Constraints in tapping BPO strengths
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Switch to higher value added services and utilities may be more rewarding for vendors
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There is optimism about the future viability of small vendors in the BPO space.
— Photo: Shaju John
COST BENEFIT: The establishment of call centres in India is the result of the business process outsourcing need in the developed countries where the cost of labour is high, while relatively cheap labour is available in the third world countries. (Above): People at work in a call centre in Chennai.
FROM THE din made in the financial media about the Indian business process outsourcing (BPO) industry, it would seem that this country commands a big chunk of the global BPO market. That is far, far away from the truth. According to Suresh C. Gupta, a renowned consultant in this business, the worldwide BPO market is estimated to be between $300 billion and $544 billion of which India is projected to gain $20 billion by 2008.
So, India certainly has a long way to go in this business. Dr. Gupta should know. The call centre end of BPO, cautions Dr. Gupta, is low in value, has wafer-thin margins and is too vulnerable to manpower attrition. With infrastructure and wage costs shooting up in India, this business could easily shift in the future to countries with lower overall costs, such as the Philippines, Vietnam and Bangladesh.
Weaknesses
The strengths of India in the BPO field are well known. Asked to point out the weaknesses, Dr. Gupta outlined the following:
Constraint on middle-management resources because of immaturity of the BPO industry.
Government bureaucracy and poor physical infrastructure.
Weak enforcement of legal system and prevalent corruption. Industry is moving towards mitigating data privacy and security concerns. However, there is an urgent need to tighten cyber laws and enforce data protection and privacy laws.
Expanding on the importance of infrastructure, Dr. Gupta emphasised that it would be difficult to shift BPO business to the second tier cities in India, as is being talked about now, unless physical access to them became easy. Foreign clients would prefer to jet in and jet out. The thought of driving a few hours over rutted roads after a long air journey from their country, just to reach the Indian vendor's facility puts them off.
Instead of pursuing accretion of real estate and bodies, Dr. Gupta felt it would be more rewarding for Indian vendors to build on the existing capabilities to provide higher value added services/utilities. True, most customers expect cost savings from offshoring. That will not change dramatically but cost savings alone would not suffice — leading firms expect process expertise, project management experience, quality and access to rare skills as well! That's what continues to drive the current race to India. With the emergence of pure vertical plays in the offshoring space, Indian vendors should stop chasing "pure outsourcing" deals and begin to emulate a "business services'' model.
Scope for small vendors
Contrary to popular belief, Dr. Gupta was quite optimistic about the future viability of small vendors in the BPO space. Due to what he termed "componentisation,'' where domain expertise rather than body count is important, tremendous opportunities were emerging for small but specialised vendors.
Dr. Gupta agreed that MNC BPO firms operating in India, such as Accenture and IBM Global Services, have an advantage over Indian BPO firms in that they have management relationships as well as global footprints that clients are beginning to demand. However, it is still a fair game if Indian vendors counteract with global expansion and leverage their past reputation as purveyors of quality and lower costs. However, Indian third party vendors have a long way to go when it comes to competing for business with the captive offshoring facilities in India of their foreign clients. This is because of the huge gap in domain expertise between the Indian vendor and the captive facility.
Security concerns
Security breaches in Indian BPO firms are a serious concern for their clients, though enlightened firms there realise that security breaches can and do happen in the West as well. Indian firms have not helped their case with underinvestment in HR, particularly background check of potential employees and governance processes, warns Dr. Gupta.
What could worry the client firms more is the reaction from their customers. Victims of personal data security breaches are showing their displeasure by terminating relationships with the companies that maintained their data, according to a new national survey in the U.S., sponsored by New York City law firm White & Case.
Even more disconcerting, the survey also reveals that 5 per cent of Americans have hired lawyers upon learning that their personal information may have been compromised.
N. N. Sachitanand
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