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Global Reach
India’s large industrial conglomerates also saw the opportunity, launching firms such as Tata
Consultancy Services (TCS) and transforming an established Indian edible oils company,
Western India Vegetable Products, into Wipro Ltd. Economic reforms during the 1990s liberalized
foreign investment, IP protection, financial markets, and telecommunications practices,
while commercial development of the Internet brought still more players—from large transnationals
to startups—into the IT services market.
The Back Office Moves
Concurrent with the shift in software development, companies began looking at India as a location
for cutting back office costs. Cheap ubiquitous global telecommunications networks, along
with rising wages and real estate prices at home, were gradually moving back office functions—
customer service call centers, data processing, and records maintenance—out of city centers toward
the suburbs and eventually overseas.
British Airways and other airlines were among the first to relocate back offices to India in the
late 1980s; American Express also consolidated its Japan/Asia-Pacific back office operations in
New Delhi at that time. General Electric poached some of Amex’s top management in the 1990s
to launch GE Capital International Services (GECIS) in the New Delhi suburb Gurgaon in the
1990s. Raman Roy, who had set up Amex’s operation and then jumped to GE, left with some of
the GECIS team to form an independent BPO firm, Spectramind, that would eventually be acquired
by Wipro in 2002. In 2004, with help from private equity investors, GECIS was spun off
as a stand-alone BPO provider, Genpact. By 2002, all major Indian firms (Infosys, Wipro, HCL,
TCS, Satyam) offered BPO services, while Accenture and IBM provided BPO services through
their captive centers.
While IT and BPO services proceeded to grow along parallel tracks, outsourcing of business
processes to India was clearly an issue of comparative advantage—or, put more bluntly, cost
arbitrage—while outsourcing of IT services and software was as much about accessing a pool
of engineering talent quickly and easily that was not available in the U.S., either in the domestic
workforce or through the H-1B visa process.
In India, BPO centers provided relatively clean, well-paying, entry-level work for which training
could be provided on the job in an economy where most other industry sectors remained paralyzed
by bureaucracy and poor management.
For U.S. and other overseas companies desperate to control costs, BPO extended the efficiencies
obtained with contract manufacturing, into the realm of increasingly sophisticated businessrelated
services. From call centers and basic data processing, BPO has grown to include a wide
range of specialized contract services from preparation of legal documents, to processing of
insurance claims and loan applications, human resources management, remote medical diagnostic
services, architectural design drawings, computerized animation, and more.
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