The Telegraph
Since 1st March, 1999
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Shakeout scare for BPO firms

New Delhi, Dec. 25: The business process outsourcing (BPO) industry, like the telecom sector, will witness a major shakeout in India. The weeding out has already begun with more than 40 BPO ventures closing down shop.

The National Association of Software and Services Companies (Nasscom) feels that several companies will fold up because of the searing heat of competition before the consolidation phase actually kicks in.

The apex organisations of software and service companies also insists that the recent moves by companies like Dell and Lehman Brothers to revert a part of their outsourced operations back to the US is just an aberration and certainly doesn’t indicate a trend.

Top Nasscom officials said such short-term hiccups would continue but felt that there was no cause for alarm.

“It is a good sign that the customers are more demanding and the Indian industry is capable of meeting these requirements. In addition, the anger in the US due to job losses is primarily because of the recession there. India and its BPO operations just happen to be the fall guys who have had to take the rap for it,” said Nasscom president Kiran Karnik.

He said the US market and those opposing BPO are aware that a fall in the information technology enabled services (ITES) in India will impact other businesses in the US.

“The demand for consumer goods — particularly the big brands from the US — has received the impetus, primarily due to the consumption by the IT professionals in India. If there are job losses here, then there will be fall in demand for consumer goods too,” said Karnik.

Nasscom is confident that this is a passing phase. The impact on the BPO sector seems to be huge due to the noise made by the US senators with crucial elections looming next year.

While the diatribe in the US against Indian BPO companies may not die down completely after the elections, the consolidation in the sector here will help to address the issues in a far more coherent manner, Nasscom officials felt.

Karnik said, “There is realisation in the US that in the next five years, the country could face a shortage of human resources to undertake different kinds of jobs that they are opposing today. Companies like Intel and IBM have already supported the need to make India a outsourcing hub.”

He, however, warned, “While the good aspect of the issue is that the climate for BPO has not worsened, we are not over the hill as yet.”

Nasscom vice-president Sunil Mehta was confident that the IT software and services industry would continue to grow at 26-28 per cent which he felt was a sure sign that the orchestrated campaign against Indian BPO operations had had no major impact in the US.

Not a single legislation seeking to block the flow of call centre jobs to India has been passed, but Nasscom isn't taking any credit for it. However, it continues its quiet, behind-the-scenes lobbying of US politicians, industry and interested groups to ensure that the hate campaign against India doesn’t escalate.

Nasscom has already renewed its contract with Hill & Knowlton — the US-based professional public relations firm hired to help counter the negative image about outsourcing — till March 2004.

The agency lobbies policy makers in US and Europe to build goodwill about India's BPO sector.

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