BPO industry must buck up to survive

The fledgling Indian BPO industry will not suvive unless service providers buck up and begin offering differentiating services.

The message was loud and clear from almost every single speaker of the morning session of IDC's conference on "Technology Outsourcing: Aligning with the opportunities" conducted as part of the second day of IT.Com 2004 here on Tuesday.

"The BPO provider in India has to evolve and broaden their range of offerings. They will also have to move from doing it cheaper solutions, to doing it better and eventually to doing it differently. They will have to figure out the best route to maximise value to the client and remodel their businesses to deliver that value," said Pradeep Mukherjee, MD of NeoIT, the ITS advisory firm.

"One of the newer trends among clients is the concept of futurising. This means that clients are in search of a services delivery business model that will hold true even ten years from now and continue to give value. In fact, this is the thought process that is driving globalisation, not just cost or quality or concentration on core processes. Its the question of future survival for the client," he added.

He urged new BPO set-ups in the country to take up transaction processing, rather than voice-based services, as growth will occur only in those areas in the future, especially in the functional areas of HR, R&D, procurement and training.

Quoting from figures, he pointed out that compliance and security were factors that were gaining increasing importance in client selections of vendors and geographies. He added that it was important for India as a country to address this issue by bringing out laws that will increase the comfort level of the clients when handing his work to the Indian vendor.

"The market forecast for offshore BPO says that it will move from $8.1 billion in 2002 to $42.2 billion by 2008. Geography wise, central east Europe shows the highest growth with 77 per cent. That's because many foreign clients feel more comfortable with near shore options when they offshore work. Many Indian companies these days are already setting up centres in these geographies to address that need. Nevertheless, competition will keep growing from other geographies and margin pressures will continue into the next few quarters," he said.

According to him, in 2008, captives or BOTs will dominate the BPO sphere largely driven by com-liance issues. Second tier cities will grow as competition to tier I cities like Bangalore and a mixture of voice and non voice services will prevail, though only the latter will show growth.

By 2014 though, the scenario is set to change, as third party sevice providers mature and take over much of the work done by captives previously. The scene will be dominated by MNCs - Indian or otherwise - non voice services will dominate and services delivery will be performed by vendors with centres of excellence in different countries, he said.