The Hindu : Outsourcing set to continue: Nasscom chief

Online edition of India's National Newspaper
Sunday, Feb 29, 2004

Opinion

Opinion - News Analysis

Outsourcing set to continue: Nasscom chief

Kiran Karnik

THE PRESIDENT of Nasscom (National Association of Software and Service Companies), Kiran Karnik, prefers to describe the "backlash" against business process outsourcing (BPO) to India as a "reaction."

In an email interview to The Hindu's Sandeep Joshi, Mr. Karnik says his association is trying to educate opinion leaders about the short and long term benefits of outsourcing to their economies.

He expects the Indian ITES-BPO industry to grow by a phenomenal 54 per cent to reach $ 3.6 billion in the current fiscal and says efforts are being made to move up the value chain. Excerpts:

Question: Do you think India needs a strategy to counter the backlash against outsourcing and what could be the possible contours of such a policy?

Kiran Karnik: I prefer the word "reaction" rather than "backlash" to describe the response of some to outsourcing. Outsourcing is the considered response of companies in the wake of the enormous pressure that businesses worldwide are faced with and we believe that this trend will continue, as there are tangible benefits in terms of productivity, quality benefits and cost savings.

This means lower costs and better service for consumers, even as it increases market share and profitability for corporates.

Gaining efficiencies, leveraging existing investments and hence enabling companies to be more flexible and adaptable to changing business and market conditions are some additional benefits of outsourcing.

NASSCOM is working towards educating policy makers/opinion leaders about the immediate and long-term benefits of outsourcing to their economies.

What is the share of BPO in the overall IT business that Indian companies generate?

According to NASSCOM estimates, the Indian ITES-BPO industry in 2002-03 grew by 59.1 per cent to US$ 2.3 billion. In 2003-04, according to NASSCOM estimates, the Indian ITES-BPO industry is likely to grow by about 54 per cent to reach US$3.6 billion.

Will India move away from the low-end market of call centres to more sophisticated and value-added services? Is it already happening?

Indian vendors are making a conscious effort to move up the value chain and target new service lines for better price realisation and higher stickiness of the relationship with the customers.

Vendors are moving up the value chain either vertically (offering more critical services in the same domain), or horizontally (expanding service portfolio by moving into sophisticated area that require to deploy highly skilled professionals such as complex claims, risk analysis and underwriting processes.)

Several under-the-radar opportunities exist such a engineering design, clinical trials, biotech research outsourcing, process plant data analysis, customer analytics, market research, equity research which are being tapped by Indian vendors.

At the same time, India continues to have considerable competitive advantages in the so-called "low-end" and there is no reason for us to vacate this space, which provides considerable employment opportunities.

Which countries do you see as possible competitors to India in the IT business?

We do not see any competition immediately, though there are some countries that compete in some specific niches (e.g. Philippines for call centres). In the long run, competition is likely to come mainly from China, though in specific segments there could be some competition from Russia, South Africa and East Europe too.

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