India brand is about skilled human resources

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.

Competition looms at large

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.

"Water-water everywhere but not a drop to drink"

"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.

Room for improvement

"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.