By Preetam Kaushik
India has traditionally been the “rising star” in the BPO industry, helping to define global outsourcing trends. Employing more than 1 million people and generating annual revenues nearing $15 billion USD, the Indian BPO industry is still growing at a rate of 15-16% per year.
BPO is a “sunrise industry” in India which attracted young graduates who otherwise would be struggling to get decent jobs. The question is, it is already evening for the BPO industry in India? While Indira Gandhi National Open University has launched a course to prepare graduates for work in the BPO sector, it is not very clear at this stage if India’s BPO growth is going to remain as promising as it is now.
Extrinsic, Intrinsic Factors Play Roles
The factors affecting the development of the Indian BPO industry are both extrinsic and intrinsic to India. First of all, there may generally be fewer jobs per BPO buyer organization available to be outsourced because of widespread budget cuts due to the continuing economic slowdown.
In addition, there is a global competition emerging in automation rather than outsourcing. Automating processes through technology, rather than having them performed by cheaper offshore labor, is proving to be a smarter, more efficient cost-saving mechanism for many organizations. And increasing pressure for US companies to not outsource jobs to offshore providers, including potential tax implications for companies that do, has a major impact on the Indian BPO market.
A number of changes are also happening on the Indian BPO homefront. There is enormous competition the Indian BPO industry is facing as it loses business to providers based in other countries in the name of better cultural compliance and/or better accent, tone, tenor and quality of voice. For example, Indian BPO giant WIPRO lost its client KLM on account of issues with communication skills.
At the same time, it is becoming clear that while many giant Indian outsourcing providers such as Infosys, TCS and WIPRO continue to succeed, many others are struggling. So at this stage, there is lot of consolidation happening within the industry, with many mergers and acquisitions happening and shaping the future Indian BPO industry. What apparently drove growth for those companies that are doing the acquiring is that they aligned strongly with client objectives, focused on productivity, delivered 10-15% annual productivity increases, and reduced costs in a systematic way.
Reports of Indian BPO’s Death Are Exaggerated
Of course, it is premature to say your prayers for the Indian BPO industry. Indian BPO providers still handle 56% of global BPO, according to BPO management services provider Outsource2India. And according to the Indian government body NASSCOM, India will add around 230,000 jobs in FY 2012 in both the ITO and BPO sectors.
However, trouble signs are on the horizon. Outsource2India data indicates the Indian BPO industry gets 70% of its revenues from contact centers, 20% from data entry work and 10% from IT related work. The point of concern for Indian BPO providers is that the work at contact centers and the quality of professionals handling contact center client interactions has come under intense scrutiny in recent years.
In addition, worldwide IT spending is supposed to decrease to 2.5% this year from a previous high of 3.7%, according to April 2012 figures from Gartner, and Indian companies such as TCS, Wipro and Infosys are also facing increased competition from US-based BPO players such as IBM and Accenture.
So the doomsday forecast for the BPO industry in India, which suggests it will end in the next 10-12 years, is not out of the question but hardly inevitable. How the Indian BPO industry, led by the “big giants,” positions itself and evolves in the face of these changing internal and external dynamics will determine the future of Indian BPO.