Business Today


Will multiple roadblocks slow the growth of booming BPO market?

Rahul Sachitanand | Print Edition: February 24, 2008

Hurdles in BPO path
The BPO industry is facing new challenges
Despite travelling the globe as perhaps the face of India’s BPO revolution, Raman Roy continues to find new and intriguing places to do business. While he visited Sri Lanka last year to advise the government and some companies on their future in this industry, in late January, he even jetted off to the tropical paradise of Mauritius to help local companies out. A full decade after he got the ball rolling with Spectramind (acquired by Wipro and later renamed Wipro BPO), the industry is set to severe the umbilical cord from IT and be counted as a distinct entity on its own. Having grown to $11 billion in size, with over 1,200 providers and employing 700,000 people directly, India is already the industry’s top dog, accounting for around 40 per cent of the global $26-29-billion industry.

Now, NASSCOM, the industry trade body, in association with Everest Group, a research and consultancy outfit, has predicted that the industry will grow to as much as $50 billion by 2012 and create around two million direct jobs in the country.

Despite these impressive statistics, Roy, now Chairman & Managing Director, Quatrro, a BPO start-up, is among the first to sound multiple notes of caution for this industry.

“This industry could be a game changer for India, but there are several hurdles we need to overcome,” he admits. These problems are spread across areas that range from a lack of employable talent to issues over taxation, inadequate infrastructure and perhaps, most worryingly, increasingly competent competition. “There isn’t a single college course in India teaching US GAAP; it’s a mandatory course in the Philippines,” says Roy. “We have created perhaps the largest base of educated unemployable people inthe world.” Already, the Philippines’ BPO industry employs 300,000 people and it has a 15 per cent share of the market. China is the other big threat, with its massive infrastructure and aggressive English adoption. At the same time, countries like Canada continue to be preferred for many sensitive tasks, due to the geographical proximity to the US.

 BPO five-fold path

But there will be hurdles.

  • Overhaul the existing education system to generate employable talent

  • Establish BPO hubs to smoothen infrastructure concerns

  • Focus on domestic BPO market to widen focus and improve seat utilisation

  • Focus on higher value services

  • Aggressively market India's abilities overseas
Part of the problem for India, according to Roy, is just how aggressive competing locations are with doling out sops. While Sri Lanka was happy duplicating India’s operational and tax structure on its own nascent BPO circuit, he’s been inundated with requests from other locations to advise them on this fast-growing industry. Then, an appreciating rupee and the removal of tax subsidies could yet hurt this evolving industry.

Experts say that the continuedgrowth and success of the industry will hinge on its ability to re-invent itself and will involve close co-ordination between industry, government and other stakeholders. “The government needs to be more proactive with taxation norms and proactive labour laws,” says Gaurav Gupta, India head of Everest Group. Despite these issues, industry players are optimistic because of the sheer potential in the market.

“We have just scratched the surface and may have covered 5 per cent of the addressable market,” says Som Mittal, the recently-appointed President of NASSCOM.

Rather than just an India presence, Gupta says a multi-locational approach will be key to a firm’s continued success in the market. “It’s not just about a large India presence anymore; a dispersed delivery base is critical in the market both to mitigate risk and provide more options to clients,” he explains. Before they can go overseas, Indian operators need to address some critical shortcomings at home. The Everest study, for example, estimates a shortfall of up to 1 million graduates (at entry level) under the current system. Then, there is also an acute shortage of specialised skills (actuaries for insurance processing, for instance), which could further hamper growth.

Critics say the biggest challenge it faces is one of perception. While BPO has opened new employment opportunities, it has also brought with it its own set of social ills. A fast-paced lifestyle and near-impossible deadlines have resulted in the creation of a parallel night life, often blamed for an upsurge in crime.

Then, issues of data theft at Indian BPOs have given naysayers in the West plenty of ammunition to protest job losses and movement of work to India. “We need to aggressively promote the skills of Indian companies and the safety of India as an outsourcing destination,” says Mittal.

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