The $5.8-billion Indian BPO industry is under threat. While the Left is pressing for unionisation of the sector, the West is demanding strict data protection laws after recent instances of client data theft.

In a three-part series, Business Standard takes a look at how Indian BPOs are trying to cope with the challenge.

For the last few days, the management of a Noida-based information technology-enabled services company has been grappling with a new problem. Its customer in the US wants a "no termination of services" clause inserted in a contract waiting to be drawn up. The customer is concerned that Indian trade unions may soon have a say in the affairs of the BPO outfit and this can one day lead to disruption of services.

Outsourcing and India: Complete Coverage

The fine print of a clause says that if work stops because of a strike by its employees, the Noida BPO will have to pay a hefty compensation. Working with wafer-thin profit margins, the company may be facing new financial costs.

The Centre for Indian Trade Unions has demanded that the sluice gates be opened for unions. This has given the country's BPO companies a new headache. After a lull of several years, resurgent trade unions have tasted blood by organising strikes in several high-profile manufacturing companies. They now want to influence 350,000 employees on the rolls of Indian BPO companies.

This scares foreign companies. Some of them have gone to the extent of saying that they will not award or renew contracts with BPO firms if unions move in, executives with several ITES players have said.

"If we have a union, then we should expect a lot of work going to some low-cost destinations," says Xansa chief executive Saurabh Srivastava. Indian ITES players fear that with other low-cost countries like the Philippines and China working without unions, they can well be the losers in the coming years.

Though most ITES companies have incorporated a clause in the service terms saying that employees cannot strike work, the workers are themselves against the idea of unions. "It is a very incentive-based, performance-oriented industry and it is the good performer who stands to lose," says an Evalueserve employee.

At the centre of the debate on the entry of unions in the BPO sector is CITU, affiliated to the Communist Party of India (Marxist).

"The fact is that the IT sector is not an essential sector, and no industrial sector can be union-free in the era of globalisation. In Australia, the sector is heavily unionised, and the reluctance of employees here to having unions is inexplicable," says CITU secretary W R Varadarajan.

"There is a basic sense of alarm because employers today equate unionisation with disruption of work," he says.

He admits that until now, CITU has not been able to penetrate the IT sector in a way, which will result in the formation of unions.

"If we manage to get in touch with anybody in a BPO or IT company, the employee will be warned and in some cases be given a pink slip," he says So far, CITU's attempts have been stalled across the country, from Gurgaon to Hyderabad and Bangalore.

In fact. earlier this month, CITU president MK Pandhe wrote to labour secretary KM Sahni, urging the government to initiate steps to protect the interests of IT workers.

Pandhe alleged that BPO workers were being asked to work 12-hour shifts and do continuous night shifts in direct contravention of the country's labour laws. He added that remuneration is arbitrarily fixed with consolidated wages and that, there is no social security for the employees.