Education reform key to BPO success

India had to reconfigure its education system from a generalist orientation to a specialist-knowledge-skill oriented one, Nikhilesh Dholakia, professor of marketing, e-commerce, and international business in the College of Business Administration at the University of Rhode Island (URI) told students of XLRI Jamshedpur recently.

If this was done, India's emergence as a superpower in business process outsourcing (BPO) would be secure.

India offered skills at lower wages, the fast growth in technology and requisite infrastructure, falling telecom costs and bandwidth bottlenecks and an increasing confidence especially of large MNCs in the reliability and efficiency of the BPO process in India, Dholakia said.

He was speaking on "IT-enabled globalization: Interplay of economics, politics & culture" at the invitation of the marketing association of XLRI (MAXI).

A researcher on IT and globalisation with focus on the current outsourcing phenomenon who is respected worldwide, Dholakia said reorientation of lifestyles of the educated urban youth who want the western "good life" contributed to the rise of BPO culture too.

He warned about the problems facing the Indian BPO industry, like erosion of the cost advantage due to increasing expectation levels from workers upgrading their skills.

However, there was a positive side of the wage increase.

As skills and salaries rise inside India, productivity and hence surplus will rise.

If wages rise too much inside India, the surplus will diminish but as Indian business develops, it in turn will outsource too. This is already the case in China which has a software sector almost as big as India's, but most projects are domestic. Domestic outsourcing has started in India also.

If prices for outsourced projects rise in India, foreign and Indian businesses may shift to other countries like Vietnam for outsourcing.

Rising domestic outsourcing would create value, said Dholakia, and would compensate for losses.

He blamed the growing resentment against India in the USA on the BPO issue on the very conspicuous westernised lifestyle that Indian IT professionals lived overseas.

Manufacturing outsourcing has been going on in China for decades but BPO had become a s "political football" as a small number of laid off IT professionals were far more vocal than millions of laid-off blue collar workers Dholakia said the future of BPO looked secure and the business looked set to grow as newer ways of slicing and splicing processes emerge.

However, competing countries like China, Vietnam, Philippines, Ghana, South Africa and Pakistan were already joining the bandwagon.

The other threats to Indian BPOs were near-shoring, like the diversion of European Union contracts to new or aspiring EU member states, as also cultural comfort, under which customers in Japan gave preference to China or Vietnam.