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#NASSCOMBPM 2017: The Indian BPM industry graduates from biryani to bhuna, but needs to stop celebrating the past

October 15, 2017 | Phil Fersht

Rohit Kapoor (right), Chair of the NASSCOMBPM Council, hosts his first summit in Bangalore

It was good times revisited in Bangalore last week, where the Indian-heritage BPM (BPO) services firms gathered for their annual reality check, courtesy of NASSCOM, India's leading IT and BPM services body.  We were pleased to get the chance to meet with many of the industry's finest and have some frank exchanges on what this industry must do to stay relevant and keep eking out a growth curve. 

And, similar to the recent HfS summit in Chicago, the conversation has moved rapidly along in recent months with a genuine buzz of excitement about the future.  In short, most folks are stepping out of the comfort zone and attempting to embrace the emergence of technology-driven value levers as part of the very fabric of the future of business process services. However we look at this, we're becoming a data services industry that supports the inexorable enterprise drive towards Digital Operations

The NASSCOM folks fondly remember how we once described the Indian-heritage BPM (BPO) industry rather like a "biryani" - (a mixed rice dish comprised of many different ingredients that also has many different regional variants across India).  At that time, three years ago, we called out all the ingredients the industry needed to embrace to reach that next level, namely partnerships, platform plays and RPA.  Fast-forwarding to last week's BPM bonanza in Bangalore, we can proclaim that a pretty tasty biryani is being regularly served up, and now we are enjoying one of my favorite dishes, the "bhuna". Bhuna is a cooking process where spices are gently fried in plenty of oil to bring out their flavor. The Indian curry dish "bhuna" is an extension of that process where meat is added to the spices and then cooked in its own juices which results in deep strong flavours but very little sauce.

Much the same can be said of the current state of the Indian-flavored BPM industry, where the baseline delivery of process services have been nicely spiced with disciplined execution, competitive pricing, RPA capabilities and process standardization, and the added meat is providing new levers of value with emerging intelligent automation and analytics capabilities.  The missing potatoes are the added element of risk that BPM services providers need to take to fix the data underbellies of their clients so they can truly start to benefit from the fruits of having digital operations to support their clients.  We’ve reached the era where real data transformation is the missing ingredient that can really take this industry to the next level.

Having met with most of the key BPM service providers with key Indian delivery ties at the annual NASSCOMBPM summit in Bangalore, these were my takeaways:

The mood is upbeat as the Indian BPM leaders are (largely) facing up to reality and embrace the opportunity.  Over the last couple of years at the annual NASSCOM reality check, we witnessed heated arguments regarding the viability of the long-term viability of BPM.  Several service provider leaders have defended the value of the traditional labor arbitrage model, while others have called for a reality check that the old model is dead and we need to conform to a very different world of outcome-driven, automation-centric models that aggressively cannibalize obsolete engagements. In short, the underlying feeling has been one of doom and gloom, and we're simply waiting for this impending nose-dive for the industry. This year, most people seem to have taken a crash-course in reality and have realized the answer lies somewhere in-between - the old model provided a valuable lever to drive out costs and tee up the next phase of engagements - and the current crop of service providers should be smart enough to invest with clients to derive value out of several additional value levers, in addition to providing affordable, global talent.  Yes, it is possible to advance the traditional labor-driven model into the digital age without making too much of a sacrifice on the profit margins.  

The mid-tier service providers are showing the way.  As the large FTE monster deals dry up and we're left with smaller engagements that require less staff, more automation and better analytics-driven outcomes - and most of the mega providers simply cannot afford to scale-down to be competitive.  The likes of EXL, WNS, CSS Corp, Sutherland, Concentrix, Hexaware et al are all competing for the smaller, tastier deals on the table that require real attention and focus.  Plus most clients are now eager to explore relationships with smaller competitors who roll out of the red carpet for them... the crux of the issue here is that the mega-deals of the past are not coming back, and if the large providers cannot accept this, they are going to be left defending that they have for the next decade, as opposed to growing their businesses and investing in their capabilities along the way.  This is going to get worse before it gets better - and everyone knows it.

Most of the BPM providers are still confusing everyone with their "strategies".  I challenged nearly every service provider to articulate their value proposition in three bullet points.  They all failed miserably.  Being all things to all people is the recipe for bland failure in this attention-deprived world, and spinning the same marketing mush as everyone else has become the disease of our industry for the past couple of decades.  It's time to crush the vernacular and talk openly about what we all stand for.  Sadly, I do not expect anything to change soon...

This industry desperately needs new blood.  As per the last 10+ years I have been coming to this event, we are subjected to many of the same folks spinning the same old stories and viewpoints.  We need to meet more of the emerging talent and hear from some of the newer thinkers.  They do exist and need to be blooded... otherwise, we come across like an industry without a succession plan.

There is a chasm between BPM and IT services, which is a real missed opportunity for India.  The divide between the process people and the tech people in India seems to be greater than ever, at a time when automation and digitalization are closing that gap.  India needs to embrace hybrid delivery and present a united front between BPM and IT at its flagship events.  The RPA and AI discussion at the BPM level is so much more real and actionable than when the techies discuss it... As we discussed here, the worlds of software, business operations and services have always been chasms apart – different mindsets, vernaculars, conversations, ideas of what constitutes value – and vastly different cultures.  NASSCOM needs to help bring together these mindsets and drive the conversation forward as a unified industry, not several soloed sub-industries.  

There is a lack of exciting up-and-coming digitally-centric BPM firms appearing in an industry in real need of some disruption.  While the mid-tier BPM firms are clearly enjoying something of a modest renaissance period, there really isn't much coming up behind them - at least they are not on display ay India's flagship BPM summit.  Where are the Indian digital pureplays and fintechs?  Sure, we met some exciting Indian RPA software firms, such as Intellibot and Option 3, but there seems to be precious few emerging human-plus-tech process delivery firms emerging to get us excited.  We need these firms to be wheeled out, wrapped in cotton wool and showcased as the future of Indian services.

Bottom-line: NASSCOM needs to deliver a stronger message of reality and guidance to support its industry

While NASSCOM has performed an amazing job over the years putting India on the IT and BPM services map and providing a vehicle for networking and information sharing, the message today is largely avoiding the harsh realities the industry is facing. The industry is going to suffer some labor shrinkage over the next few years (we predict a 450,000 decline by 2022 in India's IT/BPM service industry alone by 2022).  NASSCOM needs to be at the forefront of recreating the next phase of India's services capability and confronting the legacy model, not celebrating what's left of its glorious past but embracing its less certain, but high-potential future.

Posted in: Business Process Outsourcing (BPO)

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1 Comments

4 Comments

  1. Warren
    Posted Oct 16, 2017 01:38 PM | Permalink Reply

    Loved this write-up Phil. You capture the industry very well!

  2. Ramesh
    Posted Oct 16, 2017 02:13 PM | Permalink Reply

    Brilliant piece, Phil!

    You're right on with the lack of new blood. We need more of the emerging leadership present at these events to show us the new way,

    Ramesh

  3. Peter Smith
    Posted Oct 16, 2017 03:15 PM | Permalink Reply

    Phil - I do like a good biryani, so not sure why a bhuna is so much better =)

    Good takeaways, and I agree we need to see more of these up-and-coming firms who can disrupt the FTE model. Otherwise, it's not such a desperate market as we initially feared.

  4. sandeep gupta
    | Posted Oct 21, 2017 03:03 AM | Permalink Reply

    Phil, this is excellent guidance for the Industry. As you know these are very nimble leaders who can move very fast when they want too. What is making them circumspect is the dilemma of cannibalizing existing revenues if they move too fast with tech such RPA. Because they are caught up with negotiating gain-share with clients instead of a enabling transparent pass-through of benefits to the client, I don't believe they will be the fastest adopters of new technology except when it comes to new getting new business.

    The same goes for collaboration between IT and BPO. Usually such collaboration should result in increased productivity through automation and a lesser need for billable headcount, which is not good news for service providers

    As far as access to the data underbelly is concerned, that runs into data boundaries that are drawn to prevent over - exposure of data to external vendors for data privacy and regulatory considerations. With GDPR going live next May 18, data controllers will turn even more cautious and risk averse.

    For all these reasons, I believe that the next few years will be the age of India based captive centers - as a client, you get the offshoring advantage in costs, and access to expertise etc etc but you manage all the digital technologies in-house . That way there is a clear line of sight to the productivity benefits of these technologies and any commercial conflict of interest that a third party may have is prevented.

    Best regards,

    Sandeep Gupta Epic Sourcing Management LLP India Captive Centers - set up and optimization

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