Gartner predicts doom for Indian BPO players

The global BPO market is expected to touch $13.7 billion by 2007 from its present size of $1.8 billion. Even by 2004, the market is expected to grow up to $6.4 billion. However, this seven-fold increase in market size in the next five years does not necessarily mean good news for the Indian service providers. Gartner analyst Debashish Sinha warned that India might totally miss out on this $13.7 billion pie unless the Indian players do not undergo a radical change in their business model.

Sinha's prescription: Indian service providers should prioritize process and domain expertise over operational expertise. "Currently, most of the Indian service providers are primarily concentrating on running the contact centers. Though this is important, in the long run they would need to focus more on domain/process skills to compete on a global outsourcing market," he said. 

Speaking at the Gartner Annual Summit 2003 in Mumbai, Sinha also debunked the long perpetrated myths about advantages India offers. Employee loyalty, perceived to be an advantage two years back, just does not exist today with industry attrition rates reaching up to 40 percent. Even the cost and wage arbitrage are becoming less of an issue with Indian players charging around $six-$16 per hour as against $29-$35 in the US. Just like India, even Philippines, Jamaica, Ireland and Canada are today having access to a large labor pool.

According to Gartner, Convergys CMG was the top contact center vendor in 2002 with revenue of $1.39 billion, followed by EDS with $1.1 billion and Teletech with $1.01 billion. In comparison, Wipro Spectramind and Daksh were the biggest Indian offshore contact centers with revenues of $39 million and $33 million, respectively. This, feels Sinha, makes it obvious that Indian players have a lot of catching up to do. He also predicted that Indian vendors with inherent IT skills have a better scope than pure-play BPO players to succeed in the Long run. This would be good news for Spectramind (Wipro), Progeon (Infosys), Msource (MphasiS) and E-serve (HCL). WNS and AFS in the airlines domain were also specifically pointed out as two potentially growth companies.

With US already suffering 6.4 percent job loss owing to outsourcing and the number on the rise, Indian vendors, advised Sinha, should now also brace themselves up for the consequent backlash.

Cyber News Service

Mumbai