Indian BPO cos are yet to wake up to this new opportunity

According to Gartner, HR-based BPO revenue is expected to grow from $39 billion in 2002 to $51 billion in 2004 and would represent 39 percent of all BPO revenues. Ironically, Indian BPO companies do not seem to be enamored by this opportunity, at least till now. Otherwise, how would one explain the fact that HR does not even feature in the fairly diverse services portfolio of bpOrbit Top 15 companies.

It is not that India doesn’t have the capability. In fact, a lot of work has already come to India through MNC BPOs like Exult, Accenture and Efunds. ADP, another big name in payroll and employee services, is on its way to India, according to industry sources.

Interestingly, this is one area where many Indian companies have tried to exploit the Indian domestic market opportunities. Companies like CrossDomain and India-Life Hewitt, who have done fairly well in domestic market, are of course, now eager to tap the offshore opportunity. The only exception is Chennai-based Secova eServices, which is looking only at the offshore market. But Secova was set up only in July 2003.

A major reason for the absence of HR BPO companies could be a lack of domain expertise.

As such, the biggest challenge faced by an offshore HR BPO company today is the lack of track record and credibility backed by client references.  Besides, lack of in-depth domain knowledge coupled with lack of knowledge about specific legal, regulatory and compliance structures in the HR space in the US and UK make things difficult for potential Indian HR BPO service providers. Being a horizontal offering the complexity index of HR Operations is high and would stand at 6.5 on a scale of 1–10, as compared to CRM/claim processing with a 2–3 rank. HR processes also occupy a higher position in the value chain. The ‘HR operations’ of any company is unique and handling them demands high levels of customization. All this has meant that HR outsourcing has largely been untapped.  

However, the silver lining here is that most BPO companies do agree that HR-related business processes do offer big-time opportunities. In fact, some have either got into the HR BPO space (eFunds) or are seriously exploring it (Infowavz). And the ones like India-Life Hewitt and CrossDomain who have built up expertise servicing the domestic market are now looking at the offshore market. Cross Domain is targeting revenues of $ 2.5–3 million from North America alone in 2004.

It is interesting to note that HR offers opportunities beyond the US and UK. For example, India Life Hewitt is actively scouting for business in the Asia-Pacific region. In April this year, the company acquired a majority stake in Singapore-based Embrace 2002 Pte Ltd with the objective of building capabilities to offer a pan-Asia Pacific solution to large corporations besides expanding to 12 other countries in the region. The acquisition added customers like Singapore Technologies Group, BengQ, and Nokia.

Payroll and benefits services are the most popular in HR BPO and are driving the growth of the market. Companies outsourcing HR processes expect to increase their investment in HR outsourcing in the next 24 months. One of the main drivers for this growth is the growing perception among enterprises that HR BPO is less risky and offers good value for money. However, most are likely to outsource for a short-term in the beginning before going for long-term engagements.

The opportunity for India lies in payrolls- and benefits-processing.  This is because these processes are HR intensive and at the same time, don’t require in-depth knowledge/tracking of legal and regulatory issues, that change from time to time. There are also strong opportunities in the voice-based HR BPO work (pre-employment screening work such as reference checks, security checks and background checks).