India is closely associated with the offshore Business Process Outsourcing (BPO) industry. And with good reason, it remains the biggest single centre for BPO, having pioneered the sector in the late twentieth century. “For many, especially in the West, IT and business process outsourcing to India simply "is" outsourcing,” says Ralf Ellspermann, CEO of PITON-Global, an award-winning BPO provider. Much of this dominance came from the early lead that India had. It was the first place that saw large-scale offshoring of IT and BPO services. These were initially captive operations providing front and back-office services for large multinationals who could justify the set-up costs with the scale of subsequent ongoing savings. However, it was not long before the local workforce developed their expertise, enabling them to start their operations as third-party outsourcing providers, hugely expanding the market for BPO services. It was no longer just for multinationals, but any business regardless of size or industry.
The consequence of this was not just to expand the client base, though. “With the potential for almost anyone to establish a BPO, almost anywhere in the world, it meant that India could no longer assume it was the only option. Yet, it remains, by far, the largest offshore ITO and BPO destination in the world,” says Ellspermann. So, how has BPO in India retained that dominant position? In short: size and domain expertise. The sheer scale of India has played a large part in its success. With a population of 1.4 billion, the sector has a huge pool of talent, even allowing for the largely rural population; plenty of English-speaking Indians can staff BPO operations. “And that size also brings other advantages. Indian BPOs are often first in any search because of the long-established sector and sheer volume of options available to businesses. And the government also helps, promoting and supporting an industry that provides close to a tenth of national GDP,” explains Ellspermann.
But while these advantages have protected the Indian BPO sector, they might also prove its weaknesses. The industry has grown enormously, employing millions of Indians. Still, even with a population of 1.4 billion, there is a limit to how many have sufficient language skills, and some operators can struggle to find suitably skilled staff. Additionally, there are some signs the sector is outgrowing the infrastructure. Increasingly, operators have to locate in second-tier cities, where the communications infrastructure is not as good. The government is rushing to improve, but it has a big job on its hands. And outside factors are influencing business decisions as well. The Covid-19 pandemic, for example, provided a vivid illustration of the dangers of geographic consolidation, and many businesses are deliberately choosing multiple locations and providers for outsourcing and not just BPOs in India.
And there are plenty of places that have been keen to compete. “One of those that has emerged as a key challenger to India's BPO dominance has been the Philippines. With a robust education system and cultural links to the West, there is a high level of English fluency among Filipinos, frequently with little to no accent,” says Ellspermann. The result has been that more businesses, especially from the US, UK and Australia, have chosen the Philippines for their call centre outsourcing needs over India. The Philippine BPO sector has, as a result, seen the same type of rapid growth that India experienced at the dawn of the industry. “While BPO in India might still be the world's biggest outsourcing destination, it is facing a stiff challenge from the Philippines and other nations keen to get their share of the US$250 billion outsourcing market,” adds Ellspermann.
