In just about a decade, the Indian BPO industry has grown from almost zero to $11 billion in annual revenues and a workforce of 700,000. Starting with lowend work of data entry and then voice-based customer contact, the industry now also does sophisticated finance and accounting, besides analytics and legal work. The demand for outsourced services from India has been so large that the Indian BPO industry has been growing at 35 per cent annually for the last three years. A recent Nasscom-Everest study shows that the “potentially addressable market” for Indian BPOs could be a staggering $220-280 billion by 2012.
However, BPOs in India now seem hobbled by a lack of sufficient trained workforce and rising employee costs, and inadequate infrastructure, including power and public transportation. So, what’s the road ahead for Indian BPOs? Will they be able to ramp up revenues five-fold to $50 billion by 2012—a possibility, according to the Nasscom-Everest report? To find answers to these, and more, questions, Business Today and Nasscom organised a round table on the sidelines of Nasscom’s recent BPO Strategy Summit held in Bangalore. The industry experts at the round table comprised: Pramod Bhasin, President & CEO, Genpact; Ananda Mukerji, MD& CEO, Firstsource; Raman Roy, MD, Quatrro BPO Solutions; Akhil Gupta, Senior Managing Director & Chairman, Blackstone India; Michel E. de Zeeuw, Vice President, Europe & Africa, Infosys BPO; and Som Mittal, President, Nasscom. The round table was moderated by BT’s R. Sridharan. Excerpts:
BT: Pramod, let me start with you. How does the climate look? The subprime crisis is not yet behind us, oil is on the boil, inflation is up across economies. Are these factors going to be a threat to or an opportunity for the BPO industry?Pramod Bhasin: I think medium to long term is going to be an opportunity, but there are going to be some turbulent air pockets in between. From time to time some individual companies, depending on their situation, may choose to postpone or delay or cancel a decision. But I think along with that happening there are always going to be two new companies who are going to say, ‘this is something I need to do to drive my cost and efficiency even higher’. And, I think those two will balance it out. Will they balance it out each quarter? I don’t know. I think the unknown element obviously is how long is it on for, and how deep is the recession?
BT: Ananda, you’ve made some acquisitions in the US and signed some fairly big outsourcing deals as well. Do you think the industry can maintain its 35 per cent growth rate?
Ananda Mukerji: There clearly are macroeconomic factors that today every industry is facing, every company and so our customers are facing it; to that extent there is going to be a turbulence in the short term. I think the fundamentals of the business are very strong. The proposition of cost and skills arbitrage provided by an offshore location like India continues to be strong. The growth can be sustained and there is more than enough demand for our services.
Bhasin: One other aspect that we shouldn’t forget is demographic change. Demographic change will have a lot to do with the development of this industry. This is a change we can’t reverse. It may not be immediate, but medium to long term it’s a massive change.
Som Mittal: I think this change is visible in North America, Europe and Japan, where there are not enough people to manage. This change will get more accentuated and we have started seeing it in at least these pockets.BT:If you look at the BPO industry today, almost half of the business comes from customer interaction services. There is a lot of talk about how the industry needs to do much more of value-added work. What are the newer opportunities that the industry is capable of tapping given that even at seven lakh employees, it is already complaining of a lack of talent?
BT:Is going to Tier II really an option? Genpact has tried to go to Jaipur and smaller locations, others are working out of Pune. Is there sufficient talent coming out of Tier III cities?
Roy: To your earlier question, there is a pyramid across industries across countries. There is a pyramid from top to bottom of the number of people at every level, every competency, every particular domain knowledge. If you talk of moving to a higher domain, which was your earlier question, the next layer of the pyramid has the ability to feed it but the hunger is not that large. If you say that you will require PhDs in Econometrics in the same number as you require guys who take calls and answer balance queries, that’s not true.
But the number that is needed with the training that Pramod and Ananda spoke about, I think that’s doable because that talent is there. We have been able to learn how to compress the training time, we have been able to learn how to get an Indian up to speed to an international level, and we will move into smaller towns and cities for that segment. But will we go to these smaller towns and set up a fancy analytical capability that requires PhDs? We will not.