The Indian BPO future

The business process outsourcing industry in India refers to the business process outsourcing services in the outsourcing industry in India, catering mainly to Western operations of multi national corporations.

As of 2008, around 0.7 million people work in outsourcing sector (less than 0.1% of Indians). Annual revenues are around $11 billion, around 1% of GDP. Around 2.5 million people graduate in India every year. Wages are rising by 10-15 percent as a result of skill shortage.

Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12–24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.

Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

Despite all of the above, Indian outsourcing faces multiple challenges predominantly based on internal issues in India and these are reflecting on several fronts.

• Due to the emergence of hundreds and thousands of BPO centers, there is little loyalty amongst employees.  They leave their employment for minimum increments and the quality of manpower raises many concerns for the future of the industry.
• The cost of each employee based on commuting time, cost of free lunches, training as well as productivity is making the Indian outsourcing advantage seem like a no go.
• Cost to employers continues to soar.  Most Indian companies face huge challenges on continuous power and essential infrastructure.  This leads to additional costs of independent power plants or water plants or commute time per employee which at times extends to upto two hours one way.
• To top it off, US is taking extra ordinary steps to ensure outsourcing of jobs stops.  From tax breaks to unemployment to better local customer support, it might just mean the end of the Indian dream.

There is probably a mid-way somewhere in between where both the Indian model and the global model could work.  However, its evident that this model will not be cost saving alone.