Tuesday, June 12, 2007

Is India a BPO- Perfect Nation????

We all know that today BPO sector is booming like anything and lot of young graduates seeing their future in this sector. So, recently I read article on this sector and came to know very strange things about this. A recent study shows that 60 % of companies (software and outsourcing) fail to meet expectations in India. Lot of western firms, who initially shift their operations to fully owned units in low-cost hubs like India, becomes less attractive to global players. It’s a reality and in the last few months several leading MNCs have shut down their Indian captive centers. A clutch of global firms like GE, British airways and Citibank have already sold off their BPO subsidiaries. And others like Microsoft, Cisco and Texas Instruments are outsourcing the less critical work to third parties, Instead of their Indian companies.

The Bitter truth is MNCs are increasingly logging off from India.

A recent research shows that majority of MNC-managed captive centers in areas like product engineering, R&D, IT and other BPO services are facing grave problems. Initially we all know that large number of global IT firms set up internal campuses in India because of factors like cost savings, availability of a rich talent pool and capability to execute large projects but the reality is different. Over 60% of the captive centers are struggling due to lack of management support, spiraling costs, attrition and integration issues.

The things don’t change suddenly but it starts for the last two years. In the last 12 months there has been a tremendous cost escalation for manpower and infrastructure. This is making difficult for global firms to run small operations successfully.

Initially when MNCs decided to set up captive units, they underestimated India’s cost structure and hence the operational expenses. The global players think that there were savings to be made not just in skilled labour, but everything else like infrastructure and other fixed cost but things changed in last two years, the salary hikes among the highest in software and BPO segments and real estate prices have zoomed even in small towns.

While costs are important, there are other factors forcing a rethink among MNCs. One, India has a high rate of attrition, coupled with low productivity levels. According to one study the annual attrition rate is as high as 30 percent. This makes it more expensive for MNCs as they have to either keep a huge bench (a waiting pool) or consistently hire HR consultants to hire new sets of employees.

Also, India’s Popularity in this sector among global players reduces because of emergence of new nations like China, Russia, east Europe, East Asia and other nations which have high productivity and good infrastructure facilities.

I write this article because today lot of people want to pursue their career in this sector not only after graduation but also after PG courses….and because things are changing very fast in this sector, the one who have interest in this sector should see whether they can have a long future in this sector or not.


Anonymous said...

hey wonderful information man. seriously. BPO's on the slide!!! I did not imagine that!

Anonymous said...

I certainly believe otherwise. BPO is one sector which maybe be going down but we cant disregard it totally.. I think in terms of Back office jobs - as customer support - India remains unchallenged because of english speaking Undergraduates who can be employed for cheap. Maybe the Higher Ranks command larger salary , but they make a minority of the force. China is coming up in ENGLISH, but not briskly. How long do you think India will have its advantage? Yogesh, can you enlighten me?

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