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What Indian BPO industry needs

A Correspondent in Mumbai | April 23, 2005

The two-day Global Offshoring Outsourcing Summit (GOOS) 2005 presented by the Indo-American Chamber of Commerce concluded in Mumbai on Friday, emerging with strong recommendations for the Indian BPO Industry.

The theme of the summit was 'Offshoring: The Scaling Challenge' wherein ground realities and attendant challenges were showcased that play a crucial role in shaping the outsourcing industry in India today.

In spite of more high-end processes being outsourced to India and security issues being addressed, India's 'sunshine industry' has been going through rough waters. It has been facing daunting challenges like attrition as high as 20-80 per cent and an imbalance in the demand and supply of skilled and talented workforce.

According to a McKinsey report, the business process outsourcing industry is set to grow up to $1.2 billion from the current $0.3 billion, in the next two years. However, with the services industry growing at 10-11 per cent with emerging careers in the hotel, airline and banking industries, Indian BPOs are likely to face a manpower shortage, especially at the mid-management level by 2008.

Before making the recommendations for India's BPO industry, GOOS 2005 provided the ideal forum for industry representatives to discuss, debate and acknowledge the teething problems of the Indian BPO industry:

  • The BPO industry was initially built around the model of cost effectiveness. In recent times, with wages continuing to rise at 10-15 per cent coupled with shortage of skilled manpower, the model no longer holds good.
  • One of the most serious threats for BPO companies in India comes from the hidden cost of sub-standard infrastructure.
  • As business processes are distributed across the globe through diverse complex and increasingly mobile networks and fast growing industries, imperatives and challenges of creating a secure environment becomes paramount.
  • India's true competitive advantage lies in the ability to apply technology to business processes. As of today, that potential is largely untapped.
  • The BPO industry is capital intensive and requires huge additional capital infusion to fuel its growth.
  • Last and most critical is the scarcity of the appropriate skills gained through the education system, which is low on quality and relevance. This is a major limiting factor for the long-term growth of the industry.

In lieu of the current limitations, the Indo-American Chamber of Commerce at the GOOS 2005 has made the following recommendations for the Indian BPO industry:

1. A rebranding exercise

India should no longer be presented as a cost-effective destination alone, but one that is driven by skills and quality. The industry is however, still in its nascent stages of consolidation and needs to rebrand itself in terms of value addition, competition and innovation.

2. A conscious effort towards sound infrastructure

Public and private investment in infrastructure with all concerned bodies adopting a customised approach to meeting the needs of the BPO industry.

3. Setting the benchmark for information security

Public and private partnerships need to be developed in strengthening the courts understanding of security issues.

In addition, a robust and effective mechanism needs to be implemented for information sharing among industry, government and other interested parties.

Timely dispensation of justice, including concrete alternative dispute resolution mechanism is also an imperative.

Industry and the government must work together to make legally viable standards of due diligence.

4. Staying on top of technology

India's scientific and research establishments should be encouraged to devote greater attention to the new class of technology that is emerging to enable secure and increase efficiency of remotely delivered services. Private investment should be encouraged in development and commercialisation of technology.

5. Availability of risk capital and flexibility in taxation

Credit institutions need to develop customised norms for the BPO industry. The availability of risk capital needs to be enhanced in early stage ventures.

Third party hosted infrastructure BPO companies should be eligible to favourable tax treatment  afforded to the infrastructure sector.

6. Raising the bar for education system

Industry in association with management schools should develop BPO specific graduate level programmes for mid-management and modify curriculum and the quality of instruction in entry-level educational institutions.

Technical institutions should develop competency around the specialised technology required for the BPO industry.

Ashank Desai, Chairman, GOOS, asserted, "When you have a customer be bold, be brave and demand to go up the next level with them."

Co-chairman, GOOS, Atul Nishar added, "The BPO industry has emerged as the biggest employment generator in the country and it will create a million more jobs over the next few years."

The Indo-American Chamber of Commerce was established 35 years ago to promote trade and commerce between India and the United States of America. It has emerged as the leading Indo-US bilateral Chamber, with membership of over 2,800 members and 14 offices all over India.

The chamber's four-fold mission is to serve the business needs of its members, to act as catalyst in promoting economic growth between the two countries, to protect and promote the collective bilateral needs and interests of the Indo-US community, and to effectively lobby with the two governments on significant bi-lateral issues affecting Indo- US Commerce.

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