The Hindu : COPING WITH BPO BACKLASH

Online edition of India's National Newspaper
Thursday, Jan 29, 2004

Opinion

Opinion - Editorials

COPING WITH BPO BACKLASH

IT IS INEVITABLE that as India becomes the preferred destination for the award of business process outsourcing (BPO) contracts by firms in the United States and the United Kingdom, it has to cope with a backlash in those countries. The clause in a spending bill passed by the U.S. Congress and now awaiting President George Bush's approval prohibits the outsourcing of Federal Government contracts to India. This protectionist move is not the first of its kind. In a little over a year since the New Jersey legislature first discussed such a ban, a number of State legislative bodies in the U.S. have considered imposing controls on outsourcing to India and at least one State has rescinded a contract awarded to an Indian company. To point to the insignificance of U.S. Government business in India's information technology exports (less than two per cent of annual earnings) or to suggest that all these legislative moves are merely "election-year" events is to miss the force of the rising tide of opposition in the U.S. and in the U.K. as well.

The BPO backlash is similar to what took place in the U.S. and west Europe during the 1980s and 1990s in protectionist revolt against the relocation of manufacturing jobs to South-East Asia and China. Workers fearing a loss of employment lobbied hard with their governments to place domestic and international restrictions on job relocation. The shift in manufacturing could not be halted, but domestic groups did succeed in slowing the process by embarrassing multinationals and Asian governments with public campaigns on the working conditions of labour. The opposition to BPO will take different forms. It is also likely to be more forceful than what was witnessed before. The campaigns have already begun to argue that there has been a deterioration in the quality of services that have been outsourced; they have, among other things, targeted the "fake personalities" in some activities like call centres where Indian staff develop foreign persona. The resistance to outsourcing will be deeper because the jobs under threat this time are those being performed by skilled and well-paid men and women who can expect a greater hearing in the legislature. Besides, with "jobless growth" continuing to characterise the ongoing economic recovery in the U.S., the loss of jobs that outsourcing could entail cannot be accepted easily. Controls on government contracts are being discussed today. It will not be long before there are pressures to legislate for some form of restriction against private BPO contracts as well.

It is in the logic of globalisation that the gains for some will translate into losses for others. If India wants to establish itself as the BPO destination of choice, then it must learn to cope with the backlash by playing hardball. Indian companies can weaken the resistance by establishing their credentials on quality. At present while Indian subsidiaries of foreign companies have demonstrated a measure of quality of service, this is not yet true of all Indian firms whose sole selling point is low cost. The Government could also consider negotiating international agreements that would prevent the U.S. and the U.K. from legislating against outsourcing. That would, of course, involve a cost in the form of conceding greater market access to foreign firms in a number of areas. Finally, while the predictions are of large-scale job losses in the U.S. with an unfettered growth of outsourcing, there are no accurate estimates available of the dislocation that has already taken place. The Indian BPO companies could expect a better hearing if they can demonstrate that the true loss of employment is nothing like what has been made out.

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