BANGALORE: The known reasons for India to be considered as the hot destination for IT enabled Services (ITeS) are skilled professionals, time difference and cost advantage. However, a closer look will tell you that there are other advantages that India holds to emerge as the world leader in this sector.

According to Gartner India Services Senior Analyst for IT Services and BPO Ravindra Datar, "One of the major reasons is India’s spectacular success in establishing the "India" brand in the western economies, particularly USA and UK. This is because India, as a country offers a huge pool of skilled human resources and IT Services companies that can deliver services to clients globally, with quality levels that can match and surpass global quality standards. Now that the "India" brand is associated with high quality services, it is a solid foundation to promote business for other services."

Recently, Gartner published a Fact Book on Indian BPO industry. Research done for that report indicated that some of the factors that make India an attractive location for setting up captive shared services centers and for outsourcing business processes to third party services providers include:

 

• Huge base of easily trainable English-speaking human resources. English is taught as the first language in most urban schools and is widely accepted as the primary language for business communication. This is critical to most BPO services.

 

• Time difference relative to the US.

 

• Cost advantages

 

• Experience and exposure to US business culture.

 

• Regulatory support. Contact Centers and BPO facilities are seen as a source of large-scale employment generation by the government and hence receive many concessions and incentives

 

• Economic slowdown has stimulated more enterprises globally to consider Business Process Outsourcing

 

• Global regulatory changes in financial services, utility and telecommunications sectors to produce greater competition are stimulating more enterprises to consider BPO.

 

• Trend towards consolidation, through large-scale mergers and acquisitions in a variety of industries, continue to create new opportunities for outsourcing back-office functions.

 

• Reduced regulatory barriers to "globalising" enterprise business processes across multiple countries.

 

• The growth in new delivery modes for BPO, for instance the business service provider (BSP) model, to drive growth in the mid-market after 2003.

BPO is seen as a huge employment generating and foreign currency earning opportunity globally, leading many other countries besides India to aggressively target this business. While language, voice and accent could be an issue for some countries for contact center services, they are looking at opportunities in back office work where these become non-issues with some training.

In case of contact center services, countries that are closer to the US & European markets in cultural affinity and language have an edge over India.

While cost is a major consideration in vendor selection, if the difference in cost is not too high and if the vendor offering services at slightly higher costs is culturally and geographically closer to the client’s country, the decision may swing in favour of that vendor.

Relative number of client’s customers in the service provider’s country is also one of the parameters in the vendor selection process.

Another major concern is the perception of the "SAFETY" of location. The recent negative media hype about the unfortunate events in Gujarat and about border tensions with Pakistan have led many potential investors / buyers to consider other locations more seriously.

India can expect competition for various services from Philippines, Mexico, Guatemala, Canada, Russia, Hungary, Poland and the Czech Republic.

"I believe that if you were to put BPO on the Gartner Hype cycle, it would be somewhere near the peak of inflated expectations in terms of the hype created about it. The potential is huge, but the actual business materializing is tiny in proportion to the actual potential," said Datar.

Some of the challenges listed by Datar, faced by Indian BPO service providers include,

 

1. Availability of skilled human resources. It is a case of "Water-water everywhere but not a drop to drink". While there is abundance of English speaking "trainable" human resources, there is a dearth of "trained" human resources. In the absence of a proper training infrastructure, service providers are forced to provide in-house training and then their trained staff is the target of poaching.

 

2. Infrastructure quality and reliability beyond the few "islands" created in some urban areas, where the cost of living and cost of operating a business are very high.

 

3. Threat perception by potential clients in the wake of September 11 attacks, followed by the Indo-Pak border tensions and unfortunate events in Gujarat. Potential clients in USA don’t see these as localized issues, but see it as a threat in India as a country.

 

4. Intense rivalry amongst Indian vendors themselves and fierce price wars.

 

5. Competition from vendors in other countries

 

6. While the central government and the state governments are bringing about changes on the legal and regulatory front, a lot remains to be achieved.

 

7. Necessity to set up a "suitable" entity in the target markets as the potential buyers do not trust the ability of the Indian legal system to act swiftly in their interests.

"While many global economies are facing the problem of proportion of senior citizens rising as compared to the proportion of working age population, this ratio works favorably in case of India. India has a huge pool of potential human resources, but the irony is that they remain liabilities on the economy instead of being converted into assets for the country’s economy, due to lack of proper education system even at the basic level," stated Datar.

In case of the educated population, there is still a huge pool of English-speaking "trainable" human resources, but there is a dearth of "trained" human resources suitable for the BPO industry’s requirements. There is a need for a proper infrastructure to train for these specific skills.

The state of power, telecom and educational infrastructure in India leaves much to be desired. There is also an urgent need to revamp the legal & regulatory system from the enforcement and judiciary angle to build credibility amongst potential investors.