Som Mittal: BPO industry has moved beyond cost arbitrage

TRANSFORMATIVE ROLE: (from right) Vikram Talwar, Chairman, Nasscom BPO Forum, Som Mittal, President, and Harsh Manglik, Chairman, Nasscom, at a summit in Bangalore on Wednesday. Photo: G.R.N. Somashekar

The National Association of Software Service Companies (Nasscom), which represents the interests of the Indian software services industry, estimates that revenues of the business process outsourcing (BPO) segment is likely to increase by 15-17 per cent in 2010-11.

Speaking on the sidelines of the BPO strategy summit in Bangalore on Wednesday, Som Mittal, Nasscom President, said the IT-enabled services (ITeS) industry was likely to grow 13-15 per cent in the current year.

Mr. Mittal said the Indian BPO industry contributed 1.5 per cent of the incremental growth in gross domestic product and 4.5 million jobs. He said the industry had played a “transformative role” because 16 per cent of its revenues now emerge from Tier-II and Tier-III cities. “Women constitute 45 per cent of all employees in the BPO industry,” he added. “The industry has definitely moved beyond cost arbitrage,” Mr. Mittal said. He said the Indian BPO industry has “achieved not only greater specialisation in various domains and verticals but also positioned itself across the entire value chain.”

Mr. Mittal admitted that the industry had been “affected by the gyrations of the rupee in the last few years, which has affected margins.” He pointed out that BPOs with “large integrated players with a substantial onsite presence would enjoy a natural hedge against currency fluctuations.” “Currency has become one of the things BPOs need to manage, just as they manage attrition, salaries and customer deliveries,” he said. “There is realisation among our clients that the effect of currency fluctuations ought to be removed from the contracts they enter into,” said Vikram Talwar, Chairman, Nasscom BPO Forum.

“After all, neither our clients nor we are in the forex business,” he said. BPOs and their clients “realise that over the lifetime of a 5 or 10 year contract, currency movements are likely to even out,” he said. Companies also realise the need to prevent “balance sheets from being impacted by currency fluctuations,” Mr. Talwar added.

Contracts are being structured in such a way that the price of the service will be adjusted if currencies fluctuate within a certain band, he explained.

“In fact, increasingly, contracts are designed to even account for inflation rates,' he said.