What is the biggest challenge for the BPO industry in India today? Well, it is a no brainer: Attrition!

The business process outsourcing (BPO) industry in the country which is expected to employ around one million people by 2008 is facing the challenge of finding quality human resources given the current attrition rate of around 50 percent. Analysts say attrition rates vary by 20%-40% in some firms, while the top ones averages at least 15%. Nasscom in a report said the outsourcing industry was expected to face a shortage of 262,000 professionals by 2012. The size of the Indian BPO market is likely to be around $9-12 billion by 2006 and will employ around 400,000 people, ICRA said in its Indian BPO industry report. Mercer India said the industry should look beyond the traditional areas of recruitment and some thought should be given to employ physically challenged people and housewives. The reasons for the high rate of attrition was due to various factors like salary, work timings, other career options, adding that there is always the danger of costs increasing while billing rates decline. With 245,100 people employed at the end of March 31, 2004 against 171,100 last year, the industry witnessed a hiring growth rate of about 40-42 percent. On the hiring front, the industry absorbed about 74,000 people in 2003 despite the attrition rate of 45-50 percent being a matter of concern. Attrition rates in IT-enabled business process outsourcing sector have come down from the 30-33 per cent being witnessed of late to about 25 per cent now, according to statistics compiled by the National Human Resource Development Network.

Attrition rates US Australia Europe India Global Average

% 42% 29% 24% 18% 24%

*Source-Times News New York (2003) If you compare attrition rates for a Voice and Non-voice process, then attrition rates are significantly lower in a nonvoice process. As the industry moves up the value chain and becomes a full-scale BPO player, attrition rates will further decrease. For BPO service providers, moving up the value chain is critical, given the attrition rates in the industry, which are on an average higher in low value-added segments (in call centres) as compared to higher value-added segments like engineering. It will not be possible for the industry to arrive at a blanket agreement on poaching but bilateral agreements between companies are being signed. Basic norms are being put in place and code of ethics is being stressed upon by industry. Companies are being encouraged to adopt responsible behavior in order to ensure that the industry does not become a victim of its own actions. Industry needs to go aggressive but not cannibalistic. In order to ensure a consistent flow of trained manpower in the future, the industry needs to work with the government to introduce courses at a school and college level, which are in line with the requirements of the ITES-

BPO industry. India has one of the largest pool of English speaking graduate workforce. The challenge for the industry is not in employment but employability. The industry is also hiring professionals from outside the industry in order to meet its steady supply of manpower. Honest corporate managers will tell you that to make offshoring work, you need at least a 300% to 400% wage spread between American software writers, engineers, accountants, and call-center employees and their Indian and Chinese counterparts. Labor costs have to be very, very low overseas -- not just lower -- to compensate for timeshifting, managing over such long distances, and decreased productivity. High attrition rate, price wars, poor infrastructure and lack of data protection laws could derail India's booming outsourcing industry. This seemed to sum up the views of BPO fraternity at the Nasscom summit here. Tackling Attrition Head-On Industry experts feel, as the industry was still in its nascent strategy there was lot of strategies available to reverse this trend and make it an attractive employer. NASSCOM ITES-BPO forum has identified HR as one of the key challenges of the ITES-BPO industry and has formed a special task force to address short-term challenges such as Attrition and also long-term challenges such as ensuring availability of a skilled talent pool. To arrest this trend, companies can look into various options like good rewards, bonding programme, flexible working hours and stronger career path. With attrition rates ranging between 30-60 percent in the BPO industry, HR specialists feel that a scientific and analytical approach should be implemented. The tremendous turnover rate is undeniably one of the main problems faced by the BPO industry globally. HR specialists at the Nasscom 2004 summit brainstormed on various approaches to handle this bugbear- either declare war on attrition and tackle it head on, or adopt a more scientific analytical approach. Pay cheques alone are not enough to retain employees. Management also needs to consider other aspects like secure career, benefits, perks and communication. The attrition battle could be won by focusing on retention, making work a fun place, having education and ongoing learning for the workforce and treating applicants and employees in the same way as one treats customers. Companies need to go in for a diverse workforce, which does not only mean race, gender diversity, but also include age, experience and perspectives. Diversity in turn results in innovation and success. The 80:20 rule also applies to recruitment, she quipped, since studies showed that 80 percent of the company's profit comes from the efforts of 20 percent of the employees. So BPOs need to focus on roles, which have the most important impact. According to experts, the cost of attrition is 1.5 times the annual salary. Age should not be a barrier for training employees and could in fact bring in more stability to the company.

We attempt here to share some knowledge which could be useful to the BPO community. We will list questions even if we don't have answers for them. Hopefully, one of you will respond to those queries. Please do feel free to correct/improve the knowledgeBase. 1. What is the job growth in the BPO sector when compared to other sectors? Industry Telecom New Employees 10,000 Period January-December 2002

IT Enabled Services Software Services Retailing/Franchising 2.

50,000 30,000 35,000

April 2002 - March 2003 April 2002 - March 2003 April 2002 - March 2003

What skills are required to work in each of the verticals? SEGMENTS Call center Remote customer interaction Date search, Integration Human Resource Services Remote education Engineering and design Translation, medical transcription and Localisation Animation Finance and accounting Market Research Network Consultancy and management SKILLS Good communication and language skills, accent understanding team leadership, basic computing skills Language and accent understanding Computing, language and analytical skills Country specific HR policies, rules and regulations Subject knowledge, computing and language skills Technical and engineering design and computing skills Language understanding, basic computing (word processing knowledge) and understanding of various medical terminologies Drawing and creative skills, computer graphic skills International/ country specific accounting rules Understanding statistical sales and marketing concepts Understanding different network configurations and support equipment, technical/ computing skills

3.

4.

Segment wise break-up of the new Jobs in 2005 o IT & IT Services - An estimated 70,000 new Jobs expected in 2005. Plus there will be additional hiring to replace industry attrition that is around 25% o BPO and Outsourcing services - Around 1,25,000 new Jobs expected in 2005. o Retailing and Lifestyle - It will create close to 25,000 Jobs directly and more than twice the number indirectly. o Biotechnology - It is expected to create around 5,000 - 7,000 highly skilled jobs. What are the current salaries in the BPO world in India? o Customer Care Representatives [CSRs]: Rs 8,000 - Rs 15,000 per month o Team Leaders: Rs 17,000 - Rs 26,000 per month o Managers: Rs 3 lacs - Rs 5.5 lacs per annum o Training Heads: Rs 8 lacs - Rs 12 lacs per annum o Training Managers: Rs 5 lacs - Rs 8 lacs per annum o Trainers: Rs 2 lacs - Rs 5 lacs per annum Specialized ITeS professionals who posses MBA, BE, B.Tech, C.A. [CPA] and other expert qualifications or experience may be paid higher salaries depending upon the expertise required for the desired work profile and their level of experience. Frankly, this doesn't apply to just BPO field but to all fields. Besides the salary employees are paid incentives depending upon attendance regualrity, achievement of targets. Don't be surprised if the incentive exceeds the salary! Note: Rs 1 lac = Rs 100,000 This was last modified on June 21, 2004. We observed that only the CSR and Team Leader salaries are changing.

5.

What is the cost of accent training? The training costs for an employee in a call centre are quite prohibitive, ranging from Rs 25,000 to Rs 50,000 for 2-5 months session. For large size call centres that have high attrition it makes sense to have an inhouse trainer [but what if the trainer itself leaves ;-) ?]. We strongly feel neutral accent will become more popular than American/British accent. However, the need for American/British culture training will always be there.

6.

Do you have any statistics of the number of employees in Indian call centres? Company EXL Spectramind Daksh WNS vCustomer Tracmail HCL e-serve Epicentre ICICI OneSource GTL Captive Centres GE Capital e-serve International eFunds HSBC Healthscribe India American Express Sitel India Global e:Business Operations (HP) Axa Global Number of Employees 4,500 2,600 2,000 1,600 1,500 1,365 870 700 650 650 Number of Employees 12,000 3,149 1,646 1,128 1,126 979 584 475 350

Source: Nasscom ITES directory September 2002

Source: Nasscom ITES directory September 2002 8. Do you have any statistics regarding number of employees Vs revenues sector wise in India? Growth trend of the outsourcing industry Service Area Customer care Finance HR Payment service 2002-03 Employment Revenue (in $m) 65,000 24,000 2,100 11,000 810 510 45 210

Administration Content development Total Source: Nasscom 9.

25,000 44,000 1,71,100

310 465 2,350

Do you have any statistics/projections of employment vs revenues? Click here to see the statistics

10. What is the sex ratio in the ITeS sector? As of March 2003, the male:female ratio is 35:65. 11. Do you have any Voice Vs Non-Voice statistics? Voice Vs Non-Voice Company Wipro Spectramind Daksh eServices OfficeTiger HCL Technologies BPO ICICI OneSource World Network Services exl Service.com MsourcE Hinduja TMT Tracmail Progeon Revenues Employees Voice: Non-Voice ($ Million) 41 35 25 ? ? 35 28 20 24 11 4.4 5,000 4,000 1,000 2,346 2,175 2,500 2,300 3,162 1,400 1,000 685 80:20 70:30 0:100 90:10 70:30 65:35 75:25 93:7 66:34 50:50 30:70

Source: Business World (4 August 2003) 12. How do the salaries of voice vs non-voice employees compare? Typically an employee in a voice call center costs about 15% more than in a non-voice center. 13. Are there any metrics related to communication skills in India? Following is the performance of graduates in the MeritTrac Spoken English Test National Index Of Communication Skills Region East North South Voice Clarity 84.80% 52.79% 94.27% Accent Neutrality 33.60% 35.28% 13.29% Fluency 29.20% 32.36% 22.71% Grammar 23.00% 33.69% 13.78% National Index 85 60 38

West All India Tier I Cities Tier II Cities

71.73% 90.91% 86.71% 94.86%

23.86% 15.71% 21.66% 10.12%

23.71% 23.43% 27.74% 19.39%

21.43% 15.41% 20.40% 10.73%

44 41 48 25

Overall throughput for graudates: 10 per cent Source: MeritTrac 14. What is the attrition rate in the ITeS sector? BPOs in India are expected to employ around one million people by 2008, but the challenger is to find quality human resources given the current attrition rate of around 35-40%. Currently it is about 35% in non-voice and 45% in voice call centers. However what the number don't show is that more than 60% of those who leave a particular BPO do not leave for a competitor, but leave the industry as a whole. Here lies the danger for this sector and the challenge for HR consultants. Agents want to become team leaders. Team leaders want to become supervisors. Supervisors wants the job of the CEO. At an attrition rate of 40%, the cost of attrition in the industry is 1.5 times the annual salary. Some of the reasons could be o o o o Many see this space to be an Internet sweatshop where all that the employees are required to do is just mechanically input numbers into excel sheets or, worse still, answer phone calls inthe same tone and repeat the same lines at least 100 times a day/night. People who join a BPO usually do so to make a 'quick' buck. They are bound to quit because sooner or later they will find something more attractive in terms of the job profile and/or pay. The industry has concentrated on hiring young, dynamic and these are looking for more than just a job. Talent in this space is generally overlooked, which leaves the deserving few disgruntled with top management and hence fosters attrition.

To fix this problem BPO firms are trying to solve this big problem By hiring mature talent [i.e. people over 35 years in age]. HR must realise that fatter pay cheques can never be a sure-shot way to retain employees. More important aspects like a secure career, benefits, perks and communication cannot be overlooked at any level. o Employee rentention must be the focus, which means that talent must be recognized and suitably rewarded. o Hire outstation candidates (from small towns) and provided them with shared accomodation. o Offer management diplomas and MBA courses. o Only 5 out of 150 employees become team leaders in a year, hence cash incentives is one way to keep the employees happy. Daksh shells out about Rs 4,000 bonus per onth to almost 85% of its workforce. o Use psychometric tests to get people who can work at night and handle the monotony. o BPO must concentrate on becoming an 'employer of choice'. A comprehensive process framework and access to proper infrastructure in the work place goes a long way in retaining employees, as a congenial work environment is critical. 15. Do you have any statistics that compare Attrition Rates across industries? Sr. Sector 0-3 4-7 8-12 13+ % change Expected o o

No Pharma & Chemicals Manufacturing Financial Services Hospitality Ad & Media BPO Automobile Banking Infrastructure IT & Telecom

years

years

years

years

from 2006 to 2007 -5.00% 5.00%

increase in 2008 6.00% -3.50%

1 2 3 4 5 6 7 8 9 10 11

25.00% 8.58% 20.00% 35.00% 40.00% 40.00% 7.00% 10.00% 16.00% 32.00%

10.00% 2.46% 20.00% 25.00% 35.00% 30.00% 3.00% 15.00% 5.00% 11.00% 25.00%

5.00% 2.46% 20.00% 20.00% 20.00% 20.00% 2.00% 20.00% 2.50% 7.00% 10.00%

2.00% 3.00% 20.00% 7.50% 15.00% 10.00% 2.00% 12.00% 2.50% 11.00% 5.00%

13.00% 17.00% No visible 5.00% 2.00% 9.00% 5.00%

20.00% 22.00% 14.00% 6.00% 2.00% 20.00% 9.00%

Auto Component 12.00%

Source: Emmay HR / BusinessWorld, 4 Feb 2008 17. How good is the quality of English in India? According to McKinsey, apart from Mumbai, Delhi and Bangalore, the quality of graduates applying for jobs in the ITeS industry needs to improve. India produces over 100,000 graduates every year but the quality of English is not very good in small towns. Our view: Needless to say this report is worrysome. We sincerely hope the fanatics in the political circles stop hindering English education in India. This kind of policy will only encourage clients to move to Philippines, Ireland and Singapore. 18. Any details about English Proficiency in India? English Proficiency City Chennai Delhi Kolkata Mumbai Clarity Accent Fluency Grammar All aspects 14% 28% 28% 21% 17% 16% 26% 27% 21% 18% 13% 28% 29% 21% 16% 9% 12% 16% 13% 11% 42% 45% 27% 23% Bangalore 37%

19. (Source: MeritTrac's recent country-wide study to evaluate Indian English Speakers. Over 5,000 people across five cities in the country were part of the sample.) o Nasscom's Mentorship for SMEs - The Mentorship Programme, which is a key pillar of the Emerging Companies Forum initiative, aims to help the leadership of SME companies develop a keen sense of what needs to be done, to take the venture to the next level. o TiE - Most chapters of TiE have a mentoring session. Charter Members help startups with all the guidance they need.