.29 46.70 73.20 54.16
These figures show that there has been a rapid increase in the literacy levels of the rural India. In a span of 10 years, the literacy in rural India has gone up by about 15% which is a substantial figure given the poor history of education programs in India. In particular, the male literacy percentage is almost equal to the national figure among males. Moreover, the last 10 years in the single biggest jump in rural literacy in comparative figure terms. This shows that the employ-ability of these people has steadily increased over the years. Several important results emerge from the census and literacy figures across the country4
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http://www.indiastat.com/india/ShowDataSec.asp?secid=362602&ptid=362533http://prayatna.typepad.com/education/rural_education/index.html
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First, there is a complete absence of “free education” in India:
regardless of a household’s socio-economic background, spending on education is very substantial even at the primary school level.
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Second, “indirect” costs, such as books, uniforms and examination
fees, are very high, even in government-run schools, including at the primary level.
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Third, given the absence of a well-developed credit market for
education, expenditure on education is highly (and positively) correlated with income.
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Fourth, willingness to pay and “compulsion to pay” (i.e., the need
to compensate for a shortage of government spending on education) are both important factors.
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Fifth, government spending and household spending on education
are not substitutes, but complements: an increase in government spending is associated with an increase in household spending (due to an “enthusiasm effect” resulting from improvements in school facilities, number of teachers, etc.); conversely, a reduction in government expenditure leads to a decline in household spending on education. (Equivalently, the elasticity of household expenditure to government expenditure is found to be almost unitary, and positive.) Finally, it is found that the provision of schooling in rural habitations, or the provision of such school incentives as mid-day meals, uniforms, textbooks, etc., are both associated with increased household demand for education.
Rural infrastructure: New thrust areas5
? There is a lot of thrust on rural infrastructure in the past state plans and the penetration of broadband and the reforms in the power sector have contributed to the overall growth.
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http://www.mycoordinates.org/rular-infrastructure-in-india-may-06.php
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Rural infrastructure is not only a key component of rural development but also an important ingredient in ensuring any sustainable poverty reduction programme. The proper development of infrastructure in rural areas improves rural economy and quality of life. It promotes better productivity, increased agricultural incomes, adequate employment, etc. ? Bharat Nirman
The UPA Government has launched “Bharat Nirman” time bound business plan for action in rural infrastructure for next four years. Under Bharat Nirman, action is proposed in the following areas of Irrigation, rural roads, rural housing, rural water supply, rural electrification, rural telecommunication connectivity, etc. ? The Government has also decided to provide corpus of Rs. 8000 crore to Rural Infrastructure Development Fund (RIDF). ? Bharat Nirman through Pradhan Mantri Gram Sadak Yojana
Rural connectivity is one of the major goals of Bharat Nirman. In India, there are more than 6 lakh villages located in different terrains e.g. plain, hilly, deserts, swamps, costal region, mountainous region, back water areas, tribal pockets, etc. The climatic condition also varies from place to place to a great extent. Due to improper planning, some villages are having multi road connection while others are deprived of even single road connection. In Pradhan Mantri Gram Sadak Yojna (PMGSY) has been decided to give one and only connection to each village. It is centrally sponsored programme with 100% financial assistance. ? Rural electrification
Out of the estimated 80,000 villages yet to be electrified, the 10th Five Year Plan (2002-2007) proposes to electrify 62,000 villages through grid supply. The remaining 18,000 remote villages are proposed to be electrified by 2011-2012 through the use of decentralized non- conventional source of energy. The rural electrification programme has been included as a component of Pradhan Mantri Gramodaya Yojana (PMGY)
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and is being encouraged to pool resources from other schemes under Minimum Need Programme (MNP) and Rural Infrastructure Development Fund (RIDF) to meet objective of 100 % electrification.
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The development and implementation of various rural infrastructure projects help to create values for the rural society. Similarly, involvement of Public as well as Private companies; NGO, etc. require the technical and managerial experts of engineering consultancy in rural areas. There is provision of free electricity connection to be provided to IAY houses under Rajiv Gandhi Gram Vidutikaran Yojana.
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Programs run by the government of India Sarva Shiksha Abhiyan (SSA)6
It is Government of India's flagship programme for achievement of Universalization of Elementary Education (UEE) in a time bound manner, as mandated by 86th amendment to the Constitution of India making fee and compulsory Education to the Children of 6-14 years age group, a Fundamental Right. SSA is being implemented in partnership with State Governments to cover the entire country and address the needs of 192 million children in 1.1 million habitations. The programme seeks to open new schools in those habitations which do not have schooling facilities and strengthen existing school infrastructure through provision of additional class rooms, toilets, drinking water, maintenance grant and school improvement grants. SSA has a special focus on girl's education and children with special needs. SSA also seeks to provide computer education to bridge the digital divide. Kasturba Gandhi Balika Vidyalaya (KGBV): The Government of India has approved a new scheme called Kasturba Gandhi Balika Vidyalaya (KGBV) for setting up upto 750 residential schools with boarding facilities at elementary level for girls belonging
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http://ssa.nic.in/ssamissionstat.asp
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predominantly to the SC, ST, OBC and minorities in difficult areas. The scheme would be applicable only in those identified Educationally Backward Blocks (EBB’s) where, as per census data of 2001, the rural female literacy is below the national average and gender gap in literacy is more than the national average.
Mahila Samakhya program: The Mahila Samakhya programme was launched in 1988 in pursuance of the goals of the New Education Policy (1986) and the Programme of Action as a concrete programme for the education and empowerment of women in rural areas, particularly of women from socially and economically marginalised groups.
Azim Premji Foundation
Azim Premji established the Azim Premji Foundation7 in 2001. This is a not-for-profit organization with a vision of significantly contributing to quality primary education for every child, in order to build a just, equitable and humane society. The financial resources to this foundation have been personally contributed by Premji. The current programs of the Azim Premji Foundation engage 2.5 million children in more than 17,000 schools across India.
Rationale for Wipro BPO going Rural
A NASSCOM study says, the BPO industry in India has is expected to face a shortfall of 262,000 professionals by the year 20128. With some IT training, there is a significant opportunity for the large number of high-school graduates and undergraduate degreeholders in rural areas to fill a part of this gap in the future. We at Wipro BPO believe this gives us a huge opportunity to create a socio-economic impact. Hence we have titled this project as “PRAYAAS”.
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http://www.azimpremjifoundation.org/html/CLC.htmhttp://www.comat.com/solutions_and_services/rural_bpo.html
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Objectives for “PRAYAAS”
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Demand and supply: the expected level of demand for the services; marketing requirements; users' willingness or ability to pay; alternative sources of supply; price and quality competitiveness; input and credit availability; pricing policies.
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Profitability or Sustainability: the financial viability for entrepreneurs and stakeholders, cost-effectiveness compared to alternatives. Socio-Economic impact: the impact on targeted groups or quality of life; distribution of benefits between income classes and genders; degree and nature of local participation; effect on culture and values; long-term sustainability; the costs and benefits to society, etc.
•
According to Mission 2007 goal of GoI, around 100,000 villages in India are to be powered with connectivity and if this materializes, these villages will have the potential to act as BPO centres. Consider 10 percent of these villages employing 20 people at an average salary of $65 per month. This would directly add $1.56 billion to the rural economy per annum and create 200,000 jobs and the benefits for us in terms of lower attrition and cost advantages are huge. The attrition costs themselves for voice and non-voice services amounts to 10% and 12% of the operational expenses; hence we believe this holds tremendous potential. The demand for several allied industries such as hardware servicing and software development would also grow. The rural BPO teams can effectively narrow the gap of digital divide by leveraging the power of computing and connectivity to create wealth in rural areas. The teams can build capacity in villages thereby creating the right systems and networks for remote business operations and ensure the highest level of professionalism and quality standards.
SWOT analysis of Wipro BPO
Strengths
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Excellent training modules; (voice and non-voice). This results in a very highly trained and highly skilled, English-speaking workforce which is the main reason why there are many ITES jobs that are being outsourced to India. Clients of Wipro BPO o Presence across various sectors which include Travel and Hospitality, Banking and Capital Markets, Telecom, Healthcare sector, Insurance, HiTech Manufacturing. A client base of more than 50 clients. Abundant manpower (Wipro BPO-2600 employees)9 Cheaper workforce than our western and some of the Indian counterparts. According to NASSCOM, The wage difference is as high as 70-80 percent when compared to their Western parts. (In the West-almost 50% of the costs results in manpower costs) Dedicated workforce aiming at making a long-term career in the field Round-the-clock advantage for Western companies due to the huge time difference. Lower response time with efficient and effective service Operational excellence Conducive business environment There are Wipro BPO teams in Bangalore. Delhi, Kolkata, Chennai and Pune and two overseas centers in Shanghai and Chengdu in China.
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Weaknesses ? Recent months have seen a rise in the level of attrition rates among outsourcing workers who are quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to pursue BPO as a full-time career. ? The attrition rate of Wipro BPO is 48%10 on an annualized basis. This is the highest in the industry compared to an industry average of 30%. This gives us another food for thought to diversify this risk with the help of another business model.
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http://www.indianmba.com/Faculty_Column/FC517/fc517.htmlhttp://news.oneindia.in/2007/04/20/wipro-suffers-highest-attrition-rate.html
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The cost of telecom and network infrastructure is much higher in India than in the US. Local infrastructure Political influence To work closely with associations like NASSCOM to portray India as the most favored BPO destination in the world. India can be branded as a quality outsourcing destination. $69 billion ITES business by 2010. This is in the form of U.S. jobs moving offshore.
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Opportunities ?
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Sl. No
Number of U.S. Jobs Moving Offshore 2010 117,835 161,722 276,954 83,237 14,478 34,673 13,846 97,321 791,034 1,591,101 2015 88,281 48,028 72,632 84,347 36,770 74,642 29,639 26,564 1,659,310 3,320,213
Job Category 2000 2005 1 Management 0 37,477 2 Business 10,787 61,252 3 Computer 27,171 108,991 4 Architecture 3,498 32,302 5 Life Sciences 0 3,677 6 Legal 1,793 14,220 7 Art, Design 818 5,576 8 Sales 4,619 29,064 9 Office 53,987 295,034 Total 102,674 587,592 Source: U.S Department of Labour and Forrester Research, Inc.
**The fields marked in yellow; this is where we would like to target i.e. Wipro BPO model. Also many of the non-voice services of the existing clients attributed to Wipro BPO currently could be outsourced to these centres. $97.5 billion IT (consulting, software solutions) market by 2010.
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Threats
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The anti-outsourcing legislation in the US state of New Jersey. Three more states in the United States are planning legislation against outsourcing Connecticut, Missouri and Wisconsin. Workers in British Telecom have protested against outsourcing of work to Indian BPO companies. This could spillover to other companies. Other BPO destinations such as China, Philippines and South Africa could have an edge on the cost factor.
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Key Success Factors (KSF’s)
? Training module and time period o Training is a huge challenge. One has to select simple tasks that can be handled by these BPO’s. Due to lack of exposure, the employees in a rural BPO may take additional time in getting trained, but we think it is doable in an acceptable time frame. We believe it would take twice the time to that in an established city. The challenge lies in impressing upon the employees the importance of timeliness and quality. o This we would take the help of Azim Premji foundation; considering that they already have a headstart in this initiative ? Ability to maintain the quality and the brand name of “Wipro”; due to the lower end of the BPO value chain activities being done; this would be a huge effort for the brand name of Wipro not to suffer and we need to maintain the quality of the output the same. ? ? Language and cultural integration11 Integration with the processes and working of a larger organization. The integration has to be smooth and planned. ? Process maturity, proven outsourcing methodology, and foolproof technology platforms, if these are not taken care of then vendors could not scale up their offerings.
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http://www.anudip.org/IT_Whitepaper.html
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Reduced or no capital cost, keep the operating cost variable rather than fixed, ensure high degree of compliances and accelerated processing to stay ahead of competition.
Competitors
Rural BPO Operators12 ? Lason India Lason has its regional hub with 1,000 employees in Chennai, with another 5,000 distributed across 60 smaller centers. It operates on a franchisee model. Lason does not own the specific centers that do the processing, but designates them as franchisees, providing the hardware and training, and managing the quality of the output, while the local owner provides the physical location. Lason India has started its operations mainly in the areas around Chennai; take the case of Sharmila13 a local village entrepreneur has around five computers installed in her rural home; doing outsourcing work. This is what has transformed many a lives in this small village in Thiruvallur district. Lason India gives her all the support she needs in the form of technical, managerial and motivational. Datamation
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Datamation operates a stand alone model. It owns and operates all the BPO centers it runs. The NGOs assist Datamation in hiring and training the workforce for the BPO’s. Its operation is run based on a not-for-profit philosophy. It also runs Hewlett-Packard’s rural BPO initiative, which is part of a bigger project called HP i-Community. ? Satyam BPO The Byrraju Foundation, which is associated with Satyam, has launched GramIT, a rural BPO in village Jallikakinada (AP) that employs 100 rural youth, using the last-mile connectivity provided by Project Ashwini, which connects 32 village centers with
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http://www.convergenceplus.com/sep06 telecom 03.htmlhttp://www.businessworldindia.com/BPOBUZZ/artical8.asp
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broadband wireless. The GramIT centers are set up as co-operative societies, acting as franchisees of Byrraju foundation. Competitors in a nutshell Table 1: Competitors in the Rural BPO space14 Name of BPO GramIT Satyam) (Rural Details Supported by Satyam Foundation (NGO founded by Satyam) GramIT employs 300 people in three units and is planning to expand. GramIT recently won a project from a UK-based company. The firm based in Puttaparthy has over 50 employees and handles image-based data capturing activity, electronic records creation for investment products, loans etc. This rural BPO has a key client in HDFC Bank. Lason India provides franchise towards setting up village BPO’s. Lason (Chida Soft) India Supported by Lason, Chida Soft is located in Kizhanur village of Thiruvallur District in Tamil Nadu. Employs graduates from the village involved in coding, data entry and auditing legal publishing. Runs 2,000 telecentres and ten facilities across rural India. Comat Comat offers transaction processing services for Orbograph of the US and hires graduates in villages around Mysore. Has 10 centers and 60 employees around Chennai. This was set DesiCrew Solutions up with assistance from IIT Chennai. DesiCrew started as a pure Data Entry Service provider. But today we are working with services like - Translations, plotting data on maps, lead generation for IT companies amongst others. Employs about 50 employees in Kuppam (Andhra Pradesh) and in some villages in Uttar Pradesh. Services offered include data
BPO program of
Sai Seva
Datamation group
entry and data processing. Source: ValueNotes Research
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http://www.sourcingnotes.com/content/view/247/76/
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Consumers
? The nature of clients would differ in every phase of the Rural BPO initiative. o Targeting domestic banks, insurers for data entry work and publishers for translation and multimedia projects. o The government itself; this is in terms of outsourcing their work for their various e-Governance projects. Considering there is a major initiative from many State and Central governments in digitization of various records such as land, marriage, death, hospital and legal documents. o Security will also be a big issue. In the backdrop of the Mphasis-BFL episode where four employees duped US customers and siphoned off money from their accounts, clients will be extraordinarily sensitive about security.
Key drivers behind “PRAYAAS” - A Wipro BPO initiative
? One of the central advantages for the rural BPO is that costs associated with infrastructure and people are much lower in rural areas than urban areas. This allows us to reduce our expenditures in providing the physical location substantially given cheaper land prices and construction costs. ? One of the observations of rural BPO managers has been that employee attrition is lower as jobs are taken to where the people live. This implies lower turnaround and hence, lowers training costs. ? Another major driver behind the rural BPO model is that there is a large amount of domestic work available with respect to the spread of e-Governance projects and these are mostly at the village or the Panchayat level; hence jobs such as digitization of hospital records (proposed by GramIT) and legal documents can be another source of revenue stream. As a result, there is a huge pool of work that requires low-cost solutions.
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Effectively address the problem of people migrating from the villages to cities in search of work.15
Key Challenges
? Rural areas are dogged by problems such as under-developed infrastructure, lack of basic amenities, and low-skilled workforce. Both the private sector and Indian Government are taking initiatives to remove these deficiencies in a gradual and phased manner. Lason is wiring Kizhanur to its office through n-Logue Communications, a wireless in local loop rural connectivity company set up by IIT- Madras' TENET group. But it remains to be seen if the model will work on a larger scale. ? Today, most BPO companies are caught in a pincer. Global competition and aggressive customer expectations are pushing down billing rates. ? ? Attrition and the growing cost of talent is pushing up costs. Several BPO companies are turning to smaller cities in search of larger, cheaper and more loyal talent pools. ? Most BPO firms are more comfortable with large centres with capacities of 1,000 seats and above. Anything smaller is considered uneconomical. A rural environment just does not provide large enough talent pools to consider such centres. ? There is bound to be stiff opposition from international customers on issues including quality, reliability, infrastructure, delivery, etc. ? Software Technology Parks of India scheme (STPI) scheme o The Software Technology Parks of India (STPI) scheme offers companies various incentives in the form of tax breaks. Owing to the recent rupee appreciation, there has been an increased demand for extending the STPI scheme beyond 2009. The impact of removing the sops from large
15
http://www.icmrindia.org/casestudies/catalogue/Business Reports/A Report on Rural
%20BPOs%20in%20India.htm
24
companies will be less as they have already taken space at Special Economic Zones (SEZ’s). It is clear that small IT and BPO companies will be unable to utilize the SEZ scheme. Rural BPO’s will feel the heat as they have to pay more tax than their urban counterparts located in the SEZ’s.
Benefits and Challenges in a nutshell
Benefits of “PRAYAAS” ? ? ? ? ? ? Large pool of educated talent Lower salaries Serve growing domestic IT market Serving local and regional government IT development Alleviate need to migrate to metros Capitalize on local language skills
Challenges to success of “PRAYAAS” ? ? ? ? ? Irregular power and poor telecom facilities Absence of computer literate staff Attraction of higher salaries in metros for trained personnel Disinclination of managers to live in rural areas Transportation difficulties
The BPO business has four main inputs: communications systems, hardware, infrastructure, and people. The cost of communications and hardware are not in the direct control of the industry, but we operators can directly control costs related to infrastructure and people. A direct strategy that allows this cost control is the rural BPO model. Simply put, the rural BPO shifts the location of outsourced work from urban to rural areas.
25
Business models/ Viable Strategic Alternatives
Public Private Partnership Model
The aim of the rural BPO’s initiated by the government was to provide outsourcing service to the private IT companies by creating employment opportunities in the small towns and mandal headquarters, where the number of unemployed youth was high. The basic function of the rural BPOs was to provide data entry, human resource facilities, making pay-slips and other desktop works for the IT companies, and they are normally set up at government schools or colleges or other government offices, where the required infrastructure facilities was already available. This is being currently implemented in Andhra Pradesh.16 The key objective in this business model is mainly of providing distributed method of providing services. Comat has set up 800 Kiosks as a part of the Karnataka Government project called “Nemmadia”. This project was awarded to Comat in the year 2006-07 by Government of Karnataka under PPP (Public Private Partnership) model.17
Franchisee model/Business Associate model
It is also called the business associate model. This is the model that the Chennai based BPO firm Lason Indian operates on. They get these huge BPO contracts, break them into smaller modules and distribute them among the associates. Lason India would then aggregate the completed work and send it to its customer. In the initial phase there would be some issues with the control processes and these would be from both within and from the client side. Lason now has 60 such associates, all of whom have stayed with the company for over years.
Stand Alone model
16
17
http://news.oneindia.in/2006/12/17/rural-bpo-centres-in-andhra-pradesh.htmlhttp://www.comat.com/solutions_and_services/comat_rural_bpo.html
26
In case of the stand alone model; the BPO service provider himself bears the task of setting up the BPO in the rural area. The service provider himself bears all the cost of setting up the infrastructure; he is also responsible for hiring the people; training and also responsible for the business and the processes. This model is advocated for BPO providers who do have the financial muscle to bear the risk associated with transacting in the rural area. But the growth engine is tremendous and there is no need to share the profitability amongst the various stakeholders and the organization can profit solely from the operational efficiencies bought in by the setup of the rural BPO’s.
Build Own Operate Franchise (BOOF) model
The Byrraju Foundation's GramIT programme has generated a rural BPO model of this kind. Employees go through an intensive training period at no cost at GramIT centres operated by the foundation till the centres attain financial stability. After that the centre becomes a cooperative society through a process that "derisks stakeholders, employees, investors and customers." This programme is in operation in 150 villages in Andhra Pradesh. This is normally done in an alliance with an NGO. Satyam is the corporate entity that outsources some of its functions in HR and other nominal data processing jobs to this entity. The HR functions like the training aspects are normally outsourced to the NGO.
Internet Kiosk Network18
The TeNeT Group at Indian Institute of Technology, IIT-Madras has worked over the past 18 months on a rural BPO initiative that links urban clients with a rural workforce through the Internet kiosk network. The team identifies and trains workers in rural areas in various skills, relevant to the BPO industry. It liaises with urban clients and takes complete responsibility for the outsourcing and timely delivery of the projects undertaken, and
18
http://www.i4donline.net/articles/current-article.asp?articleid=799&typ=Features
27
ensures that quality standards are met. As a coordinating agency, the team protects the interests of both the clients and the kiosks. At the village-end it filters out unproductive kiosks from the system, and at the city-end it runs due diligence checks on the client to guard against fraudulent BPO activity.
Value Proposition for PRAYAAS
Wipro BPO would build its PRAYAAS initiative based on the following pillars: Rural Citizen - IT based employment for rural communities Corporate Clients- Enable business expansion through cost effective BPO solution ? ? ? Investors- Significant ROI, while creating employment opportunities Society- Sustained growth of rural communities Government- Employment creation, reduce population migration
? ?
Society
Investors
Government
Value Proposition
Rural Citizen
Corporate Clients
Business Model
PRAYAAS------HUB BASED MODEL
28
The model to be employed would be a combination of the franchisee and a stand alone model. There would be a set of villages which would be taken in the initial phase. Each nodal town would have a cluster. The cluster would then be in direct contact with the central office located at Hyderabad. A separate division in the Hyderabad office would be looking after these operations. This would also save costs on the infrastructure front. The clusters could range from 4-10 considering the number of franchises who would take the option of setting up a rural BPO in their villages. In the initial phase we may have even single cluster considering the concentration of operations. The challenge would be to bring the franchisee onboard. We won’t call them a franchisee; they would be our village level entrepreneur (VLE).
VLE
VLE
VLE
Cluster 1
Cluster 2
VLE
Central Hub located at Hyderabad
VLE
Cluster 4
Cluster 3
VLE
VLE
VLE
The reason for a VLE is because there would be accountability and at the same time we would not like to loose control over the output. Secondly a hub also plays a very important role in the contingency plan of our new initiative. The aspects of security of data and its importance in disaster recovery management also play a very important role. Second the VLE also has an opportunity to earn revenue and also would then look at aspects of scalability. The VLE is the person of the village and there would be no one who would know the grassroots better. 29
The Azim Premji foundation would play an important role in helping us choose the VLE as the co-ordinator of the UEE (Universal Elementary Education) programme in that particular mandal knows the village very well and the level of literacy among the villages.
Rural Marketing Mix
Product/Service Portfolio
Table 2: PRAYAAS Product/Service Portfolio
Services Survey & Questionnaire forms Enrollment forms Product/Warranty Registrations Invoice forms
Target Industry Education Department (Govt) and Research firms Government Organizations, Research firms, etc Major Indian corporate, MNC etc Major Indian corporate, MNC from all sectors of the industry. The major qualification criteria for the lead will be CSR (Corporate Social Responsibility)
Product Order Forms Health Care Studies Insurance Claim Forms
Major Indian corporate and MNCs Education, Government, Health Departments etc Indian insurance companies
**Theses are just a section of services that would be carried out in the initial phase. But most of the initial work would come from the parent Wipro BPO. Promotion We would like to leverage the PRAYAAS initiative on the brand name of Wipro BPO. Now most of the promotional aspects would be in terms of discounts to our end clients. The reason being that the benefits of this new initiative have to be passed onto the client; we would promote this initiative as the one being very beneficial for the masses of that particular village. This is more of a relationship building exercise; hence we would undertake most of the promotional aspects in AP with the help of Azim Premji foundation and convincing the local VLE (Village level entrepreneur) of the benefits would be a challenge; but if the others are doing it so can we.
30
Price ? As said earlier the benefits would be passed onto our clients. Keeping the quality at the top; the services garnered from these rural BPO’s would be priced competitively. ? The revenue sharing model with the VLE also has to be taken care of. Hence this aspect does play a very important role in making the initiative sustainable. ? But we have the financial muscle to take it all the way; hence we are confident enough that things would be worked out between the various stakeholders.
Plan for Implementation
The entire process would be established in two phases. The two phases would be known as Roll It and Scale It. The first phase is establishing the rural BPO’s across the southern state Andhra Pradesh only. Rationale for choosing Andhra Pradesh ? Good infrastructure facilities in terms of excellent internet connectivity. o As per the Rajiv Internet programme, the state government has established internet kiosks across 8600 villages across the entire state. The kiosks were established with the help of Bharat Electronics Limited (BEL). o Hence we could leverage on this infrastructure. ? Literacy rate is above the national average and a rise in the school enrollment ratio of 6 to 10 year olds from 73 to 85 percent.19 ? It is one of the leading states in the field of e-Governance. They have various projects running like the GramIT which have a very wide reach even into the hinterlands of Andhra Pradesh. ? The findings of a survey that actually compare urban and rural Andhra Pradesh in certain fundamental aspects of logical reasoning and analytical ability.
19
http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN.htm
l
31
?
The Azim Premji foundation has a deep inroad into the educational front considering it signed a MOU with the AP government to provide elementary education in most of the villages in AP. This could be definitely used and leveraged upon and it would save most of our efforts in the training front even though it would act as a trickle down effect.20 The power scenario in the state is excellent as it is one of the very few states in India which is power surplus.
?
Activities in Phase 1 Start outsourcing low skilled work such as data entry, scanning, formatting, etc. to the village BPO’s. Projects like data entry and bookings in which voice interaction is not required or is minimal would be taken in this initial phase. Projects like designing, digitization and others in which connectivity would not act as an impediment would be taken. We at Wipro believe that Prayaas holds tremendous potential especially at the lower end of the value chain and as times change move the Rural BPO’s higher up the value chain. Sections of the Indian BPO industry, especially those at the lower end of the value chain, are watching this experiment with some interest. But for Wipro BPO; it is not only an experiment but also an initiative.
Rationale for the alternative
? A big chunk of our revenue would come from high-volume, low-value services like data capture, data and document management, etc. The margins would be wafer thin.
20
http://www.azimpremjifoundation.org/html/ini_andhra.htm
32
?
We would be able to give discounts to our customers. These discounts would be possible only because we would be operating in the rural areas. This would also help bring down employee costs. The rural areas; salaries may be up to 50 per cent lower than in the cities. Since the rural BPO’s would usually employ local candidates, the companies do not have to provide transport to the employees21. Moreover, real estate may be about five times less expensive. These two overheads alone would make a substantial difference to our cost competitiveness. There are reasons why we would succeed. Our BPO work and the range of services lend itself quite well to the village BPO model. We work predominantly in the healthcare and financial services sector, processing health insurance claims, airline bills and credit card applications. A big portion of the work is data capture or data entry. This is low-skill work that can be done by anyone who can read and write English. It is this that we want to move to the villages.
?
?
?
?
We at Wipro BPO believe that we can successfully integrate “PRAYAAS” i.e. rural BPO’s into our current model by identifying the lowest level of process-driven tasks. Chunks of such tasks can be farmed out by providing sufficient training to the rural BPO workers, with quality checks done at the main center. The model can be improved over time for cost-effectiveness and efficiency. Phase 2 This would mainly deal with the scaling of the activities or operations and help the organization move up the value chain.
Contingency Plans
? As said earlier; the nature of the business model is itself brings out the contingency aspect of the initiative. The VLE would be able to take advantage of the infrastructure for other initiatives according to her discretion. We believe upholding the interest of the stakeholders is our prime objective.
21
http://www.aol.in/news/story/2007120622129019000001/index.html
33
o The infrastructure could be utilized for long distance education programmes; supporting government mandated literacy programmes; and even outsourcing work from other BPO’s. ? Disaster Recovery Management o The hub based model with a nodal cluster would take care of the data back up and security. Another important aspect of security would also be effectively addressed. The cluster would also act as a liaison between the central office located at Hyderabad and the Rural BPO’s and the VLE. ? Infrastructure related problems o The portfolio of services to be outsourced has to take this aspect into consideration. The liaison mechanism between the VLE and the cluster would be able to have a plan in place; but other than that these are factors that could effectively employ technology as an enabler.
Conclusion
According to a report by Global Sourcing Now, the Global Knowledge Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion will be outsourced to India. It is believed, that out of the above USD 12 billion, up to 25% can be delivered from rural centers by 2010. As Urban India (the big cities) has seen the benefits of outsourcing, Rural India experiences large scale migration. The sourcing of services (both transactional and knowledge) from the rural centers would stem this migration. Much like the phenomenon of “Reverse Brain Drain” from the developed countries to countries like India and China, there could be a reverse flow, back from Urban India to Rural India (the place from where most Knowledge Professionals have really originated). That day would be the real day of reckoning for Rural India and then the true bridging of Rural / Urban IT divide would be achieved. Chances are that the day is not too far off. Rural India is well equipped to meet the challenges of this emerging sector and potentially has a very bright future in being the global hub for many, if not all, knowledge services. In future, core IT areas like Software Engineering, Networks and Systems, Infrastructure Management can be tapped too. We cannot afford to be blind to this opportunity. 34
Hence we believe that “PRAYAAS” is a step in the right direction.
35
doc_906215780.doc
WIPRO's initiative of taking BPO rural.
Table of Contents
Introduction ............................................................................................................2 The Company: Wipro Ltd........................................................................................2 Vision....................................................................................................................3 Value Proposition of Wipro BPO......................................................................4 Details about Wipro BPO.................................................................................5 Achievements and awards...................................................................................6 Porter’s Five Forces analysis of the Indian BPO Industry......................................9 Rationale for going Rural .....................................................................................12 Rural infrastructure: New thrust areas ..............................................................13 Rationale for Wipro BPO going Rural ..................................................................16 Objectives for “PRAYAAS”.................................................................................17 SWOT analysis of Wipro BPO..............................................................................17 Key Success Factors (KSF’s)...............................................................................20 Competitors ..........................................................................................................21 Consumers............................................................................................................23 Key drivers behind “PRAYAAS” - A Wipro BPO initiative ...................................23 Key Challenges.....................................................................................................24 .............................................................................................................................24 Benefits and Challenges in a nutshell .................................................................25 Business models/ Viable Strategic Alternatives ..................................................26 Public Private Partnership Model.......................................................................26 Franchisee model/Business Associate model...................................................26 Stand Alone model.............................................................................................26 Build Own Operate Franchise (BOOF) model...................................................27 Value Proposition for PRAYAAS..........................................................................28 Business Model ....................................................................................................28 Rural Marketing Mix..............................................................................................30 Plan for Implementation........................................................................................31 Rationale for the alternative...............................................................................32 Contingency Plans................................................................................................33 Conclusion............................................................................................................34
Introduction
"We don't feel the cost pressure now. So this is a good time to experiment. We have the time to make the mistakes, correct them and refine the model." This is what we at Wipro BPO believe. With huge wage costs and high attrition in urban India, the IT enabled services industry is slowly turning to rural India for salvation. Indeed, we believe that business process outsourcing (BPO) players who have initiated low-end transaction processing units say manpower in Tier III townships and this could prove to be the answer to the sectors problem1. Hence we at Wipro BPO believe that the next growth engine would be from the rural areas. Hence we have named this initiative as “PRAYAAS”
The Company: Wipro Ltd
Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of clients across the world. Wipro has 40+ ‘Centers of Excellence’ that create solutions around specific needs of industries. It delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. The major initiatives of Wipro Limited include: 1. Wipro Technologies Ltd. 2. Wipro InfoTech 3. Wipro BPO Apart from these, Wipro also has interests in consumer goods and white goods.
1
http://www.offshoringtimes.com/Pages/2007/BPO_news1711.html
2
Vision
Wipro has achieved the pinnacles of process and quality credentials (through ISO 9000, SEI CMM, PCMM and Six Sigma). The company’s Vision is focused on attaining leadership in the areas of business, customer and people. Business Leadership: Among the top 10 Information Technology Services companies globally and the No.1 Information Technology company in India. Customer Leadership: The No.1 choice of customers through innovative solutions and Six Sigma processes. People Leadership: Among the top 10 most preferred employers globally by creating an environment of empowerment, intellectual challenge and wealth sharing. Brand Leadership: Wipro to be among the 5 most admired brand in India.
Wipro BPO
Wipro BPO is one of the leading BPO’s in the country offering expert services in across industry vertical’s using a highly process driven culture. Wipro BPO is about delivering long-term benefits & measurable value to our customers through:
• • •
Business process re-engineering Integrating technology with BPO Knowledge services
Wipro BPO is uniquely positioned to service customer requirements by leveraging its tenets of quality and innovation, the best people talent, self sustaining process framework and domain knowledge. Wipro BPO offers customized service offerings; translating into the most flexible and cost effective services of the highest quality for customers. The BPO operations came into existence in 2002 when Wipro took a quantum jump by acquiring Spectramind, which was one of leading BPO in the country. Wipro BPO Solutions
3
complements the services offered by Wipro Technologies, making it one of the largest BPO service players. Wipro BPO has over 19,000 people, operating out of 9 different locations (India and Eastern Europe). The company has been a critical partner to all its customers in achieving their business goals. Wipro BPO services customers in various industries including Banking & Capital Markets, Insurance, Travel & Hospitality, HiTech Manufacturing, Telecom & Healthcare sectors. Wipro BPO also has deep expertise in delivering process specific solutions in areas like Finance & Accounting, Procurement, HR Services, Loyalty Services and Knowledge Services.
Value Proposition of Wipro BPO
Wipro BPO provides its customers with services required to keep the business operating as efficiently and as cost effectively as possible, so all that the customers need to concentrate on is their core business.
The three pillars on which the entire organization works are: 1. Standardization 2. Simplification 3. Optimization
4
Details about Wipro BPO
Offices The organization has offices in the following cities: New Delhi, Mumbai, Belapur, Chennai, Pune, Kolkata, Bangalore, Hyderabad, Bucharest (Romania), Shanghai (China), Cebu (Philippines)
BPO Verticals: 1. Banking and Financial Services 2. Insurance 3. Health and life sciences 4. Telecom 5. Travel and transportation BPO Horizontals: 1. Finance and Accounting 2. Procurement 3. Loyalty services 4. HR Services 5. Knowledge services.
Financials of Wipro Limited
Wipro BPO contributes about 20% to the total revenues of the company. The total revenue for the 3rd quarter in 2007-08 stood at Rs. 2.998 billion, which was a growth of about Rs. 600 million in comparison to the same period in 2006-07. The company has 19,907 employees in the BPO Services business. During the first quarter ended June 5
2007, Wipro BPO recorded a Y-O-Y growth of 34.8% in operating margins, while revenue grew by 19.9%.2 The BPO has 84.2% of their revenues coming from the American market while the remaining almost 16% comes from the EU. Wipro BPO won a won a multi-tier end to end engagement covering Payroll/HR services, F&A services and Procurement services from a leading US based retail giant. The engagement also includes Product Warranty management and Insurance claims administration. 2007-08 Revenues of BPO Services Cost of revenue in BPO 2,372 1,529 2006-07 2,998 (figures in Rs. Million) 2,063 (figures in Rs. Million)
The figures are for the quarter ending 31st December in both the years.
Achievements and awards
• Wipro BPO has won International Quality and Productivity Center’s (IQPC) 2007 Global BPO Standard Bearer 2007 award. Wipro BPO made a clean sweep at the awards ceremony winning awards in all the major categories at a ceremony held recently in Hyderabad. • • • • • T K Kurien, CEO, Wipro BPO won the 2007 Global BPO Industry Leader award. The 2007 Global KPO Excellence Award The 2007 Global F&A Excellence Award The 2007 Global Standard Bearer for Talent Management. Wipro BPO was chosen for the award based on sustained organizational performance, market leadership, profitability and revenue growth.
SWOT analysis of Indian BPO Industry
2
www.wipro.com/investors/pdf_files/Indian_GAAP_Press_Release_Q3_FY07_08.pdf
6
Strengths ? ?
?
Large no. of talented graduates and skilled workforce Affordable and quality education as compared to developed countries English language proficiency Well-developed IT industry Strong customer base of well known companies Powerful venture capital interest in investing in growth opportunity Focus on process quality of Indian BPO industry Government SOPS and tax benefits Existing long-term relationships with other nation
? ? ? ? ? ? Weakness ? ? ? ? ? ?
Scarce foreign language skills other than English. Lack of customer service culture Expensive and poor quality telecom infrastructure Poor electricity supply Cultural differences High attrition rates, therefore less no. of people with extensive call centre experience
Opportunities
•
Horizontal and vertical expansion of existing customer base into new markets Time zone difference between India and target markets Increasing awareness of outsourcing services
? ?
?
Creation of global brands
7
? ? ? ? Threats ? ? ? ?
Call center offerings Chinese domestic & export market Develop relationships in West to access APAC/Middle East markets Indian domestic-market growth
High Billing rates Political instability India's competitors in Eastern Europe, Latin America and the Asia Pacific regions offering cheap BPO services Increasing technology automation
?
Internal competition for resources
? ? ? ? ? ?
Over-promise / Under-deliver Regional geopolitical uncertainty Government blocking reform/deals Corruption/piracy/distrust Political & religious instability -war Spiraling costs of labour and ever increasing monthly salaries
8
Porter’s Five Forces analysis of the Indian BPO Industry
Bargaining power of Buyer 1. Costs advantage offered by BPO in other countries offers high bargaining power to the buyers. 2. In some cases, large organizations are responsible for a major share of the BPO revenues. In such a situation, the Buyer can have a lot of bargaining power. 3. Even though the switching costs of the buyer would be high, he can always bargain on the basis of services provided by other organizations. 4. Over-dependence on the voice business — the mainstay of BPO companies currently —can actually be a recipe for disaster. At the moment, upwards of 60% of the BPO business coming to India is voice-related. Barring transcription, voice has the lowest margins among BPO businesses. So, companies need to graduate to more value-added businesses like transactions processing, HR and consulting to get better margins. Till then, they have to maintain a healthy balance between voice and non-voice work. Bargaining power of suppliers Most Suppliers focus on three points: technology strength, scale and experience. However, three other points: quality, success record and communications are what truly differentiate superior suppliers.
9
• •
Technology strength: If a vendor has reliable voice, data and power systems, and is competent at CRM, it gives it substantial bargaining power. Scale: The most important question is whether the vendor is prepared to meet the growth requirements of the organization. The factors which need to be considered include its access to capital and how to compete with other clients for the outsourcer’s internal resources. In the long run, only companies that successfully deliver quality service will have the access to capital required to be scalable.
•
It is not necessary that the vendor have experience with the exact product or function in question. It is more important that it has experience with analogous programs, programs that require similar technology, training and quality management to the program that is to be outsourced. This will help the vendor in its bargaining power.
•
It is important to carefully evaluate total costs, including both the upfront costs and the ongoing costs. Upfront costs include training, program design and IT setup. Often overlooked are the hidden costs, such as attrition, telecommunications charges, reporting and call handling. Consider also the savings (or costs) that come from an outsourcer’s efficiency and effectiveness, including reductions (or increases) in Average Handle Time and First Time Call Resolution. The lower these costs, the more is the bargaining power of the supplier.
•
Quality. Vendor quality is extremely important to success. Good execution improves customer satisfaction, reduces average handle times and improves the rate at which callers’ issues are resolved on the first try, all of which save money in the long run. A vendor that is committed to quality will have stringent quality monitoring and continuous improvement practices in place before you ask for them.
Threat of new entrants • A few years back, the threat of a new entrant was substantially low due to high costs of infrastructure, hardware and few outsourcing undertakings being done by organizations. However, in recent years this threat has increased due to lowering in fixed costs of the fixed costs of the voice business like dialer running and 10
maintenance, bandwidth costs, employee wages and related expenses. Moreover, cheap labour in available due to good quality manpower who are unemployed. This manpower can be used to serve the high levels of outsourcing that is being done in the current world. Real estate costs are still a hindrance, but this is being countered by going to smaller towns and cities. Rivalry among existing firms There is high competition between the existing firms 1. Most of the BPO offer similar types of services, which are not too different from those offered by competitors. 2. A lot of importance is given to brand recognition and brand value in the market. 3. The value proposition shown by most of the BPO is of low cost and high efficiencies. With spiraling costs of workforce etc, there is tremendous pressure on the BPO. 4. Shortage of skilled manpower is also a reason for the existing firms to compete with one another. The high attrition rates also contribute to this factor. 5. There is high competition between the firms to move up the value chain by offering better services and more comprehensive solutions. 6. The competition also comes from the fact that the existing players are trying to setup base in countries where costs are low. This puts additional pressure on them to manage their operations in a cost effective manner. Threat of substitutes 1. New counties are ready to replicate the success model of India by offering cheap manpower to do these jobs. The threat is such that work is now being outsourced out of India.
11
2. Countries like Philippines, Mexico etc have the same advantages which India has which include cheap qualified manpower, time zone difference, familiarity with American culture etc.
3. There is also a small amount threat from direct customer information
centers which can carry out a lot of the work done by BPO’s.
Rationale for going Rural
Literacy in India3
Table Rural-Urban 1951-2001 Year 1991 Rural Urban Total 2001 Rural Urban Total 10.13 Rates Persons 44.70 73.10 52.21 59.40 80.30 65.38
Literacy Male 57.90 81.10 64.13 71.40 86.70 75.85 Female 30.60 64.00 39.29 46.70 73.20 54.16
These figures show that there has been a rapid increase in the literacy levels of the rural India. In a span of 10 years, the literacy in rural India has gone up by about 15% which is a substantial figure given the poor history of education programs in India. In particular, the male literacy percentage is almost equal to the national figure among males. Moreover, the last 10 years in the single biggest jump in rural literacy in comparative figure terms. This shows that the employ-ability of these people has steadily increased over the years. Several important results emerge from the census and literacy figures across the country4
3 4
http://www.indiastat.com/india/ShowDataSec.asp?secid=362602&ptid=362533http://prayatna.typepad.com/education/rural_education/index.html
12
•
First, there is a complete absence of “free education” in India:
regardless of a household’s socio-economic background, spending on education is very substantial even at the primary school level.
•
Second, “indirect” costs, such as books, uniforms and examination
fees, are very high, even in government-run schools, including at the primary level.
•
Third, given the absence of a well-developed credit market for
education, expenditure on education is highly (and positively) correlated with income.
•
Fourth, willingness to pay and “compulsion to pay” (i.e., the need
to compensate for a shortage of government spending on education) are both important factors.
•
Fifth, government spending and household spending on education
are not substitutes, but complements: an increase in government spending is associated with an increase in household spending (due to an “enthusiasm effect” resulting from improvements in school facilities, number of teachers, etc.); conversely, a reduction in government expenditure leads to a decline in household spending on education. (Equivalently, the elasticity of household expenditure to government expenditure is found to be almost unitary, and positive.) Finally, it is found that the provision of schooling in rural habitations, or the provision of such school incentives as mid-day meals, uniforms, textbooks, etc., are both associated with increased household demand for education.
Rural infrastructure: New thrust areas5
? There is a lot of thrust on rural infrastructure in the past state plans and the penetration of broadband and the reforms in the power sector have contributed to the overall growth.
5
http://www.mycoordinates.org/rular-infrastructure-in-india-may-06.php
13
Rural infrastructure is not only a key component of rural development but also an important ingredient in ensuring any sustainable poverty reduction programme. The proper development of infrastructure in rural areas improves rural economy and quality of life. It promotes better productivity, increased agricultural incomes, adequate employment, etc. ? Bharat Nirman
The UPA Government has launched “Bharat Nirman” time bound business plan for action in rural infrastructure for next four years. Under Bharat Nirman, action is proposed in the following areas of Irrigation, rural roads, rural housing, rural water supply, rural electrification, rural telecommunication connectivity, etc. ? The Government has also decided to provide corpus of Rs. 8000 crore to Rural Infrastructure Development Fund (RIDF). ? Bharat Nirman through Pradhan Mantri Gram Sadak Yojana
Rural connectivity is one of the major goals of Bharat Nirman. In India, there are more than 6 lakh villages located in different terrains e.g. plain, hilly, deserts, swamps, costal region, mountainous region, back water areas, tribal pockets, etc. The climatic condition also varies from place to place to a great extent. Due to improper planning, some villages are having multi road connection while others are deprived of even single road connection. In Pradhan Mantri Gram Sadak Yojna (PMGSY) has been decided to give one and only connection to each village. It is centrally sponsored programme with 100% financial assistance. ? Rural electrification
Out of the estimated 80,000 villages yet to be electrified, the 10th Five Year Plan (2002-2007) proposes to electrify 62,000 villages through grid supply. The remaining 18,000 remote villages are proposed to be electrified by 2011-2012 through the use of decentralized non- conventional source of energy. The rural electrification programme has been included as a component of Pradhan Mantri Gramodaya Yojana (PMGY)
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and is being encouraged to pool resources from other schemes under Minimum Need Programme (MNP) and Rural Infrastructure Development Fund (RIDF) to meet objective of 100 % electrification.
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The development and implementation of various rural infrastructure projects help to create values for the rural society. Similarly, involvement of Public as well as Private companies; NGO, etc. require the technical and managerial experts of engineering consultancy in rural areas. There is provision of free electricity connection to be provided to IAY houses under Rajiv Gandhi Gram Vidutikaran Yojana.
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Programs run by the government of India Sarva Shiksha Abhiyan (SSA)6
It is Government of India's flagship programme for achievement of Universalization of Elementary Education (UEE) in a time bound manner, as mandated by 86th amendment to the Constitution of India making fee and compulsory Education to the Children of 6-14 years age group, a Fundamental Right. SSA is being implemented in partnership with State Governments to cover the entire country and address the needs of 192 million children in 1.1 million habitations. The programme seeks to open new schools in those habitations which do not have schooling facilities and strengthen existing school infrastructure through provision of additional class rooms, toilets, drinking water, maintenance grant and school improvement grants. SSA has a special focus on girl's education and children with special needs. SSA also seeks to provide computer education to bridge the digital divide. Kasturba Gandhi Balika Vidyalaya (KGBV): The Government of India has approved a new scheme called Kasturba Gandhi Balika Vidyalaya (KGBV) for setting up upto 750 residential schools with boarding facilities at elementary level for girls belonging
6
http://ssa.nic.in/ssamissionstat.asp
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predominantly to the SC, ST, OBC and minorities in difficult areas. The scheme would be applicable only in those identified Educationally Backward Blocks (EBB’s) where, as per census data of 2001, the rural female literacy is below the national average and gender gap in literacy is more than the national average.
Mahila Samakhya program: The Mahila Samakhya programme was launched in 1988 in pursuance of the goals of the New Education Policy (1986) and the Programme of Action as a concrete programme for the education and empowerment of women in rural areas, particularly of women from socially and economically marginalised groups.
Azim Premji Foundation
Azim Premji established the Azim Premji Foundation7 in 2001. This is a not-for-profit organization with a vision of significantly contributing to quality primary education for every child, in order to build a just, equitable and humane society. The financial resources to this foundation have been personally contributed by Premji. The current programs of the Azim Premji Foundation engage 2.5 million children in more than 17,000 schools across India.
Rationale for Wipro BPO going Rural
A NASSCOM study says, the BPO industry in India has is expected to face a shortfall of 262,000 professionals by the year 20128. With some IT training, there is a significant opportunity for the large number of high-school graduates and undergraduate degreeholders in rural areas to fill a part of this gap in the future. We at Wipro BPO believe this gives us a huge opportunity to create a socio-economic impact. Hence we have titled this project as “PRAYAAS”.
7
8
http://www.azimpremjifoundation.org/html/CLC.htmhttp://www.comat.com/solutions_and_services/rural_bpo.html
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Objectives for “PRAYAAS”
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Demand and supply: the expected level of demand for the services; marketing requirements; users' willingness or ability to pay; alternative sources of supply; price and quality competitiveness; input and credit availability; pricing policies.
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Profitability or Sustainability: the financial viability for entrepreneurs and stakeholders, cost-effectiveness compared to alternatives. Socio-Economic impact: the impact on targeted groups or quality of life; distribution of benefits between income classes and genders; degree and nature of local participation; effect on culture and values; long-term sustainability; the costs and benefits to society, etc.
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According to Mission 2007 goal of GoI, around 100,000 villages in India are to be powered with connectivity and if this materializes, these villages will have the potential to act as BPO centres. Consider 10 percent of these villages employing 20 people at an average salary of $65 per month. This would directly add $1.56 billion to the rural economy per annum and create 200,000 jobs and the benefits for us in terms of lower attrition and cost advantages are huge. The attrition costs themselves for voice and non-voice services amounts to 10% and 12% of the operational expenses; hence we believe this holds tremendous potential. The demand for several allied industries such as hardware servicing and software development would also grow. The rural BPO teams can effectively narrow the gap of digital divide by leveraging the power of computing and connectivity to create wealth in rural areas. The teams can build capacity in villages thereby creating the right systems and networks for remote business operations and ensure the highest level of professionalism and quality standards.
SWOT analysis of Wipro BPO
Strengths
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Excellent training modules; (voice and non-voice). This results in a very highly trained and highly skilled, English-speaking workforce which is the main reason why there are many ITES jobs that are being outsourced to India. Clients of Wipro BPO o Presence across various sectors which include Travel and Hospitality, Banking and Capital Markets, Telecom, Healthcare sector, Insurance, HiTech Manufacturing. A client base of more than 50 clients. Abundant manpower (Wipro BPO-2600 employees)9 Cheaper workforce than our western and some of the Indian counterparts. According to NASSCOM, The wage difference is as high as 70-80 percent when compared to their Western parts. (In the West-almost 50% of the costs results in manpower costs) Dedicated workforce aiming at making a long-term career in the field Round-the-clock advantage for Western companies due to the huge time difference. Lower response time with efficient and effective service Operational excellence Conducive business environment There are Wipro BPO teams in Bangalore. Delhi, Kolkata, Chennai and Pune and two overseas centers in Shanghai and Chengdu in China.
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Weaknesses ? Recent months have seen a rise in the level of attrition rates among outsourcing workers who are quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to pursue BPO as a full-time career. ? The attrition rate of Wipro BPO is 48%10 on an annualized basis. This is the highest in the industry compared to an industry average of 30%. This gives us another food for thought to diversify this risk with the help of another business model.
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http://www.indianmba.com/Faculty_Column/FC517/fc517.htmlhttp://news.oneindia.in/2007/04/20/wipro-suffers-highest-attrition-rate.html
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The cost of telecom and network infrastructure is much higher in India than in the US. Local infrastructure Political influence To work closely with associations like NASSCOM to portray India as the most favored BPO destination in the world. India can be branded as a quality outsourcing destination. $69 billion ITES business by 2010. This is in the form of U.S. jobs moving offshore.
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Opportunities ?
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Sl. No
Number of U.S. Jobs Moving Offshore 2010 117,835 161,722 276,954 83,237 14,478 34,673 13,846 97,321 791,034 1,591,101 2015 88,281 48,028 72,632 84,347 36,770 74,642 29,639 26,564 1,659,310 3,320,213
Job Category 2000 2005 1 Management 0 37,477 2 Business 10,787 61,252 3 Computer 27,171 108,991 4 Architecture 3,498 32,302 5 Life Sciences 0 3,677 6 Legal 1,793 14,220 7 Art, Design 818 5,576 8 Sales 4,619 29,064 9 Office 53,987 295,034 Total 102,674 587,592 Source: U.S Department of Labour and Forrester Research, Inc.
**The fields marked in yellow; this is where we would like to target i.e. Wipro BPO model. Also many of the non-voice services of the existing clients attributed to Wipro BPO currently could be outsourced to these centres. $97.5 billion IT (consulting, software solutions) market by 2010.
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Threats
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The anti-outsourcing legislation in the US state of New Jersey. Three more states in the United States are planning legislation against outsourcing Connecticut, Missouri and Wisconsin. Workers in British Telecom have protested against outsourcing of work to Indian BPO companies. This could spillover to other companies. Other BPO destinations such as China, Philippines and South Africa could have an edge on the cost factor.
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Key Success Factors (KSF’s)
? Training module and time period o Training is a huge challenge. One has to select simple tasks that can be handled by these BPO’s. Due to lack of exposure, the employees in a rural BPO may take additional time in getting trained, but we think it is doable in an acceptable time frame. We believe it would take twice the time to that in an established city. The challenge lies in impressing upon the employees the importance of timeliness and quality. o This we would take the help of Azim Premji foundation; considering that they already have a headstart in this initiative ? Ability to maintain the quality and the brand name of “Wipro”; due to the lower end of the BPO value chain activities being done; this would be a huge effort for the brand name of Wipro not to suffer and we need to maintain the quality of the output the same. ? ? Language and cultural integration11 Integration with the processes and working of a larger organization. The integration has to be smooth and planned. ? Process maturity, proven outsourcing methodology, and foolproof technology platforms, if these are not taken care of then vendors could not scale up their offerings.
11
http://www.anudip.org/IT_Whitepaper.html
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Reduced or no capital cost, keep the operating cost variable rather than fixed, ensure high degree of compliances and accelerated processing to stay ahead of competition.
Competitors
Rural BPO Operators12 ? Lason India Lason has its regional hub with 1,000 employees in Chennai, with another 5,000 distributed across 60 smaller centers. It operates on a franchisee model. Lason does not own the specific centers that do the processing, but designates them as franchisees, providing the hardware and training, and managing the quality of the output, while the local owner provides the physical location. Lason India has started its operations mainly in the areas around Chennai; take the case of Sharmila13 a local village entrepreneur has around five computers installed in her rural home; doing outsourcing work. This is what has transformed many a lives in this small village in Thiruvallur district. Lason India gives her all the support she needs in the form of technical, managerial and motivational. Datamation
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Datamation operates a stand alone model. It owns and operates all the BPO centers it runs. The NGOs assist Datamation in hiring and training the workforce for the BPO’s. Its operation is run based on a not-for-profit philosophy. It also runs Hewlett-Packard’s rural BPO initiative, which is part of a bigger project called HP i-Community. ? Satyam BPO The Byrraju Foundation, which is associated with Satyam, has launched GramIT, a rural BPO in village Jallikakinada (AP) that employs 100 rural youth, using the last-mile connectivity provided by Project Ashwini, which connects 32 village centers with
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http://www.convergenceplus.com/sep06 telecom 03.htmlhttp://www.businessworldindia.com/BPOBUZZ/artical8.asp
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broadband wireless. The GramIT centers are set up as co-operative societies, acting as franchisees of Byrraju foundation. Competitors in a nutshell Table 1: Competitors in the Rural BPO space14 Name of BPO GramIT Satyam) (Rural Details Supported by Satyam Foundation (NGO founded by Satyam) GramIT employs 300 people in three units and is planning to expand. GramIT recently won a project from a UK-based company. The firm based in Puttaparthy has over 50 employees and handles image-based data capturing activity, electronic records creation for investment products, loans etc. This rural BPO has a key client in HDFC Bank. Lason India provides franchise towards setting up village BPO’s. Lason (Chida Soft) India Supported by Lason, Chida Soft is located in Kizhanur village of Thiruvallur District in Tamil Nadu. Employs graduates from the village involved in coding, data entry and auditing legal publishing. Runs 2,000 telecentres and ten facilities across rural India. Comat Comat offers transaction processing services for Orbograph of the US and hires graduates in villages around Mysore. Has 10 centers and 60 employees around Chennai. This was set DesiCrew Solutions up with assistance from IIT Chennai. DesiCrew started as a pure Data Entry Service provider. But today we are working with services like - Translations, plotting data on maps, lead generation for IT companies amongst others. Employs about 50 employees in Kuppam (Andhra Pradesh) and in some villages in Uttar Pradesh. Services offered include data
BPO program of
Sai Seva
Datamation group
entry and data processing. Source: ValueNotes Research
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http://www.sourcingnotes.com/content/view/247/76/
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Consumers
? The nature of clients would differ in every phase of the Rural BPO initiative. o Targeting domestic banks, insurers for data entry work and publishers for translation and multimedia projects. o The government itself; this is in terms of outsourcing their work for their various e-Governance projects. Considering there is a major initiative from many State and Central governments in digitization of various records such as land, marriage, death, hospital and legal documents. o Security will also be a big issue. In the backdrop of the Mphasis-BFL episode where four employees duped US customers and siphoned off money from their accounts, clients will be extraordinarily sensitive about security.
Key drivers behind “PRAYAAS” - A Wipro BPO initiative
? One of the central advantages for the rural BPO is that costs associated with infrastructure and people are much lower in rural areas than urban areas. This allows us to reduce our expenditures in providing the physical location substantially given cheaper land prices and construction costs. ? One of the observations of rural BPO managers has been that employee attrition is lower as jobs are taken to where the people live. This implies lower turnaround and hence, lowers training costs. ? Another major driver behind the rural BPO model is that there is a large amount of domestic work available with respect to the spread of e-Governance projects and these are mostly at the village or the Panchayat level; hence jobs such as digitization of hospital records (proposed by GramIT) and legal documents can be another source of revenue stream. As a result, there is a huge pool of work that requires low-cost solutions.
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Effectively address the problem of people migrating from the villages to cities in search of work.15
Key Challenges
? Rural areas are dogged by problems such as under-developed infrastructure, lack of basic amenities, and low-skilled workforce. Both the private sector and Indian Government are taking initiatives to remove these deficiencies in a gradual and phased manner. Lason is wiring Kizhanur to its office through n-Logue Communications, a wireless in local loop rural connectivity company set up by IIT- Madras' TENET group. But it remains to be seen if the model will work on a larger scale. ? Today, most BPO companies are caught in a pincer. Global competition and aggressive customer expectations are pushing down billing rates. ? ? Attrition and the growing cost of talent is pushing up costs. Several BPO companies are turning to smaller cities in search of larger, cheaper and more loyal talent pools. ? Most BPO firms are more comfortable with large centres with capacities of 1,000 seats and above. Anything smaller is considered uneconomical. A rural environment just does not provide large enough talent pools to consider such centres. ? There is bound to be stiff opposition from international customers on issues including quality, reliability, infrastructure, delivery, etc. ? Software Technology Parks of India scheme (STPI) scheme o The Software Technology Parks of India (STPI) scheme offers companies various incentives in the form of tax breaks. Owing to the recent rupee appreciation, there has been an increased demand for extending the STPI scheme beyond 2009. The impact of removing the sops from large
15
http://www.icmrindia.org/casestudies/catalogue/Business Reports/A Report on Rural
%20BPOs%20in%20India.htm
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companies will be less as they have already taken space at Special Economic Zones (SEZ’s). It is clear that small IT and BPO companies will be unable to utilize the SEZ scheme. Rural BPO’s will feel the heat as they have to pay more tax than their urban counterparts located in the SEZ’s.
Benefits and Challenges in a nutshell
Benefits of “PRAYAAS” ? ? ? ? ? ? Large pool of educated talent Lower salaries Serve growing domestic IT market Serving local and regional government IT development Alleviate need to migrate to metros Capitalize on local language skills
Challenges to success of “PRAYAAS” ? ? ? ? ? Irregular power and poor telecom facilities Absence of computer literate staff Attraction of higher salaries in metros for trained personnel Disinclination of managers to live in rural areas Transportation difficulties
The BPO business has four main inputs: communications systems, hardware, infrastructure, and people. The cost of communications and hardware are not in the direct control of the industry, but we operators can directly control costs related to infrastructure and people. A direct strategy that allows this cost control is the rural BPO model. Simply put, the rural BPO shifts the location of outsourced work from urban to rural areas.
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Business models/ Viable Strategic Alternatives
Public Private Partnership Model
The aim of the rural BPO’s initiated by the government was to provide outsourcing service to the private IT companies by creating employment opportunities in the small towns and mandal headquarters, where the number of unemployed youth was high. The basic function of the rural BPOs was to provide data entry, human resource facilities, making pay-slips and other desktop works for the IT companies, and they are normally set up at government schools or colleges or other government offices, where the required infrastructure facilities was already available. This is being currently implemented in Andhra Pradesh.16 The key objective in this business model is mainly of providing distributed method of providing services. Comat has set up 800 Kiosks as a part of the Karnataka Government project called “Nemmadia”. This project was awarded to Comat in the year 2006-07 by Government of Karnataka under PPP (Public Private Partnership) model.17
Franchisee model/Business Associate model
It is also called the business associate model. This is the model that the Chennai based BPO firm Lason Indian operates on. They get these huge BPO contracts, break them into smaller modules and distribute them among the associates. Lason India would then aggregate the completed work and send it to its customer. In the initial phase there would be some issues with the control processes and these would be from both within and from the client side. Lason now has 60 such associates, all of whom have stayed with the company for over years.
Stand Alone model
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http://news.oneindia.in/2006/12/17/rural-bpo-centres-in-andhra-pradesh.htmlhttp://www.comat.com/solutions_and_services/comat_rural_bpo.html
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In case of the stand alone model; the BPO service provider himself bears the task of setting up the BPO in the rural area. The service provider himself bears all the cost of setting up the infrastructure; he is also responsible for hiring the people; training and also responsible for the business and the processes. This model is advocated for BPO providers who do have the financial muscle to bear the risk associated with transacting in the rural area. But the growth engine is tremendous and there is no need to share the profitability amongst the various stakeholders and the organization can profit solely from the operational efficiencies bought in by the setup of the rural BPO’s.
Build Own Operate Franchise (BOOF) model
The Byrraju Foundation's GramIT programme has generated a rural BPO model of this kind. Employees go through an intensive training period at no cost at GramIT centres operated by the foundation till the centres attain financial stability. After that the centre becomes a cooperative society through a process that "derisks stakeholders, employees, investors and customers." This programme is in operation in 150 villages in Andhra Pradesh. This is normally done in an alliance with an NGO. Satyam is the corporate entity that outsources some of its functions in HR and other nominal data processing jobs to this entity. The HR functions like the training aspects are normally outsourced to the NGO.
Internet Kiosk Network18
The TeNeT Group at Indian Institute of Technology, IIT-Madras has worked over the past 18 months on a rural BPO initiative that links urban clients with a rural workforce through the Internet kiosk network. The team identifies and trains workers in rural areas in various skills, relevant to the BPO industry. It liaises with urban clients and takes complete responsibility for the outsourcing and timely delivery of the projects undertaken, and
18
http://www.i4donline.net/articles/current-article.asp?articleid=799&typ=Features
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ensures that quality standards are met. As a coordinating agency, the team protects the interests of both the clients and the kiosks. At the village-end it filters out unproductive kiosks from the system, and at the city-end it runs due diligence checks on the client to guard against fraudulent BPO activity.
Value Proposition for PRAYAAS
Wipro BPO would build its PRAYAAS initiative based on the following pillars: Rural Citizen - IT based employment for rural communities Corporate Clients- Enable business expansion through cost effective BPO solution ? ? ? Investors- Significant ROI, while creating employment opportunities Society- Sustained growth of rural communities Government- Employment creation, reduce population migration
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Society
Investors
Government
Value Proposition
Rural Citizen
Corporate Clients
Business Model
PRAYAAS------HUB BASED MODEL
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The model to be employed would be a combination of the franchisee and a stand alone model. There would be a set of villages which would be taken in the initial phase. Each nodal town would have a cluster. The cluster would then be in direct contact with the central office located at Hyderabad. A separate division in the Hyderabad office would be looking after these operations. This would also save costs on the infrastructure front. The clusters could range from 4-10 considering the number of franchises who would take the option of setting up a rural BPO in their villages. In the initial phase we may have even single cluster considering the concentration of operations. The challenge would be to bring the franchisee onboard. We won’t call them a franchisee; they would be our village level entrepreneur (VLE).
VLE
VLE
VLE
Cluster 1
Cluster 2
VLE
Central Hub located at Hyderabad
VLE
Cluster 4
Cluster 3
VLE
VLE
VLE
The reason for a VLE is because there would be accountability and at the same time we would not like to loose control over the output. Secondly a hub also plays a very important role in the contingency plan of our new initiative. The aspects of security of data and its importance in disaster recovery management also play a very important role. Second the VLE also has an opportunity to earn revenue and also would then look at aspects of scalability. The VLE is the person of the village and there would be no one who would know the grassroots better. 29
The Azim Premji foundation would play an important role in helping us choose the VLE as the co-ordinator of the UEE (Universal Elementary Education) programme in that particular mandal knows the village very well and the level of literacy among the villages.
Rural Marketing Mix
Product/Service Portfolio
Table 2: PRAYAAS Product/Service Portfolio
Services Survey & Questionnaire forms Enrollment forms Product/Warranty Registrations Invoice forms
Target Industry Education Department (Govt) and Research firms Government Organizations, Research firms, etc Major Indian corporate, MNC etc Major Indian corporate, MNC from all sectors of the industry. The major qualification criteria for the lead will be CSR (Corporate Social Responsibility)
Product Order Forms Health Care Studies Insurance Claim Forms
Major Indian corporate and MNCs Education, Government, Health Departments etc Indian insurance companies
**Theses are just a section of services that would be carried out in the initial phase. But most of the initial work would come from the parent Wipro BPO. Promotion We would like to leverage the PRAYAAS initiative on the brand name of Wipro BPO. Now most of the promotional aspects would be in terms of discounts to our end clients. The reason being that the benefits of this new initiative have to be passed onto the client; we would promote this initiative as the one being very beneficial for the masses of that particular village. This is more of a relationship building exercise; hence we would undertake most of the promotional aspects in AP with the help of Azim Premji foundation and convincing the local VLE (Village level entrepreneur) of the benefits would be a challenge; but if the others are doing it so can we.
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Price ? As said earlier the benefits would be passed onto our clients. Keeping the quality at the top; the services garnered from these rural BPO’s would be priced competitively. ? The revenue sharing model with the VLE also has to be taken care of. Hence this aspect does play a very important role in making the initiative sustainable. ? But we have the financial muscle to take it all the way; hence we are confident enough that things would be worked out between the various stakeholders.
Plan for Implementation
The entire process would be established in two phases. The two phases would be known as Roll It and Scale It. The first phase is establishing the rural BPO’s across the southern state Andhra Pradesh only. Rationale for choosing Andhra Pradesh ? Good infrastructure facilities in terms of excellent internet connectivity. o As per the Rajiv Internet programme, the state government has established internet kiosks across 8600 villages across the entire state. The kiosks were established with the help of Bharat Electronics Limited (BEL). o Hence we could leverage on this infrastructure. ? Literacy rate is above the national average and a rise in the school enrollment ratio of 6 to 10 year olds from 73 to 85 percent.19 ? It is one of the leading states in the field of e-Governance. They have various projects running like the GramIT which have a very wide reach even into the hinterlands of Andhra Pradesh. ? The findings of a survey that actually compare urban and rural Andhra Pradesh in certain fundamental aspects of logical reasoning and analytical ability.
19
http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN.htm
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The Azim Premji foundation has a deep inroad into the educational front considering it signed a MOU with the AP government to provide elementary education in most of the villages in AP. This could be definitely used and leveraged upon and it would save most of our efforts in the training front even though it would act as a trickle down effect.20 The power scenario in the state is excellent as it is one of the very few states in India which is power surplus.
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Activities in Phase 1 Start outsourcing low skilled work such as data entry, scanning, formatting, etc. to the village BPO’s. Projects like data entry and bookings in which voice interaction is not required or is minimal would be taken in this initial phase. Projects like designing, digitization and others in which connectivity would not act as an impediment would be taken. We at Wipro believe that Prayaas holds tremendous potential especially at the lower end of the value chain and as times change move the Rural BPO’s higher up the value chain. Sections of the Indian BPO industry, especially those at the lower end of the value chain, are watching this experiment with some interest. But for Wipro BPO; it is not only an experiment but also an initiative.
Rationale for the alternative
? A big chunk of our revenue would come from high-volume, low-value services like data capture, data and document management, etc. The margins would be wafer thin.
20
http://www.azimpremjifoundation.org/html/ini_andhra.htm
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We would be able to give discounts to our customers. These discounts would be possible only because we would be operating in the rural areas. This would also help bring down employee costs. The rural areas; salaries may be up to 50 per cent lower than in the cities. Since the rural BPO’s would usually employ local candidates, the companies do not have to provide transport to the employees21. Moreover, real estate may be about five times less expensive. These two overheads alone would make a substantial difference to our cost competitiveness. There are reasons why we would succeed. Our BPO work and the range of services lend itself quite well to the village BPO model. We work predominantly in the healthcare and financial services sector, processing health insurance claims, airline bills and credit card applications. A big portion of the work is data capture or data entry. This is low-skill work that can be done by anyone who can read and write English. It is this that we want to move to the villages.
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We at Wipro BPO believe that we can successfully integrate “PRAYAAS” i.e. rural BPO’s into our current model by identifying the lowest level of process-driven tasks. Chunks of such tasks can be farmed out by providing sufficient training to the rural BPO workers, with quality checks done at the main center. The model can be improved over time for cost-effectiveness and efficiency. Phase 2 This would mainly deal with the scaling of the activities or operations and help the organization move up the value chain.
Contingency Plans
? As said earlier; the nature of the business model is itself brings out the contingency aspect of the initiative. The VLE would be able to take advantage of the infrastructure for other initiatives according to her discretion. We believe upholding the interest of the stakeholders is our prime objective.
21
http://www.aol.in/news/story/2007120622129019000001/index.html
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o The infrastructure could be utilized for long distance education programmes; supporting government mandated literacy programmes; and even outsourcing work from other BPO’s. ? Disaster Recovery Management o The hub based model with a nodal cluster would take care of the data back up and security. Another important aspect of security would also be effectively addressed. The cluster would also act as a liaison between the central office located at Hyderabad and the Rural BPO’s and the VLE. ? Infrastructure related problems o The portfolio of services to be outsourced has to take this aspect into consideration. The liaison mechanism between the VLE and the cluster would be able to have a plan in place; but other than that these are factors that could effectively employ technology as an enabler.
Conclusion
According to a report by Global Sourcing Now, the Global Knowledge Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion will be outsourced to India. It is believed, that out of the above USD 12 billion, up to 25% can be delivered from rural centers by 2010. As Urban India (the big cities) has seen the benefits of outsourcing, Rural India experiences large scale migration. The sourcing of services (both transactional and knowledge) from the rural centers would stem this migration. Much like the phenomenon of “Reverse Brain Drain” from the developed countries to countries like India and China, there could be a reverse flow, back from Urban India to Rural India (the place from where most Knowledge Professionals have really originated). That day would be the real day of reckoning for Rural India and then the true bridging of Rural / Urban IT divide would be achieved. Chances are that the day is not too far off. Rural India is well equipped to meet the challenges of this emerging sector and potentially has a very bright future in being the global hub for many, if not all, knowledge services. In future, core IT areas like Software Engineering, Networks and Systems, Infrastructure Management can be tapped too. We cannot afford to be blind to this opportunity. 34
Hence we believe that “PRAYAAS” is a step in the right direction.
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doc_906215780.doc