BPO in India

It is a fact that India has been at the forefront of the BPO/Services revolution and its firms have garnered a huge chunk of the BPO/Services market. However, the firms that operate in the BPO space in India face their own challenges as far as the conduct of business is concerned. For instance, one of the foremost challenges that are faced by the BPO firms in India is the instability and the chaotic way in which infrastructure and logistics management is concerned.

The frequent power outages, poor traffic management, political instability in the form of strikes and shutdowns all take a toll on the operations of the BPO firms. Because the sector needs to work 24/7, it cannot afford any disruption to its service. Hence, the move by the BPO firms to lobby with the government on granting them the essential services tag so that they are not subject to the instability and can carry on their operations.

The next set of challenges deal with the increasing un-employability of the workforce. In previous articles we discussed how the ready availability of highly skilled resources is an advantage that India has. However, it is also the case that a majority of this resource pool does not pass the criteria for employment. The point here is that it is not enough to have a million graduates graduating each year. Rather, the real test should be as to how many of them actually qualify for employment. Towards this end, the BPO sector is making efforts by roping in management institutes and technology colleges to partner with the apex IT/ITES body, NASSCOM to improve the skill set of the graduates and make them better suited for the kind of work that the BPO firms do.

Third, the way in which the BPO sector has evolved in India is mainly by doing low end work which is rapidly being threatened by new entrants like Philippines and other countries. This means that either the BPO firms cut their costs of resources or migrate to higher end work like the KPO or Knowledge Process Outsourcing. Again, the task here is cut out for the BPO sector and for NASSCOM i.e. to market the Indian BPO sector as being worthy of doing high end work and capable of innovation and other higher value chain activities. In short, these are some of the challenges that the BPO sector in India faces as far as its operations are concerned.

On the external front, there has been a hue and cry over outsourcing to India in the ongoing presidential campaign in the United States. This means that the BPO sector in India has to be extra vigilant to rebut the charges made by the politicians in the US and the UK. The point here is that the BPO sector must not become a scapegoat in times when the US and the UK are in recession and so there needs to be aggressive lobbying taken up externally to counter these perceptions. In conclusion, as in life and so in business, nothing is permanent and hence the BPO sector in India should not be complacent and let events and circumstances pass them by.

Further, the fact that Indians are well educated and that there is a humungous body of resources who have graduated in commerce and technology has meant that the BPO story took off in right earnest in India. Added to this is the fact that the demographics favour India since a majority of its population is young and under 30. This is the so-called demographic dividend wherein a country that is youthful reaps the fruits of having a labour force which can be tapped into. All these reasons have conspired to bring about a revolution in the way the Indian BPO sector has performed.

However, things are not all that hunky dory since many other countries in Asia seem to be playing catch-up with Philippines emerging as a viable alternative to India. One of the reasons for the completion is that the wage differential that India had over the West is eroding since the industry is maturing and hence wages of the workforce are going up.

This means that other low cost rivals like can tap into the advantage that India hitherto had. Further, there is a certain level of saturation that has set in India with the law of diminishing returns coming into play. These factors mean that India has to watch out for competition from other countries. Of course, there are certain steps that can be taken to arrest the decline and ward off the competition.

For instance, Indian BPO companies can branch out into Tier II and Tier III cities so that their wages are competitive and that a skilled workforce that exists beyond the cities can be tapped into. Moreover, the costs can be kept down because of the fact that these cities have a lower cost of living and doing business than the Tier I cities. The most important step is that Indian BPO companies can move up the “value chain” which means that they can migrate to higher end knowledge work or KPO which is more cerebral and pays well. The point here is that it is time for the Indian BPO industry to take the phenomenon to another level and this is precisely the reason for many Indian BPOs to take up KPO work as well as opening centres in smaller cities.

Finally, the Indian BPO industry has to realize that once the industry matures, profit margins and return on investment stagnate and reach a plateau. It is for this reason that the time is ripe for the Indian BPO sector to innovate and move up the curve. With other nations snapping at its heels, the Indian BPO sector cannot afford to take it easy nor be complacent.