Global, local BPO biz not the best mix

NEW DELHI: Global and domestic BPO businesses are as different as chalk and cheese. In fact, the differences are so stark that companies hoping to share infrastructure for the twin operations (domestic and global) may find it better to separate the two rather than try and blend them.

Experts point out that the experiment of working international at night and domestic BPO operations in day from the same facility has not worked. How different the two businesses are is revealed by the numbers. Everything from billing rates and profit margins to employee salaries and quality of infrastructure is different. Mixing the two businesses and operating them from same premises is difficult.

The Department of Telecom had, in 2005, allowed BPOs with more than 50 seats to share infrastructure for both domestic and international call centre operations. While a domestic BPO worker’s salary starts at Rs 6,000 sometimes even lower, an international BPO worker gets Rs 10,000-12,000 per month.

While international BPO workers get food and transport facilities, domestic BPO workers don’t. Different HR policies for employees working in the same premises can be demotivating for some, and they may feel harshly treated.

Billing rates in both businesses are entirely different. Domestic BPO businesses carry billing rates almost one-fourth that of an international process. While a domestic client pays $450 (Rs 20,000) per seat per month, an international BPO pays $1,760-$2,000 per seat per month.

In hourly terms, the billing rates break down to $3-$4 per seat per hour in a domestic BPO versus $10-$12 per hour for an international BPO. So, an MNC bank outsourcing the same work for its India customers would pay a BPO $3 per hour versus $12 per hour that it would pay for serving its UK customers.

“The economics change completely with different profit margins. While domestic BPO businesses operate at an EBIDTA margin of 13-14%, an international BPO works at 18-20% margins. Simply put, about 4-5 seats in a domestic BPO will generate the kind of revenue generate by a single seat in an international BPO for the same duration,” says Aditya Gupta, President of 6,000 strong InfoVision, India’s third largest domestic BPO. Intellenet and Essar owned Aegis are the other two large domestic BPOs.

A company also cannot possibly provide the same kind of infrastructure — workstations, building, ratio to a domestic BPO. An international setup runs on a 200% power backup at any point of time. Maintaining this in a domestic BPO will hit overall margins.

Of course, SLAs with clients also come into play. Some international clients want exclusive seats, workstations, and even floors for themselves, regardless of the call flow. And the time difference over global locations is a major dampener.

The UK shifts start at about 12:30 pm IST ending at 0030 hours IST. The US shifts start from 7.30 pm and continue till 6:30 am India time. The Australian shift starts at 3:00 am and continues till 11:00 am India time. Thus, nowhere can a BPO find a 8 am - 8 pm time slot exclusively free for allocating seats for domestic operations.

International BPOs like HCL, IBM Daksh, MphasiS, HTMT have started dabbling in domestic BPO operations. All MNCs that outsource international call queries to India also have domestic BPO operations, which they keep captive while outsourcing to third parties.

Citibank, HSBC, GE Money, American Express have outsourced domestic BPO operations. ICICI and HDFC also have large domestic BPO operations, apart from mobile operators like Hutch, Airtel, Spice and BSNL. The domestic BPO industry is estimated to be over Rs 6,000 crore, growing at over 40% per annum.