Safeguarding BPO

Policy must protect low-skilled jobs in the high-tech sector

The prospects for India’s export-oriented information technology and services industry can only get more daunting, given the current global economic trends. At present, 18 per cent growth has been projected in the current financial year, the same as last year, but a lot can change quickly once the steady stream of bad news from the developed countries has its inevitable fallout. Within this sector, the odds are stacked even higher against the business process outsourcing (BPO) players. What happens to this space is important for the country because it is an employment-intensive sector, with wage rates lower than in IT proper. Over the last decade, the acute problem of the educated unemployed in India has been partially addressed by BPO jobs (835,000 direct ones in financial 2011), which have played their part in reducing social tension. It can be argued that were it not for sectors like BPO, India would have faced the kind of social discontent that recently led to rioting in several British cities.

 

The challenges before the BPO sector are manifold. Poor global economic prospects have exerted pricing pressure on vendors from all geographies, but India faces the additional challenge of low-cost competition from the Philippines, which is able to offer better value for money in communication skills. On the other hand, India-based operations face severe skills shortage and do not receive the kind of government support available in the Philippines. The industry has faced up to this challenge in two ways. It is going up the value chain by getting out of low-value, voice-based services and is moving to tier-two and tier-three cities, where both wages and infrastructure costs are lower. In the last five years, the share of non-voice business has gone up from 52 per cent to 58 per cent. In terms of specific sectors, revenue share of finance and accounting services, knowledge services, business analytics, data management and legal services has gone up. In particular, analytics and legal services are set to grow at 25 per cent per annum or more, well ahead of the overall sector. The firms, for their part, are travelling up the technology ladder by offering more platform-based (industry-specific proprietary processes) and cloud computing (hosted outside) solutions.

Though the government has only played a marginal role in growth of the BPO business, this role should not be underestimated. Basic educational skills cannot be extensively provided by the private sector, though firms spend a lot – which they should not – to make their new recruits job-ready. Also, infrastructure costs have to be kept low, otherwise industry players will find it impossible to keep their costs competitive. Adequate power at affordable rates and public transport to ferry large numbers of workers are uppermost in the list of what is lacking. Much can be achieved by simply making Indian cities more liveable. That will also help the BPO sector.