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BPO: An opportunity and challenge for India

November 19, 2003

A torrent of new business is coming to India in a way which could not have been conceived of earlier.

These are in three fields software, which is old hat, BPO which is much newer but no longer a new story and thirdly R&D, in which the new elements are the volume and complexity of work envisaged.

General Motors opened their new research centre in Bangalore last week, SAP, the European software leader, inaugurated its new development centre in Bangalore yesterday, signaling a commitment to undertaking really high-tech work in India. Such news is reported everyday.

Clearly, there is global recognition of Indian competency in three of the five main areas in a business -- product design, outsourced services and software -- leaving out manufacturing and the corporate functions.

Large chunks of business will be shifting to India, particularly from the US, in the same way manufacturing shifted to China in the last decade, but with a difference.

The wave of R&D outsourcing to India will create an overall technological competency and have a tremendous impact on Indian manufacturing as well.

More and more forward looking Indian companies will become globally competitive in their respective fields with, and here lies the key difference with the earlier nature of Chinese growth, globally competitive technology developed by themselves.

The upshot of all this -- particularly the offshoring to India of software, BPO and R&D -- will have a huge impact on US public opinion.

There is likely to be an anti-Indian upsurge in the way there was against Japan in the late eighties and early nineties, symbolically captured in the 'voluntary' restrictions that the Japanese imposed on their car exports to the US.

The upsurge, currently known by the term 'backlash', is already there. Less than a year ago, Nasscom was telling us that it is the Indian media that first highlighted reports of the backlash, which were then played back by the US media to their own audience.

The implicit accusation was that the Indian media played a key role in blowing things out of proportion.

Today, the protest against offshoring -- in the US, Britain and Australia -- is mainstream. US politicians' willingness to listen to this is certainly dictated by the exigencies of election year politics but the protests go deeper.

Contrary to the situation prevailing even a year ago, those protesting today are white collar people -- engineers and MBAs -- who see even their jobs going away to India. And when such educated and articulate people protest, the media and the politicians sit up and take note.

K P Balaraj, a member of The Indus Entrepreneurs and managing director of the venture capital firm WestBridge Capital Partners, sees offshoring to India taking place at a qualitatively different level than earlier.

The expected part is that western companies will offshore more and more critical technology development to their captive units in India, and people of Indian origin with an equal presence in both India and the US will increasingly think of locating the high- tech work of their startups in India.

But the unexpected new trend will be western companies locating some of their high-tech startups in India -- non-Indians will leverage their Bangalore experience -- and all this will provide very good reasons for highly skilled Indian professionals to return.

The implication of all this is that at some point in the not too distant future, the offshoring to India will lead to a partial hollowing out of the Silicon Valley and an equal backlash.

The Indian government, industry leaders and business associations will have to develop an action plan to counter it. Balaraj says they must lobby the US media more rigorously, larger Indian companies will have to find a role in the overall scheme for themselves and high profile US government leaders who are pro-Indian will have to be roped in.

Clearly, Indians will have to do better than win over a Larry Pressler and try to grab the support of the likes of Hillary and Bill Clinton.

As the decade progresses, this will be a bigger external agenda for India than containing the menace of Pakistan or even the influence and impact of China.

There is of course the possibility that the potential for offshoring to India outlined above may not happen.

Somewhere down the line, the adequate supply of skills of different levels of sophistication may run out or people seeking to do business with India may feel they have had enough of Indian airports, roads and power supply.

Vivek Kulkarni, until recently Karnataka's IT secretary and now CEO of a BPO company B2K, feels that the infrastructure will respond to the challenge but it is in education that policy makers will have to be more proactive.

While still in government he helped launch B-SAT (BPO Skills Assessment Test) which can be taken by any entry level BPO aspirant and makes the recruitment job of BPO operations much easier.

At a higher level, there has to be much better imparting of analytical and communication skills, something that is now done only in the best engineering colleges.

Technology bigwigs have also spoken of the need to have more industry-academia cooperation, create chairs for example, so that academia does not entirely lose to industry the services of the best technology brains.

R A Mashelkar, head of CSIR, has led a task force to chalk out a road map for upgrading the regional engineering colleges.

Such carefully worked out strategies should be implemented rather than talking loosely, as the prime minister has done, of creating several new IITs.

When a historic opportunity knocks at the door, the least a nation should do is have a clear agenda for action, both domestic and global, to make good use of the opportunity.

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