Big churn awaits BPOs

Top Indian BPO start-ups may cease to exist

As many as 70 per cent of the top 15 Indian business process outsourcing (BPO) start-ups will cease to exist in the coming months, analyst firm Gartner has said.

"By the end of 2005, 70 per cent of the top 15 Indian-owned BPO start-ups offering customer call centre services will be acquired, merged or marginalised," it said.

Gartner said despite the hype, only a small fraction of customer service outsourcing will be done at offshore locations.

"Offshore call centres, offshore customer service outsourcing only represents a tiny fraction of the market. In 2005, it is expected to be less than 2 per cent of the total and will grow only to less than 5 per cent in 2007," it added.

The worldwide market for customer service outsourcing is set to grow from $8.4 billion in 2004 to $12.2 billion in 2007.

Gartner also predicted that through 2007, 80 per cent of the organisations outsourcing customer service and support contact centres with the primary goal of reducing cost, will fail.

Upto 2008, 60 per cent of the organisations outsourcing parts of the customer-facing process will encounter customer defections and hidden costs that outweigh any potential savings derived from outsourcing, it said.

"Our research shows the existence of significant risks associated with outsourcing customer service," Gartner's Research Director Alexa Bona said.

Companies outsourcing successfully can achieve cost savings of 25-30 per cent. However, Bona warned a poorly managed model can reduce the quality of customer experience, dilute the brand values of the company and fail to deliver cost savings.

Most companies neglect the management of the customer service experience and often lock the organisation into long-term outsourcing contracts without conducting appropriate pilot testing, she added.

She also pointed out the risks related to knowledge management and retention, accentuated by the fact that customer service outsourcing providers have staff attrition rates of 70 to 80 per cent, compared with an average of 19 to 25 per cent in in-house contact centres.

There are benefits to be gained from outsourcing non-core processes, but rewards would not be instant and organisations should adopt a controlled and phased approach, Gartner said.

---

BPO tale

By the end of 2005, 70 per cent of the top 15 Indian-owned BPO start-ups offering customer call centre services will be acquired, merged or marginalised

Only a small fraction of customer service outsourcing will be done at offshore locations

The worldwide market for customer service outsourcing is set to grow from $8.4 billion in 2004 to $12.2 billion in 2007