Software growth may be down, but the growth in business process outsourcing is breathtaking, and Bangalore, which is behind Delhi and Mumbai in terms of volumes, is rapidly making up through accessing more and more higher-end work.

"In two years, the work force in the BPO sector has gone up 10 times to 200,000 and this is barely scratching the surface," says K Ganesh, one of the BPO pioneers, confident that 50 per cent growth will continue over the next few years.

Ganesh started and ran Customer.Asset as its CEO till it was acquired by ICICI and rechristened ICICI OneoSurce as its BPO arm.

The company's expansion is nothing short of phenomenal. Starting in April 2000, it ended the first year with a staff strength of 200, which went up to 700 in March 2002 and 2,500 in March 2003.

It is expected to touch 3,200 by September 2003 and around 20,000 in less than three years, by March 2006.

It is the same with the multinationals, but all are not willing to talk about it for fear of a backlash at home against outsourcing of jobs to foreign countries.

Wipro proudly announced it was taking on work from Microsoft, but promptly shut up. A leading global application infrastructure company has also decided to outsource substantial operations to India, but is not announcing it right now.

Several processes are running simultaneously -- new companies are coming in, those which had come in not so long ago are rapidly upscaling, those which started with the presence of a third party are now setting up their own centres, and more and more complex work is being outsourced to India.

Says an industry representative: "The next boom will be in focused play, signifying that the sector is quickly moving beyond the undifferentiated call centre business."

Novellus, which provides high-end technical support to semi-conductor companies, wants to expand within a year of coming to India.

Sykes, one of the largest US call centre companies, is also planning to raise its staff strength from 200 to 1,200 in a year's time.

AOL is planning to increase its staff to 3,000 and Cognizant, which is registered in the US but run in India, is also getting into BPO and setting up operations.

Dell and Prudential are examples of companies with both third-party as well as own operations. Says an industry source: "Companies come for one type of work, discover the extent of the talent pool here, and start doing higher-end work."

ICICI OneSource has been going through the same process with its clients. An insurance client began by sending e-mail quotations, added inbound sales and most recently entered into customer service.

An international bank started two years ago with a single application using nine people -- it now has 150 people handling eight processes.

Ganesh, now president (contact centre business) of ICICI OneSource, points out that of the 1,800 people who joined the company last year, as many as 1,400 are engaged in upscaled work.

The journey for the sector in the past two years has been a transition from the proof-of-concept stage to the ramp-up stage and moving onto evolving a standardised model.

The question then was, GE and Amex can do it, but can Indian companies deliver similarly, and most important, can they upscale?

"Today, for many we handle an entire process out of India. There is no back up anywhere. For an insurance company, we take all their calls after 5 pm (their time). For a credit card company, we handle an entire process, nobody else has the data," says Ganesh.

As a result, contracts are now annuity-based and not based on a particular project. "This gives predictability to revenue and stickiness to customers. In such a scenario, when long-term business relationships are being built, prices have a lower weightage," said Ganesh.

"Margins are good, but not improving. The market is yet to mature, so prices have not settled down," he added.

There is a peculiar contradiction on the prices front. There is no dearth of business to be had, but still there are instances of undercutting.

"This is because a lot of new players are going all out to acquire their first few customers who will give them a track record for subsequent marketing," he points out.

In the current scenario, when large investments are being undertaken and outsourcers look for established names and respectable balance sheets to raise their comfort levels, start-ups have begun to disappear -- Customer.

Asset followed by the takeover of Spectramind by Wipro. After the takeover of Customer.Asset by ICICI, new financial clients have been acquired.

Indian BPO will keep growing at a fast pace because there is no shortage of skills. There may, however, be a shortage of middle managers.

Indian BPO only faces competition from the Philippines' outbound tele-marketing business because of the country's cultural proximity to America. However, there is a serious shortage of middle managers in the Philippines.

Ganesh also points out to a significant change in the attitude of US consumers. They have understood the logic of outsourcing and how it benefits them, he adds.

The need for agents to adopt American names is going down and customers who call in often chat them up, wanting to know where they are operating from.