BPO can't be the only engine to drive growth

UNDP REPORT: TRADE ON HUMAN TERMS

Even as estimates of business process outsourcing have been projected to increase from $570 billion in 2002 to $1,200 billion in 2006, a United Nations Development Programme (UNDP) report called 'Trade on Human Terms' has pointed out that global outsourcing must not be seen as the only engine of growth.

According to the report, outsourcing flows between countries are becoming more complex.

For instance, several Indian IT firms and some independent business process outsourcing (BPO) providers are outsourcing to other developing countries like China and the Philippines.

Singapore companies such as Singapore Computer Systems are in turn establishing outsourcing facilities in India and China.

"These new patterns of outsourcing are driven by the need to diversify production bases, pool risks and take advantage of individual country strengths," the report stated.

It indicated that even countries with considerable experience in outsourcing could run into problems.

India, for example, was finding it difficult to recruit enough skilled people, the education pipeline was not producing a sufficient number of educated young people, turnover rates were high, wages were rising and service providers were poaching amongst themselves.

It observed that bans on government outsourcing were not likely to have a major impact since in countries like India such projects constituted 1 per cent or less of outsourcing.

"However, the protectionist challenges could grow and start affecting the volume and type of business outsourcing," the report stated.

The direct impact of outsourcing on reducing poverty was not substantial.

"India, for example, has just over a million people working in software and IT enabled services, but this amounts to just one-quarter of 1 per cent of all workers. Even if the sector were to grow fourfold over the next few years, it would still account for only 1 per cent of the world force and the opportunities would be limited to those who have basic literacy and computer skills and access to training opportunities," it added.