Jul. 5, 2009 (The Hindu Business Line) --
K Bharat Kumar
Murthy
The BPO industry which, for long, was seen as the poorer cousin to the IT services industry, may be leading recovery from the recent economic slump. This stems from decision makers needing to cut costs on the operations front, as well as on the technology front. And, across the outsourcing spectrum, first-time outsourcers are trying out India vendors. This is the gist of what Phaneesh Murthy, CEO, iGate, had to say, among other things, when eWorld met him recently.
Aftermath of economic turmoil
There a few trends here. First, the Financial Services companies in the US have reached the end of their M&A work and consequently are starting to make decisions. That's a positive. Normally, you would have expected a flush of projects in the January-March quarter but because of the M&A work, no decisions were made at that time. The most important thing now is that the decisions are getting to be made.
The second trend is that recovery in the outsourcing space will be BPO-driven. Fortune 1000 CIOs spend 17-19 per cent of their IT dollars in India, while the F1000 COOs spend only about 2-3 per cent of their operations dollars in India. With the need to dramatically restructure costs, I see the operations dollar tracking upwards quite significantly now and a big wave of BPO work coming to India. The challenge, on the negative side, is that one never knows if the operations work is going to land in captives (owned by those clients) or with third-party vendors. (Typically, the bulk of IT work always lands with third parties.)
The third trend is that IT will continue to be under pressure, from an overall dollars budgeted this year. .I don't see a significant up-tick in the budget also. In a bad environment, the tendency is to be more conservative. Even 2010 will not be great from an IT perspective but I think there is a lot of BPO revenue that will come our way.
The most fascinating trend I have seen in the recent past has been that for the first time in as much as I can remember we opened four new customers all of which are first-time offshorers.
Challenges to the industry now
The biggest challenge in front of the industry is the lack of Government sponsorship to fight newer regulations on the visa side. In a sense, India's largest natural resource is its people. And that risk has become extremely high in the US. If the Durbin-Grassley Bill gets passed, it will have a huge implication on the industry. Also, Obama's overall mindset on TARP (Troubled Asset Relief Programme) money users not going offshore is a big challenge. He believes that jobs should remain in the US and that has an effect on many corporates. These are the headwinds. Of course, the positives are that we play in a cost reduction game and `faster-cheaper-better' game and hence more and more dollars will end up coming to India. Those are the tail winds, particularly on the BPO side.
