BPO companies told to move up value chain

The business process outsourcing (BPO) industry, which has consolidated its position, should now gear up to move up the value chain as the potential of high-end offshore processing services is quite huge, according to Ajay Dhankar, a partner at McKinsey & Co. He was speaking at the iTECH 2004 Summit which concluded here yesterday.

The Indian BPO industry, which is close to clocking $ 4 billion turnover, should think ahead of competitors in other Asian countries to create greater value besides leveraging their low-cost services, the McKinsey partner advised.

Cautioning against the negative emotional impact on the Americans by losing out of services sector jobs to India, which accounts for around 80 per cent of contracts, he called for educating the Americans on the economic benefits of offshoring BPO services to India.

Around 15.6 million job losses were expected in the US by the year 2015 due to ageing factors, while the loss due to BPO would be miniscule 3.3 million.

In this regard, he quoted a study by McKinsey Global Institute that for every US dollar worth service outsourced to India, over 67 cents worth returns accrue for the American companies, while India would get merely 33 cents.

He also painted a rosy picture on the offshoring front, stating that the potential R&D services being outsourced to India in the pharmaceutical sector were alone being estimated to be around $ 25 billion. "For this the country needs to create brand image for itself by gearing up for high-end services," Ajay Dhankar said.