India Losing Out in Voice and Call Center Industry

April 15, 2014 Posted by India Briefing Reading Time: 3 minutes

DELHI – According to a joint report on India’s Business Process Outsourcing (BPO) industry by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and KPMG, India is currently losing about 70 percent of new business in its BPO industry to competing jurisdictions, such as the Philippines and Eastern Europe.

BPO entails the outsourcing of specific operations, responsibilities and business functions to third-party providers. India’s BPO industry has exploded in recent years as overseas firms have increasingly outsourced operations to take advantage of India’s comparatively cheap labor and rents. Foreign call centers in particular have been exceptionally popular due to the country’s relatively well-educated, English-speaking labor supply.

“It is estimated that in the ongoing decade India might lose about US$30 billion in terms of foreign exchange earnings to the Philippines, which has become the top destination for Indian investors, thus the need to reduce costs and make operations leaner is increasingly becoming significant across the BPO industry,” the secretary general of ASSOCHAM, D.S. Rawat, said while releasing the results of the study.

The Philippines in particular has begun attracting many Indian BPO firms seeking to tap into the nation’s pool of well-educated, English-speaking, talented and employable graduates. According to the report, around 30 percent of recent graduates in the Philippines are immediately employable in contrast to 10 percent in India, where most graduates must undergo time-consuming training before beginning work.

Warning that India is at risk of falling further behind other competitors over the next decade, the report suggests several steps that could be taken to reduce BPO industry costs by up to 30 percent, including moving current firms out of major cities such as Delhi and Mumbai to tier two and three cities. In particular, the expansion of non-English BPOs to tier 2 and tier 3 cities is projected to provide services to both the telecom and aviation sectors, and will play an increasingly significant role in BPO industry growth according to the ASSOCHAM-KPMG report.

Projects such as the National e-governance Plan (NeGP), Unique Identification Authority of India (UIDAI) and other government-funded initiatives are expected to perpetuate industry growth – most notably in smaller cities and towns.

“Lower attrition rate in smaller towns is a big positive owing to lower recruiting and training costs, while there is comparatively high attrition rate of 30-35 percent in Tier I cities. Cities like Ahmedabad, Chandigarh, Coimbatore, Dehradun, Jaipur, Kozhikode, Nagpur, Nashik, Palakkad and others can help meet the 50-60 percent of projected talent requirement [in the] BPO industry over the next five years,” it added.

While India remains one of the world’s largest BPO sourcing jurisdictions with a 37 percent share of the global BPO sourcing market, conditions within the industry appear to be changing rapidly as automated call technology such as speech recognition software brings traditionally outsourced operations back to the U.S., Europe and nearshore (geographically closer) countries.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as as well as liaison offices in Italy and the United States.

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