The decision of the US-based Lehman Brothers to stop using Wipro Spectramind as an outsourcing partner for technical help has spawned a number of questions on whether Indian companies have it in them to do BPO or plain vanilla call centre work.

India and outsourcing: Complete coverage

Interestingly, National Association of Software and Service Companies has pointed out that the BPO phenomenon has largely been a story scripted, directed and acted upon by 'insourcing companies' -- multinational companies that have set up their own captive call centres for work.

So is the BPO industry an outsourcing opportunity after all? Or is it more amenable to insourcing?

Interestingly, while IT services outsourcing and offshoring is okay with MNCs, when it comes to BPO it is a different story.

In the fast growing BFSI segment, MNC companies like GE, American Express, Standard Chartered, ANZ Grindlays, HSBC, ABN Amro, Fidelity and the World Bank have all been outsourcing their IT requirements to companies like TCS, Wipro, Infosys, Cognizant and Satyam but importantly have chosen to do their BPO themselves. And there seems little exception to this rule.

Other verticals like transportation, manufacturing and airlines companies like P&O NedLloyd, Conesco, Dell, Convergys, WNS, Ford, McKinsey, HP, Bechtel Axa have also set up their own BPO centres.

Another facet that needs to be noted is the fact that recent news on BPO troubles in India have all been voice related. Dell in Bangalore some weeks back and now Lehman with Wipro.

The ostensible reason according to industry sources for the Wipro-Lehman BPO deal going sour is the inability of the technical help desk at Wipro to handle calls related to Sybase - a database management system. India traditionally is Oracle country and the lack of enough trained people on

Sybase, which is the standard database used by Lehman, ensured that there were quality related issues.

"Indian IT companies must realise that BPO is a different ball game. It is not just adding a simple "es" to "IT". Indian IT companies have not managed shifts, they have not managed 2000 people handling a single account. These are new things and there will be hiccups on the way," a Bangalore-based IT industry veteran points out.

Nasscom numbers indicate that insourcing companies have more than doubled their presence compared to third-party vendors.

According to the report, insourcing companies grew from 710 companies to 1350 compared to third-party companies that grew from 769 to 985, for the period 2002-03.

Although the absolute numbers seem high even for third-party companies, market sources peg the revenue contribution of captive units to be over 65 per cent of the export revenue, compared to the less than 35 per cent by the third-party ones.

Analysts point out that BPO in India will tend to mirror the growth of software services. "The BPO model has to be validated by MNCs and then only will we see large scale deals going through," a BPO analyst points out.