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Strategies for entering the BPO sector in India

Can a small BPO exist in India ?

      BPO is the “in thing” in India today. Several companies operating in traditional sectors such as construction and telecom are getting itchy to start operations in the BPO sector. Also several entrepreneurs are testing the waters before committing resources.

       But now is the time to examine if a small independent BPO operation can be sustained in India

Recent trends

    The recent trends in the BPO sector point toward consolidations. The consolidation is taking place through two channels. The first channel is mergers and acquisitions. Big fish eats small fish. It is nothing new. Big companies take over small companies. We also notice that a big company is taken over by a bigger company. Reasons could be many.

        Two examples of companies being acquired are Daksh and Spectreamind. Daksh was doing very well and was acquired by IBM.  Similarly Spectramind was doing very well and was bought out by Wipro.

        The second channel of the consolidations is some of the small operators closing the doors. The reasons for this include manpower attrition, market expenses, cash flow problems, etc.

Can a small BPO company India survive independently

     It is a good question. The answer depends on several factors. 

             How small is the company? 

             What is the company’s exit strategy viz. IPO, being bough out, etc.

 Factors to Consider before Starting a Small BPO / CRM center:

The following factors need to be studied in detail:

     1. Clients          - identify the clients or potential clients and talk to them.  Only after you have enough confidence that they will use your facilities, start your activities to set up the company in India .

     2.  Location     - Place from where you want to operate matters a lot. Check the local government policies, real estate costs and the operational costs.  Many companies are moving to second level cities in India such as Puna, Gurgaon, etc.

     3. People          - Manpower requirements and the section of location go hand in hand. It is true that reasonably good people are available from the second level cities. But if you are thinking of starting a voice based CRM industry, it is preferable to stick to the major metros of India . The people in the metros are better in communication through the English language.

    4. Infrastructure – Keep the infrastructure costs low. Check whether the place you would like to operate from is covered by reliable Internet Service Providers (ISP). There should enough telecom infrastructures. Ensure that the location is easily accessible. This would cut the costs of transportation of the employees in odd times.

 5. Training – Have a tie up with a good training company that can train your recruits.

Problems you could face:

1. Getting good Manpower :

     Though there are so many English speaking graduates, you may find it a bit difficult to build a good team as you may not be able to pay on par with the big boys of BPO industry.

2. Be prepared for high attrition:   

         You are bound lose some employees with in 3 months. These people are probably the people who are employable, but do not like to work in BPO. Then some people may quit after few months. Some of these are due to the fact that the body shopper who brought in this candidate may poach him or her from you. They do this to place the candidate in another company in senior positions. These candidates may be lured away by fatter salary check from a bigger company.  You need to create a good value proposition for them so that they do not leave you.

3. Take over by bigger company:

     If your company is successful it may become the target for acquisition. This is a good thing. In case you want to sell you should go through the process of negotiations to get the best price. Close attention must be paid to revenue and profit metrics.

   4. Infrastructure 

Erratic power or telecom or Internet connection would cause problems to the BPO operation. Internet service providers generally provide certain service level agreements ( SLA ).  Make sure that the SLA provided by the provider is adequate for your needs.

     Unfortunately, you can not negotiate an SLA regarding the electric power supply. You need to arrange alternative power supply yourself or request the real estate provider to offer the premises with sufficient back up arrangements for power.

Finally, we need to address the biggest issue of all that is, the clients.

You should be able to address the following issues:

1. Do you have good contacts and the client is going to stick with you, presuming that you deliver reasonably well to his satisfaction? Being small, you need to provide some good value addition to the client’s process.

2. Do you have capacity to service more than one client at a time? This is required to ensure that you need to close if you lose your only client.

3. Keep in touch with the client on regular basis and build a good relationship, so that they come to you for all their new requirements.

4. Educate the client about what is possible and explore implementing new processes for the client.

 Beware of frauds:

      There are many companies / people hanging around projecting that they are authorized on behalf of a client to outsource a project. They may tell you that you need to set up a BPO unit with 25-30 seats and you will be given a data conversion project. They may demand upfront guarantee money to award the outsourcing contract.

     Once you pay the upfront money, they will simply vanish. Or keep rejecting your work by saying that your quality is not up to the standard and they can not pay you.  One operator even asked for bank guarantee and got it en-cashed in Singapore to show as if it is genuine and transferred money to Indian bank and went on rejecting the out put given by the suppliers. Finally he did the vanishing act.

 Survival Strategy

Never ever pay upfront guarantee fee to anybody.

Select a niche area, which has a good entry barrier to entry.

Provide good value addition to the client.

Strive to see that the client ‘needs’ you for all his work.

Provide a good environment for the employees and make them feel at home so that they may stick to you a longer time.