The business process outsourcing train will keep chugging fast for India with the new year round the corner but the question is what kind of baggage will it bring.
As only a fraction of the commoditised work has so far migrated globally, in 2005 traction will be maintained mainly by attracting larger call centre dominated volumes instead of significantly going up the value chain, foresees Avinash Vashistha, managing director of the outsourcing consultancy neoIT.
There will be a spate of outsourcing announcements as the year progresses, driven by the outcome of the results of the US presidential elections.
Spadework for this had begun before the elections but the moves were kept under wraps for fear of a political backlash in an election year.
The year 2005 will be the year of secondary cities for Indian BPO, which will increasingly expand into destinations like Mysore, Mohali (Chandigarh) and Kolkata. The last is sprinting quite a bit with Reliance Infocomm being the latest to announce a centre.
These second order cities will compete with the Philippines, Russia, Vietnam and second order cities in China. Bangalore, Delhi, Mumbai, Shanghai and Beijing and destinations in California and Boston will not be in the running, as they will become too costly for the volume-end of the BPO business.
"Businesses migrating to the secondary cities will seek a 30 per cent cost saving," predicted Vashistha. Bangalore in particular will emerge as a primary destination for outsourced R&D and product, which requires costlier high-end skills.
Indian prospects for hosting more complex work, which involves migrating entire processes, will be partly hampered by the combination of two factors -- India's continued inability to have in place a data protection statute and the emergence of low-cost destinations like the Czech republic and Hungary which have just come within the ambit of an enlarged European Union and its laws.
Similar data protection is also available in NAFTA destinations like Mexico and Canada, which will also bid to host entire processes.
"If Indian suppliers do not start opening centres in the EU (Infosys subsidiary Progeon has already done this with a Czech centre) and NAFTA, they will miss out. To become big players, they have to be there before the market matures and position themselves as global players," says Vashistha.
Deigo, a European conglomerate, was considering migrating to India 'order to cash' (the entire process from order placement to payment) work but finally chose Budapest.
It is difficult to migrate entire processes like procurement and supply chain, HR and core banking, which also cannot be broken up. And when it comes to entire processes, the security concerns become several fold. Absence of data privacy and security laws works in many ways.
For example, it is not yet mandatory to maintain personal records of individual workers so that security clearing them (seeing if they have a clear track record) becomes difficult.
As outsourcing will not wait and jobs cannot be broken up, some high end jobs are likely to miss Indian shores, according to present reckoning. The continued deficit in domain knowledge will also play a part.
"Global migration of business processes is becoming increasingly country, city and company agnostic and the winners will be centres of excellence, wherever they may be located and whichever company or conglomerate they may belong to. And clients are increasingly looking at multi-company, multi-country supplies," observed Vashistha.
