The Hindu : BPO backlash unlikely to affect India

Online edition of India's National Newspaper
Thursday, Jun 26, 2003

Business

Business

BPO backlash unlikely to affect India

By Our Special Correspondent

NEW DELHI JUNE 25. Industry analysts here are confident that "the small but growing backlash'' against offshore service providers in the U.S. will not affect the trend towards more businesses relocating in India.

"We are witnessing a disaggregation of the vertically integrated enterprise and a strategic shift in the way business is evolving in a growing global economy,'' observes Gartner, a research and advisory firm.

At present up to two lakh people are employed offshore in the call and contact centre business, predominantly in India, the Philippines and Ireland (to a lesser extent). As more offshore stories get publicised, there has been increased backlash from trade unions and governments regarding the job losses within local communities.

The anti-outsourcing tirade from local trade unions and local government bodies is primarily a result of the relocation of labour-intensive business transactions, such as contact centres and transaction processing work to lower-cost locations in other countries. Large MNCs such as GE, American Express, Proctor & Gamble have built large shared service centres in locations like India. These successes have spawned third-party delivery models such as offshore and remote delivery of business processes by independent service providers.

The New Jersey Bill, which first addressed this issue, by itself, will not have a direct impact on the offshore BPO industry, because the number of contracts directly being outsourced by New Jersey or other governments is relatively small. More importantly, the Bill has not been passed and been sent back to the Senate Committee for review.

Although the value proposition of going offshore remains significant, offshore vendors should be sensitised to the issue of layoffs and, in particular, hasten their plans to have a larger domestic delivery presence to provide end-to-end business process outsourcing (BPO) services and help reduce social resistance against the offshore BPO model.

Offshore providers must also realise business processes form an integral part of the smooth functioning of any enterprise and should focus on building trust and relationships at the local level, while paying more attention to changed management concerns, Gartner advised.

Stopping outsourcing is a digression no country can afford to make. Globalisation has rendered most businesses to be run virtually.

What started out with the outsourcing of application related IT services to India has increased in scope to include the entire gamut of business processes. Technology is now making it possible for enterprises to source these business processes from remote parts of the globe, giving rise to the "virtual enterprise.''

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