Businessworld

(MIT) laboratory = of computer=20 science, reckoned India has some 50 million English-speaking = people,=20 each of whom could earn $20,000 a year doing office work = =E2=80=98proferred=20 across space and time=E2=80=99, making a total of $1 = trillion. That=E2=80=99s twice=20 India=E2=80=99s current GDP.

Other predictions were = more restrained=20 and were then upgraded even as the sector grew 55-60% a = year. When=20 the Nasscom-McKinsey study was released, it emphatically = stated that=20 IT-enabled services will employ 1.1 million people and earn = $17=20 billion by 2008. That was soon revised to $24 = billion.

As on=20 31 March 2003, the sector employed 171,000 professionals. It = has $1=20 billion invested in it, creating about 100,000 smart = cubicles in 7.5=20 million sq. ft of space. And it generated revenues of $2.3 = billion=20 in 2002-03.

The rapid growth is throwing up winners = (See =E2=80=98The=20 Winners And The Losers=E2=80=99 on page 30) who did nearly = everything right=20 and are now set to take on a larger share of the BPO pie = even as=20 they gear up to meet competition from the world=E2=80=99s = biggest BPO=20 corporations which are eyeing India. About 8-10 Indian = start-ups are=20 set to clock $100 million in revenues in the next 18-24 = months,=20 purely on the strength of their current = contracts.

Yet, a=20 vast majority of the 310 start-ups (Nasscom figures) are = headed for=20 a dead-end. (Assocham puts the total number of start-ups at = 400.)=20 Their capacity utilisation is less than one (of the three = shifts).=20 Many of these are companies that converted their empty = basements and=20 warehouses into BPO units. Or firms with $10 million-20 = million VC=20 funds that ran out of cash without creating anything more = than white=20 elephants. Dennis Ross, global general manager, Convergys = Corp.,=20 notes: =E2=80=9CIt=E2=80=99s the desperate players who are = responsible for the=20 irrational pricing behaviour. We get calls from about 6-8 of = these=20 companies to buy them out.=E2=80=9D

They have driven = down prices to=20 grab business, but have failed to deliver. They were always = clueless=20 about people, processes or technologies =E2=80=94 the three = key elements of=20 the BPO business. One example: the Noida-based Phoenix Shoes = took on=20 a job in the niche area of psychological counselling without = having=20 the expertise to pull it through. Many players who jumped in = recklessly have shut shop while others are desperately = looking for=20 white knights. Sunil Mehta, vice-president, Nasscom, says: = =E2=80=9CThe=20 severe consolidation which has already started will actually = be good=20 for the industry.=E2=80=9D

Meanwhile, the industry = has more to worry=20 about than just reckless start-ups. Primary among those is=20 infrastructure. While telecom networks are state of the art, = getting=20 a connection still takes up to three months. Unreliable = power supply=20 is forcing units to create their own back-ups. Roads are bad = and=20 airports are in dire need of repairs and upgrades. = Nasscom=E2=80=99s Mehta,=20 for instance, just met a US telecom major which plans to = offshore=20 work to the tune of $2 billion. However, its only concern is = the=20 infrastructure in India. Such perceptions could indeed = dampen=20 spirits.

Another major problem is the high attrition = and=20 growth aspirations of the workforce. At least 60,000 of the = 171,000=20 workforce change jobs every year. About 80% of them look for = better=20 prospects within the industry. Agents want to become team = leaders.=20 Team leaders want to upgrade to supervisors, quality = professionals=20 or operations heads. The HR problem threatens to soon become = grave.=20 Says Amit Maheshwari, CEO of the Boston-based I-vantage, = which=20 advises GE, Ford Motor and Baxter Healthcare: =E2=80=9CIn = the next 8-12=20 months, recruitment will be a significant issue. Good agents = are=20 becoming hard to find and with tardy infrastructure, big = moves to=20 the much-talked-about smaller towns will take longer. This = means=20 costs will rise, making it difficult for small VC-funded = companies=20 to survive.=E2=80=9D

And finally, the success of = offshoring to India=20 has woken up other English-speaking countries such as South = Africa,=20 Australia, New Zealand and Canada. All these countries have = a large=20 pool of professionals. Companies are already beginning to = set up=20 centres there. But the biggest perceived threat to the = Indian BPO=20 industry is from China, which has made English mandatory in = schools=20 and colleges. In another four to five years, China could = pose a=20 challenge in non-voice businesses, if not voice-based = operations.=20

The only way to tackle such threats is to continue = to do the=20 job as best as expected and to re-engineer client=E2=80=99s = processes,=20 thereby adding value. The ongoing shake-out in the industry = will=20 only make strong players stronger and weak players even = weaker.=20 Those who emerge out of this current round of consolidation = will be=20 the big boys of the Indian BPO industry. But the silver = lining is=20 that it will bring order to the chaos. India could well = become the=20 world=E2=80=99s BPO capital in the next three years. And the = effort must be=20 to ensure that Indian BPO companies get business not just = for the=20 cost advantage, but also because the job is best done=20 here.