The Drivers of the BPO Phenomenon: Globalization, Economics and Geopolitics

The main drivers of the BPO phenomenon are globalization, economics and geopolitics. To elucidate, ever since the global economy started getting more integrated and interconnected, there has been a concomitant movement towards opening up of the economies of the developing countries to greater interaction with the west. This “flattening of the world economy” has meant that the East was no longer ensconced in protectionist walls but threw open the doors of its economies to companies from the west.

Any developing country that had invested in infrastructure and education could reap the advantages of the opening up of the global economy. This was what happened in the case of the BPO sector where the presence of a large pool of English speaking graduates along with availability of broadband brought on by the huge investments made in the Telecom and Software sector during the dotcom boom were leveraged by companies to communicate and plug into the economies of the west.

The second driver of the BPO phenomenon is the economic aspect where the efficiencies brought about due to the economies of scale and the theory of comparative advantage which stated that countries benefit by exporting goods and services when they are cheaper to be made in the home country and benefit by importing goods and services from countries where they are cheap. This mutually beneficial trade between the west and east gave rise to the emergence of the software and the BPO sectors that capitalized on the wage differential and the advantage of low cost production to successfully harness the power of technology and communication.

The third driver of the BPO phenomenon is the geopolitical aspect where the countries in the West encouraged greater interaction and cooperation with the countries in the East as means of facilitating world trade and increasing globalization.

The point here is that it made economic and political sense apart from greater international cooperation leading to gains to all countries to encourage the technology and BPO sectors.

Further, the three drivers that we have discussed are intertwined and interlinked where each feeds on the other leading to greater synergies between them. Indeed, they have created conditions for the emergence of booming BPO sectors in Asia thanks to this “triple convergence”.

Finally, the BPO phenomenon has also been driven by demographics as the populations in the West age and at the same time, the populations in the East are youthful leading to a comparative advantage in tapping the huge pool of skilled workers in countries like India. Hence, though the ongoing global economic recession has undermined some of the gains, the BPO sector is still thriving because of the confluence of these factors.

In conclusion, while one cannot prognosticate as to the future of the BPO sector a decade from now, for the time being the economies of the west and the east are conjoined and this is indeed a positive development from the perspective of the drivers of the sector as discussed above.