India's outsourcers move to the next level
By Raja M
MUMBAI - "Join the competition before it becomes serious competition" seems to
be the hot new strategy for India's business processes outsourcing (BPO)
industry, with global leaders such as Wipro - India's third-largest software
company - setting up its own BPO centers in countries such as China, Romania,
the United States and Egypt.
The seller turning buyer gives an intriguing twist to the global outsourcing
business, worth US$930 billion last year and
expected to grow at 15% annually to amass $1.4 trillion by 2009 and dominated
by India. That domination is under threat, and the empire is striking back.
T K Kurien, Wipro's chief executive officer for BPO, told the media that his
company is setting up two Chinese BPO centers, in Shanghai and Chengdu, to
provide accounting and financial services by next month. Wipro's US unit is to
appear within nine months.
Upping its global ambitions, Wipro has also announced buying Infocrossing, a
US-based outsourcing firm, for $600 million in one of the largest acquisitions
of its kind by an Indian software company.
The outsourcer-outsourcing trend is also being eagerly wooed by countries such
as Egypt that want India to share some of its BPO work. Egypt has a time zone
closer to that of Europe, claims a multilingual workforce, and sent a top-level
delegation to India to rake in outsourcing work from this country. As an Indian
publication put it, "Egypt is marketing its edge over India to India itself."
The Egyptian pitch found takers, with industry giants such as Wipro and Satyam
inking agreements to establish support centers. Egypt is estimated to be about
two decades behind India in outsourcing, but has positioned itself to offer the
same advantages that India did two decades ago to dominate the world's
outsourcing market.
A new study by the business research and consulting firm Frost & Sullivan
says countries such as China and Malaysia are challenging India's supremacy in
the outsourcing industry. Based on interviews with more than 300 Fortune 500
companies, the report suggests that India's original advantages of low labor
costs and bountiful skilled workers are now being transferred to other Asian
countries such as Singapore, China, Malaysia and the Philippines.
India, according to market progression, seems an inevitable victim of its own
BPO success: higher labor costs, a higher attrition rate, a stronger rupee, and
infrastructure struggling to meet demand. With other Asian countries such as
Malaysia sliding in to provide what India used to provide, Indian outsourcing
firms are smartly moving in to tap this potential themselves to execute their
clients' orders before their clients themselves do so directly.
Technology research firm Forrester has in fact produced a survey saying that
North American and European countries are not as pleased now with cost savings
from outsourcing as they were earlier. Outsourced jobs could revert back to
source.
However, India is moving in strongly to the buyer's end of the business and
emerging as the biggest purchaser of outsourcing services in the Asia-Pacific
region, according to Texas consultancy firm Technology Partners International
(TPI).
India overtook China, Japan and Australia in issuing outsourcing contracts
worth $1.7 billion, almost one-third of contracts sold in the Asian market,
says TPI. The biggest outsourcing contracts came from India's telecommunication
industry, and the researchers, who only monitored contracts worth over $25
million, say that India's lead as a regional services hirer will loom larger if
smaller contracts are taken into account.
India's momentum shift could mark a significant change in the global
outsourcing market, with new doors being opened even as old ones close. Two new
doors of opportunity for India, according to market analysts, are more
specialized forms of outsourcing such as KPOs (knowledge process outsourcing)
or RPOs (recruitment process outsourcing).
Both need more complex skills such as analysis and research rather than the
present basic BPO services of more cheaply hired Asian voices answering phone
calls with irritatingly fake (and sometimes incomprehensible) Western accents.
Indications are that the next generation of outsourcing work, primarily from
multinational financial companies now wanting cheaper expertise, is already
taking root in India, with a Bangalore-based firm, Amba Research, planning to
increase its analyst staff by 50% to 600 during the next year.
With consultancy McKinsey predicting that Indian firms will be among global
leaders in hiring new executives in the next six months, the good times are not
over for India's rollicking BPO industry, but merely seem to be shifting gears
and direction to the next level.
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