Priya Mutalik-Desai

The lure of big bucks offered by the BPO industry has seen a large number of students dropping out of colleges and opting for jobs instead. But this trend could snowball into something ugly 10-15 years down the line.

BUSINESS process outsourcing (BPO) is in big demand in developed countries and in large supply in the developing. While the situation seems to be tending towards equilibrium, a number of developments are destabilising this global phenomenon.

In `Transformational Outsourcing', an article in Sloans Management Review, Jane C. Linder says that when executives began outsourcing substantial portions of their operations more than a decade ago, they did it to offload activities they considered non-core and, thereby, cut costs and improve strategic focus. But companies now, she says, are looking outside for help for more fundamental reasons — to facilitate rapid organisational change, to launch new strategies and to reshape company boundaries.

What is evolving in this inter-company engagement is transformational outsourcing where a company partners with another company beyond its boundaries to achieve a rapid, substantial and sustainable improvement in enterprise-level performance. This is the reason why outsourcing has today become a non-reversible factor in global business development.

On the basis of research on 20 companies that have attempted this practice, Linder has identified four broad organisational categories that can benefit from transformational outsourcing.

These are "startups" such as TiVo that need partners to scale up rapidly; "crouching tigers" such as Family Christian Stores that are being stymied by a deficiency in some key capability from meeting their strategic aspirations; "fallen angels" — BP in the mid-1990s, for instance — that settle into the wrong performance trajectory and need strong action to change their tack; and organisations on the edge of survival — as Britain's National Savings and Investments was several years ago — that need transformational outsourcing to become "born again."

This global churning of businesses has not only opened up new avenues for employment in many developing countries but also created astronomical opportunities for income generation. A report by Deloitte Research estimated that $356 billion of cost for the global financial services industry would move offshore — much of it to India. What the hollowing out of manufacturing sector in developed countries did for new age manufacturing industries in China, South-East Asia and Latin America is today getting replicated in the case of services, with India leading the pack of beneficiaries.

"It's a basic economic law that companies will seek lower costs. Services are following the same path as manufacturing," comments Vivek Paul, President, Wipro Technologies (India's largest IT company).

Many other countries, such as China, the Philippines and South Africa, are close on India's heels. The South African President, Mr Thabo Mbeki, has cited the call-centre industry as a national economic priority for his country.

Filipino trade officials in London say that developing their call centre and BPO industries are their "number one focus." While labour in the Philippines, as in India, is 80-90 per cent cheaper than in the US, it is currently rated higher on quality parameters, thanks to the advantage of a more Americanised accent.

Thus, BPO is no more a development that can receive cursory attention. Constant analysis, follow-up and strategies to maximise benefits and minimise risks are needed.

Indian IT companies have been quick to grasp the emerging opportunities. The emergence of BPO outfits was the proverbial shot in the arm for the seemingly sagging IT industry. As the BPO business swelled, it started accounting for a larger share of business of almost all big IT companies.

When the clouds of unemployment loomed large on the industry's horizon and the educated class found itself in a limbo, as non-existent jobs and golden handshakes elsewhere made things bleaker, BPO emerged as the silver lining.

Being a sunrise sector, jobs started shifting from the recession-hit industries, providing employment to a large number of youth entering the job market and ready to grasp new opportunities.

A brand new career option beckoned these enthusiasts. It has brought sizeable income to those who were worried about their careers and, more important, is a safe-margin business in foreign exchange for all leading companies in IT-enabled services.

With so many points tipping the scale in favour of BPO, it would seem cynical to look at the underside, a larger social issue that has unfortunately been overshadowed by the more powerful economic one.

The emergence of BPO units in India has brought economic independence to many young people. So a year back, if you were smart, around 22-25 years of age, able to communicate well in English, a graduate or having an equivalent qualification and willing to work at night, you would have sailed through the interview in an international call centre — the seat for BPO.

At present, most of the eligibility factors for getting a BPO job have remained the same, save one. A number of BPO businesses are now recruiting undergraduates as well.

While this change in recruitment policy has provided employment to those who did not have access to higher education owing to financial or other such constraints, there is a major worrying factor as well. The lure of big bucks offered by BPO units has seen a large number of students dropping out of colleges and opting for jobs instead. Could this trend snowball into something ugly 10-15 years down the line, where the desire for higher education is dampened or where the BPO sector turns out to be a catchment area for all those who have no desire for further studies?

Communication skills, customer relations and people management are the current hallmarks of the BPO industry. It is claimed that a person working in this industry can make a smooth transition to many other service-oriented industries, such as health, hospitality and tourism.

A distinct movement of professionals from areas such as software and finance to this industry is, again, a new trend. For instance, NASSCOM estimates that the percentage of software professionals moving to this industry could settle at 25 in 2004.

A number of companies, such as Transworks, Daksh eServices, IT&T, Parsec Technologies, ATS Services Pvt Ltd, Sapphire Callnet and Spectramind, have witnessed this shift — different from when only fresh graduates were herding at call centres.

A rise in high-end services, demanding vertical expertise by customers, is another factor triggering the setting up of BPO outfits and contact centres to hire professionals with the required skill sets.

Hence, it is argued that given the huge and varied openings in this sector and the training imparted to handle all kinds of pressure at the workplace, the youth should have no hesitation in entering this industry. Career opportunities, too, are expected to multiply exponentially.

Surprisingly, the lure of BPO has not been restricted to the taught; it has engulfed the teaching community as well. The increasing training requirements of this nascent industry are encouraging BPO firms to poach on academic institutions. Long waits for tenure jobs in academic institutions and poor pay are pushing teachers to desert the classroom and seek call-centre jobs for monetary gains.

Call-centre managers say that there is a strong trend of teaching professionals moving to the BPO industry, as their good communication skills and command over the language come in handy.

A number of academic institutions, which are already facing a dearth of good teachers, will find it increasingly difficult to retain the better ones, as this nascent but fast-growing industry lures them with a fat pay and an assured job.

These are signals of lurking dangers in the educational field, which may gather momentum and hack at the base that supports our education system.

The West has been facing stiff competition from Asians, particularly Indians, as far as jobs are concerned. The US alone lost about three million jobs in a variety of fields since the presidency of Mr George Bush Jr. Not surprisingly, BPO business in India, among other countries, has started facing the backlash through new legislation aimed at curbing the transfer of jobs as well as through cancellation of contracts — the latest being that of TCS.

The US Bill barring outsourcing of government contracts has emanated from this fear of growing unemployment and transfer of jobs to low-wage developing countries.

Education has been a trump card for Indians looking for a job in the US. Today, educated Indians migrating to the US are looked upon as a threat to Americans as far as local employment is concerned.

In India, can one ignore the emerging situation where youth prefer money to education? At present, it is a win-win situation as far as everyone involved is concerned — unwilling to give up a bright today for an unknown tomorrow.

But who will take the responsibility for the future of the country? What happens when the BPO bubble bursts? Or when the competition takes away the cream of the BPO business from India? What happens to the IT industry, which is currently reeling under competitive pressures and margin squeeze?

And on the social plane, what about the thousands of college dropouts with no formal education and who may be left jobless owing to circumstances beyond their control? Is there any guarantee that there will emerge another business which can absorb the flood of uneducated unemployed, who could be suddenly out in the cold?

The concern is that easy money too soon and at the expense of education can turn India into another America.

What is needed are some effective disaster management solutions and strategies as far as BPO is concerned. Corporates venturing into the BPO business should look a little beyond their pockets and into the future — further than the immediate bright horizon.

Must we walk with blinkers, or look around to pick up danger signals, visualise and take responsibility for India's youth?

Big corporate houses should give serious thought about providing support programmes that would give young people an edge no matter what turn the BPO industry takes.

Rather than focus on costs, companies should look at how to maximise the quality of service they offer, by providing better training, a comfortable working environment and better management. That will improve staff motivation, increase productivity and reduce attrition rates, thus cutting costs.

What is required is a futuristic approach with futuristic solutions to meet the silent but sweeping challenges. Education should not take the backseat. It should be given the importance it deserves.

(The author is a Mumbai-based consulting economist.)

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