India’s internal challenges

The third challenge is India itself. Despite its impressive economic growth, India faces enormous challenges to sustain that level of expansion. Of its nearly 1 billion inhabitants, an estimated 350-400 million are still below the poverty line, We must strive to elevate the standard of living for all Indians because huge gaps between the haves and have-nots will hold us back, both in terms of dissatisfaction of those still below the poverty line, but will also affect the way India is perceived internationally. A successful international player must be seen to break down the barriers between rich and poor.

The infrastructure in India could also prove to be a significant obstacle to global success. Travel across the country is challenging, with ancient railways dating back to the Raj, poor roads and horrific congestion in urban areas, and unreliable aircraft routes servicing the main cities. Electricity supply can still be intermittent, despite major investment and clean water is not universally available outside principal urban areas.

The Indian BPO industry must strive to ensure that it does not become a victim of its own success. Rising costs such as wages inflation and also high rates of staff attrition are often cited as key reasons why other countries are making inroads on India’s supremacy in the outsourcing sector. With estimates of attrition in Indian BPOs varying wildly from 15-40% depending on the process, this is seen as a fundamental weakness of the BPO sector. Nasscom predicts that the outsourcing industry as a whole will face a shortage of 262,000 professionals by 2012. In some of the main BPO hubs like Mumbai, Bangalore and Hyderabad, wage inflation and competition for experienced agents is driving labour costs up by around 20% per annum.

So will this upward trend continue until the salary differential between India and the developed world becomes eroded and other countries overtake India in the outsourcing league through undercutting on wage costs? Probably not. India’s expanding population and increasing wealth will ensure that an increasing number of people enter the education market and join the potential catchment pool for new BPO recruits. Yes, there will always be a ‘brain drain’ of the brighter graduates who move on from the BPO to other more lucrative and prestigious businesses, but outsourcing will remain a great step onto the career ladder. We have many people at management level who have originally considered BPO to be a short term opportunity, but have discovered that due to the fast pace of the business, there are huge openings for upward progression and many BPOs prefer to promote from within.

Overcoming common misconceptions & attitudes

The Indian outsourcing industry has had a rough ride particularly in the western press, with journalists seizing the opportunity to paint a picture of offshoring companies as stealing local jobs and Indian contact centres selling off clients’ bank details for £10 a go. Offshoring was singled out as a major issue in the 2004 US Presidential election, with calls for protectionism to face the challenge of the loss of American jobs overseas.

The UK government has been more open minded about the matter, with Prime Minister Tony Blair stating: “Companies are using relocation of call centers and outsourcing in order to build a more effective structure that benefits not just the places to which the work is outsourced but also the companies and people in the UK and Europe”. Patricia Hewitt MP, when she was Trade & Industry Secretary, also welcomed offshoring as a mutual benefit, saying that if developing countries prosper, so will the UK. Regional development agencies in the UK openly court Indian companies and other offshore service providers, encouraging them to open contact centres in areas that need a boost to the local economy and helping the outsourcers to develop their global footprint.

There is always the potential for political backlash from western countries, based on the perceived loss of jobs to India, if the global economy sees a marked decline. Already, a number US states have passed laws restricting offshoring of state contracts, despite the increased costs, and some banks have taken very public stances about not offshoring their call centres to India. And there have been a few instances of US and UK companies, returning outsourced work back to home shores from India. Unions and the popular press have jumped on these isolated cases as indications of the demise of the Indian outsourcing fad.

However, this opposition is likely to wane. In the UK, some unions have already publicly recognised the inevitability of outsourcing and are working closely with outsourcing companies to bolster the job prospects of those affected by offshoring. Some UK organisations have made agreements with trade union Amicus, to invest some of the savings from offshoring into helping those whose jobs are threatened.

Secondly, the western world will come to the realisation that outsourcing jobs actually represents only a small proportion of normal job churn. Data from Forrester Research, for example, shows that by 2015 a total of 3.4 million jobs in services could have moved abroad, but that it is dwarfed by the 30 million jobs destroyed and created in the US every year. The west will also come to recognise that many of the media reports have been little more than scaremongering, without giving the full story. The call centre sector in the UK, for instance, is still thriving, with call centre employment expanding almost three times as fast as the UK national average in the past four years, and expected to employ more than one million people by the end of 2007.

Furthermore, negative emotions about outsourcing will be increasingly offset as the global expansion of Indian BPOs creates job opportunities for people in the US, UK and Europe. People are comfortable working for Japanese car manufacturers. Over time, the same will be true for Indian companies.

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