The Future of BPO (Business Process Outsourcing) in India

India has emerged as a hot destination for BPO work in recent years. The success is mainly due to the fact that there is a ready availability of large numbers of resources fluent in English and the diligent and hardworking efforts put in by the companies in India that do BPO work.

Further, the fact that Indians are well educated (by Asian standards) and that there is a humungous body of resources who have graduated in commerce and technology has meant that the BPO story took off in right earnest in India.

Added to this is the fact that the demographics favor India since a majority of its population is young and under 30. This is the so-called demographic dividend wherein a country that is youthful reaps the fruits of having a labor force which can be tapped into. All these reasons have conspired to bring about a revolution in the way the Indian BPO sector has performed.

However, things are not all that hunky dory since many other countries in Asia seem to be playing catch-up with Philippines emerging as a viable alternative to India. One of the reasons for the completion is that the wage differential that India had over the West is eroding since the industry is maturing and hence wages of the workforce are going up.

This means that other low cost rivals like the Philippines can tap into the advantage that India hitherto had.

Further, there is a certain level of saturation that has set in India with the law of diminishing returns coming into play. These factors mean that India has to watch out for competition from other countries. Of course, there are certain steps that can be taken to arrest the decline and ward off the competition.

For instance, Indian BPO companies can branch out into Tier II and Tier III cities so that their wages are competitive and that a skilled workforce that exists beyond the cities can be tapped into. Moreover, the costs can be kept down because of the fact that these cities have a lower cost of living and doing business than the Tier I cities.

The most important step is that Indian BPO companies can move up the “value chain” which means that they can migrate to higher end knowledge work or KPO which is more cerebral and pays well.

The point here is that it is time for the Indian BPO industry to take the phenomenon to another level and this is precisely the reason for many Indian BPO’s to take up KPO work as well as opening centers in smaller cities.

Finally, the Indian BPO industry has to realize that once the industry matures, profit margins and return on investment stagnate and reach a plateau. It is for this reason that the time is ripe for the Indian BPO sector to innovate and move up the curve. With other nations snapping at its heels, the Indian BPO sector cannot afford to take it easy nor be complacent.