Analyzing common myths of Indian BPO Industry

May 5, 2012: Indian IT-BPO industry is relatively a young industry when compared to sectors like FMCG and Automobile industries. But over the last decade Indian BPO industry has grown by close to 20 times to reach 16.9 billion USD in 2011. In the same period, the growth rate of Indian IT industry was just 9%. However as any industry, Indian IT-BPO industry is also at crossroad now. There are talks in town regarding the possible decline of this industry. A number of myths have been put forward as reasons for the decline.

The common myths that we hear on a frequent basis include rising labour cost, advent of Philippines and China as larger BPO locations, lack of product focus and scarcity in innovation. However as per Nasscom latest report, Indian still remains the largest BPO services market in the World. How far these myths could have a desired impact on the growth of Indian IT-BPO industry in the coming years?

It is an analytical exercise to see why and how these are just myths and no realities. I am optimistic about the future growth of Indian IT-BPO sector. Let us see why we can safely ignore these common myths. Regarding the expected increase of labour wages in India by 10% every year, this increase is still quite less and not alarming. Even with this maximum expected 10% increase, the gap between Indian wages and average US wages cannot be covered in another twenty years assuming US wages are not going to change. Now that is a generous assumption, isint it?

The other myth is that Indian IT-BPO firms lack imagination and innovation. They are too much skewed to the offshore operating model. This is utterly baseless. Last year we saw many Indian BPO firms like Infosys and Genesis successfully deploying onshore model. They are investing heavily in emerging technologies like cloud computing to increase the breadth and depth of their service offerings. Isint it innovation? We don’t need to forget the fact that it was the same Indian BPO industry which put innovative offshore models including outsourced product development and managed services into real practice. The other innovation that I could observe was in relation to pricing models. Indian firms are now ready to adopt on-demand pricing and pricing as you go models.

Don’t go by some names and create a myth. Apple and Microsoft are not the only 2 companies in the world making products. There are so many Indian IT firms like Infosys, Polaris, Flexcube (now Oracle), Subex, SunTec and so on who have made successful products. However, this product model need not work for services firms as their operating models are different. But the myth that India lacks skills to develop successful software products is not true.

Now the last, but not the least myth is about a potential threat from countries like Philippines and China emerging as larger BPO destinations. Though we can’t deny the fact that both countries have their own strengths like neutral accent and better infrastructure, they lack the resourcefulness and scale to threaten the position of India in global BPO market.

Hence I would like to emphasise that these are just myths. They won’t come anyway near the realities paradigm.

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