Patrick Snowball, executive director of Aviva UK, flew down to Mumbai, India in February to accept an award from the Indian software industry. But India's National Association of Software and Service Companies (NASSCOM) wasn't lauding the insurance giant for the jobs it was moving to outsourcing firms on the subcontinent. Instead, Aviva was recognized for taking jobs back.The previous month, Aviva transferred 1,600 employees in Bangalore from an outsourcing vendor, 24/7 Customer, to Aviva Global Services. It was the first move of its kind and size in the Indian business processing outsourcing industry, NASSCOM said.

When a vendor creates a call center for a company, runs it for a certain period of time, then hands the operation over to the company, it's called the build-operate-transfer (BOT) model. Typically, a company moving operations to India would build the operation from scratch, or subcontract the operation to an outsourcing vendor, or some combination of the two.

The BOT approach lets a company get going in India faster, Aviva executives said at the ceremony in Mumbai.

That helps Aviva, and its Norwich Union insurance subsidiary, adapt to change, Snowball said when he accepted the award.

"Our excellent operations in India are critical for us to ensure we maintain a competitive advantage," he said. Aviva has worked with three vendors under the BOT model: EXL, WNS and 24/7 Customer. Over the course of the year, 5,000 employees will be transferred from those vendors to Aviva's own offshore division. The Bangalore facility was just the first to be transferred. Later this year, the company will transfer facilities in Sri Lanka to its control, and in Pune.

"Several other players have been waiting and watching to see how the BOT model works," said NASSCOM president Kiran Karnik.

Aviva's outsourcing provider, Los Gatos, Calif.-based 24/7 Customer, is a BPO company with offices in the United States and the United Kingdom and outsourcing facilities in India, the Philippines and Guatemala. The company employs 8,500 BPO personnel.

Aviva plc is the world's fifth-largest insurance group and the U.K.'s largest insurance service provider. It provides life and pension products to Europe, with substantial positions in other markets around the world. Its subsidiary, Norwich Union, is the U.K.'s largest general insurer with a market share of around 14% and a focus on insurance for individuals and small businesses.

Aviva has been working with 24/7 Customer since 2003, but the dedicated Bangalore facility, with 1,600 seats, was opened in December 2005.

A dedicated facility in Chennai followed shortly after, with 1,800 seats launched in March 2006. John Hodgson, executive director of Aviva's Norwich Union insurance subsidiary, originated the project.

"We are strongly committed to our core values and to having our own staff," Hodgson says. However, to derive the most benefit from being in India, the company had to ramp up staff quickly, he said. Building a new facility from scratch, even with the help of experts, would have created more difficulties, he said.

"We could have gone out and recruited our own management staff," Hodgson says, "but we wanted to be certain that we would go into a working environment, rather than a theoretical environment designed by a consultant."

So he looked for a partner that had established facilities and shared Aviva's cultural values, he says, adding that Aviva got more than just a ready-to-go call center.

"They brought a new degree of process understanding to our business, such as Lean and Six Sigma," Hodgson says, referring to management strategies geared toward excellence. "They have made a difference in the way we think about quality and repeatability," he notes, "and they had ideas about ways we could do things better."

Today, according to Mahesh Ramamoorthy, Aviva Global Services' director of information technology, the company employs 6,500 people in India and Sri Lanka.

Some 15% of those people work directly for Aviva, as part of captive operations. Eventually, that percentage will rise to 60%, Ramamoorthy says. The other 40% will continue to be outsourced to partners. Maintaining some outsourced operations gives the BOT partner an added incentive to get involved in the project, he says.

"As the business expands back in the U.K.," he continues, "there is opportunity to tape some global talent and reduce some operating costs. BOT is the best way to ramp up very fast."

INDIAN FIRMS DO MORE THAN CLERICAL WORK

Just as Indian software companies moved beyond exterminating the Y2K bug to higher-level software development, the Indian business process outsourcing (BPO) industry is moving beyond processing paperwork and answering the telephone.

24/7 Customer, for example, sometimes identifies unmet market needs. The company handles inbound sales for a Top-20 U.K. insurance firm, says founder and chief people officer S. Nagarajan. Customers were calling and asking for a product that the insurance firm did not offer, because it supposedly would not have been cost-effective to sell it.

"So we said, if we were able to sell it for you, would you do revenue sharing with us?" Nagarajan says. The company agreed, and, about a year ago, 24/7 created a new sales channel, taking on all the risk of developing it and hiring staff.

Now, customers clicking on an online ad for the product will go immediately into a live online chat, Nagarajan said, with the conversion rate increasing six-fold as a result. He declines to give specific numbers or disclose the customer's name but says the practice is spreading. "Now we're offering the same channel to other customers," he says.

Besides process innovations and product innovations, Indian outsourcing firms are offering knowledge-process outsourcing and business transformation. Hyderabad-based business process outsourcing company Nipuna Services Ltd., for example, goes beyond simple data entry, the company says, to knowledge-process outsourcing and "high-end complex analytics across the value chain." Insurance is a key business segment for the company, which became the first BPO firm to win the Rajiv Ghandhi National Quality Award, the nation's highest award for quality.

"Insurance is one of the areas in which we do entire end-to-end management," said Nipuna CEO Venkatesh Roddam. "We use Six Sigma tools and techniques to suggest changes as we go along. We create dashboards for every activity-and we use industry benchmarks rather than internal benchmarks."

Like Japan before it, India is embracing quality and innovation.

"In the field of business process outsourcing, we must not only retain our first-mover advantage, but move up the value chain," Indian Prime Minister Manmohan Singh said during his keynote address to the NASSCOM conference. "As our capabilities in the knowledge sector grow, our ambition of being a knowledge powerhouse depends upon that key ingredient which drives the knowledge economy: innovation."

To help move the process along, Singh promised the Indian government will help promote the outsourcing industry. That means investing in infrastructure, he says, amending the legal framework to keep up with changes in technology and helping to create domestic demand for IT services.

In 2006, the technology sector accounted for U.S. $25 billion, or a fifth of India's exports, making it the leading export sector in India's economy, Singh said. NASSCOM has set a target of U.S. $60 billion by 2010.

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