The “outsource India” Age Over?

As market research firm Gartner, Inc. puts it a labourwhat are the reasons for this sudden change of heart.
crisis and wage hikes could disconnect India (quiteThe one reason that American companies have this
literally) off, from 45% of its “Outsource India”feeling is that they anticipate wage inflation that may
crowd. Even Indian economic experts are nowbe passed on to the consumer. In 2003, wage rates
accepting the fact that India’s BPO industry, itsfor a typical call centre employee, were 5000 to 6000
industrial magic lamp for the time being, is encounteringrupees monthly. Now it’s up to Rs.9000.
a big problem. India’s recent upsurge in BPO growthThis is a critical time for Outsource India Inc. It must
could be thwarted by these “challenges” askeep these wage hikes in check. If they do continue to
Kiran Karnick of NASSCOM (National Association ofoccur, Sujay Chohan anticipates that Outsource India
Software and Services Companies) put across whileInc. will be out. He also says that Ireland made similar
speaking in an interview with CNN/Money.mistakes 10 years prior and that India could learn from
But Gartner, Inc.’s research goes further; it cautionsthem. The problem isn’t IT outsourcing, Chohan said,
the Indian BPO industry of possible future competitors.as the Indians are dominating in that respect due to
The Philippines, Malaysia, Vietnam and some countriestheir skill and low costs, but other less skilled BPO
in Eastern Europe to name a few are he potentialpositions could pose a threat to the overall health of
predatory of that number one spot in the offshoreIndia’s BPO sector. But some business analysts
BPO industry, currently occupied by “Outsourcehave apparently stepped up to the plate offering
India Inc.” By the way, the American and othersolutions. Mastek chairman ( Mastek does IT and BPO
international companies do outsource to India for twooffshore, bringing in $130 million annually.), Ashank Desai
reasons:believes that one way to maintain market share would
Relatively low wages (I.e. it keeps their labour costsbe to better the services that are supplied from run of
down)the mill back office procedures to more complicated
The constant reliable supply of English speakingones, hence creating a sense of indispensability. For
graduates who are willing and ready for the job (2.5example, reprogram IT used for handling insurance
million annually!)claims for greater efficiency and therefore they are
But, “India can’t afford to rest on its laurels”more efficiently processed for clients. Chohan also
Sujay Chohan said. VP of Gartner Inc. and co-authormentioned that Indian dependence on the US business
of their report, he is also head of research of Offshoreoutsourcing puts it in a weak bargaining position. It could
BPO with Gartner, New Delhi. India must create a longstrengthen itself by expanding into Europe and other
term plan to improve conditions, infrastructure andnon-English speaking regions.
maintain a growth of skilled labor, unless it wishes toWhatever the time constraint, India has to take action
see perfectly good cash flutter away to Malaysia andsooner rather than later before its horrendous
the others. "Although India's infrastructure is improving, itpredicted 40% demise in market share. The
is not keeping pace with the rapid growth of thecompetitors for India’s leading status in the global
industry,” says the Gartner report. The mostBPO industry are many and that situation now
shocking revelation of the report is this: India’sbalances precariously in India’s hands. The Indian
Market share (85%) could drop to less than 45%.ButBPO sector must now act fast to secure this position.