The Hindu : Business : 'Smart-shoring' is the new buzzword

Online edition of India's National Newspaper
Thursday, Jun 10, 2004

Business

Business

'Smart-shoring' is the new buzzword

By Anand Parthasarathy

BANGALORE, JUNE 9. With a nice round number like $3.6 billion ringing in every one's ears, the annual strategy summit of the Information Technology-Enabled Services and Business Process Outsourcing (ITES-BPO) sector, organised by the National Association of Software and Service Companies (Nasscom), got off to an upbeat start here today. That's the total size of India's ITES-BPO exports in 2003-04 — up 46 per cent over the previous fiscal, and almost a third of all IT software and services earnings abroad.

But industry panelists warned that the performance was still peanuts — when stacked against the total global volume of the outsourcing business: $250 billion. And how long can India encash its edge: low cost of human resources and the ability to speak English? Dan Sandhu, Chief Executive of the India operation of U.K. outsouring leader, Vertex, aired the summit's first new buzzword: `Smart shoring' — A canny mix of inshoring and offshoring was the smart way to go, he suggested, for the developed nations.

And India was well poised to `pluck the low hanging fruit' to use the neat phrase of James Hale, Managing Partner of the U.S.-based venture capital company, FTV Management. Even that would be a good chunk of the 250,000 jobs that are up for offshoring in the West, he suggested.

It sounded very comforting for exactly 30 seconds — till fellow panelist Raman Roy, Managing Director of Wipro Spectramind and a pioneer of the call centre business in India, interjected: "We are busy cutting each others' throats, by cutting prices.'' The reference was to the intense competition among Indian players in the call centre and BPO business which outsourcers had exploited to pare margins for everyone to single digit numbers.

In fact, this was the reason so much `consolidation' was taking place here — a polite word for acquisitions of the small and the weak by big international operators.

In India, the right word was not `consolidation' but `concentration,' suggested Edward Males, Managing Director of venture capitalists, Broadview International, the less serious players tended to be taken over by those who were more committed to the BPO business. Finally it would boil down to `who is a `scale' player'?

It was Darwin all over again, on Day One of the Nasscom meet: In the ITES/BPO business it is clearly going to be `survival of the fittest.'

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