WHY IS INDIA LOSING OUT ITS BPO MARKET TO OTHER COUNTRIES LIKE BRAZIL, CHINA ETC.? ARE THE REASONS FOR IT DOMESTIC OR GLOBAL OR BOTH. EVALUATE.
The much acclaimed Indian business process outsourcing/ management (bpo/m) industry is losing its shine to other countries. As per the economic survey the Indian industry lost 10 per cent share of the global market in the last five years.
Countries such as the Philippines, Malaysia, China, Egypt, Morocco, Brazil, Mexico, Chile, Columbia, Poland and Ireland are emerging as attractive destinations for voice contracts, posing a significant threat to around $20-billion Indian BPM industry.
According to Economic survey, India however, has achieved a brand identity in this sector whereas other developing countries are trying to emulate India’s example.
The primary reason could be cited as slowdown impact or global recession and tax rationalizations
SLOWDOWN IMPACT: GLOBAL RECESSION
As per Nasscom the global slowdown has impacted the revenues of the IT- BPM sector, the growth of which decelerated from 15 per cent in 2011-12 to an estimated 8.4 per cent, reaching $ 95.2 billion in 2012-13.
Though China faces challenges such as language proficiency, the country is spending large amounts in mission mode to increase English proficiency, and thus may eventually emerge as a threat to India.
Philippines, the second largest destination for outsourcing, though currently facing the challenge of appreciating currency, is a serious competitor, having developed both the hardware and software segments of IT.
It is important to mention that outsourcing has also become a national issue in several developed countries, like the US and the UK, who are supporting the local BPO industry through various means. According to industry sources, the BPO industry in the UK employs 800,000 British workers and is emerging as a vital part of the economy.
The Economic survey underlined the tax rationalization efforts as one of the reason for losing BPO market. It further mentioned that in this volatile situation of the global market the Indian BPO industry needs to gear up to address the challenges. Information campaigns to dispel the myths and fears about outsourcing needs to be undertaken by the industry in the developed economies.
Besides, government also needs to focus on infrastructure development and correction in various taxes that has direct bearing on the industry to bring better growth to the industry.
Nonetheless, it is also a fact that Indian BPO industry is expanding to other geographical destination as well. So, to say India is losing much market is slightly unfair. However, this is true that India would face tough competition in these regions as well. Therefore, as per survey too, India should move up the value chain in software services. Equally important is the need to focus on the large domestic sector, where there is a huge opportunity which, if tapped could also lead to lower costs due to scale economies.
High wages in BPO industry
In order to address the rising wages in the urban BPO space, there is a need to move more towards rural areas, for which skill development, and English language training with American and different European accents is necessary.
Nasscom’s recent estimates show that IT-ITeS exports grew 10.2 per cent to $ 75.8 billion and domestic revenues grew by 14.1 per cent to $ 19.46 billion during fiscal 2012-13.
During next fiscal, the exports are expected to grow 12-14 per cent to $ 84-87 billion, while domestic revenues are expected to be around 13-15 per cent to $ 22.31 billion. Thus, India requires concerted of efforts to be remain a key player in BPO industry.