Today, technology is the great enabler for pretty much every kind of business proposition being schemed. However, everyone is more or less also aware of how brutal the rapidly evolving world of technology can be on the fate of existing businesses — something that I wrote about here when looking at the future of Xerox through the lens of the diverging fortunes of Kodak and Fuji. In India, the trajectory of former phone tzar and India's most beloved handset maker Nokia illustrates this example more poignantly than any other company. But for an entire industry to go up in smoke almost overnight is surreal — and that's exactly what seems to have happened to India's Business Process Outsourcing Industry, especially its voice-based businesses.
According to India's top industry apex body Associated Chambers of Commerce and Industry of India (ASSOCHAM), the country witnessed a massive 50 percent flight of BPO business — currently pegged at around $25 billion — last year. This figure includes both low-end voice businesses, as well as back-office accounting and financial-type work, but the main flight is in voice-based businesses. The primary culprit? India's nemesis, the Philippines. Apparently, the Americans did a better job of colonizing them than the Brits did us, since the country's large, English-speaking populace there can speak the language fluently and with a natural American accent. Moreover, 30 percent of the graduates in the Philippines are employable, compared to 10 percent in India, where a lot of time is spent on the painful task of training new recruits in an industry where churn rates have reached an astonishing 55 percent.
It is ironic that the same disruption that India engineered in the West with its IT and BPO outsourcing model is exactly what is happening to it today, thanks to the Philippines. According to Tholons, a research outfit that tracks trends in this industry via its Top 100 Outsourcing Destinations for 2014 list (PDF), Manila is now the second most important venue for BPO businesses after Bangalore, pushing Mumbai one step lower to number three. Sure, other Indian cities still have a strong showing on the list (Delhi is fourth, Chennai is fifth, Hyderabad is sixth, and Pune is seventh), but Philippine cities are rapidly gaining prominence. Seven Philippine cities were in the top 100, and two — Manila and Cebu, ranked eighth — were in the top 10. Other parts of the world are also gaining traction in this sector, such as Krakow, Poland (ninth), and Dublin, Ireland (10th).
ASSOCHAM earlier this year also stated that as much as 70 percent of incremental Call Center and voice business in India for this year will also be lost to foreign competitors. And it's apparently only going to get worse. "It is estimated that in the ongoing decade, India might lose $30 billion in terms of foreign exchange earnings to Philippines, which has become the top destination for Indian investors," ASSOCHAM secretary general D S Rawat said. The new Indian government's fixation with promoting Hindi over other languages may not help the situation any.
So it must be some sort of relief for Indian industry folk to see that the country has been able to claw back some businesses from the Philippines . Apparently, a high churn rate there along with a perception of increased risk in doing such a large volume of business in a small country have been some factors helping nudge some customers back to India. Also, apparently Indians in BPOs are also good at executing sales functionalities which companies are interested in tacking on today as they look towards going beyond just the cost-centre approach by milking their BPOs for some revenue. The Economic Times reports that Telstra and Best Buy are companies who have relocated to India because of this 'sales' factor. Aegis BPO, which is part of the Essar Group, apparently moved 600 jobs to India from the Philippines for this very reason.
Then, there's the domestic business angle. Ten years ago, BPOs would turn their noses up at the thought of going after local business, but today it could very well turn out to be the lynchpin of their existence. Aegis, for instance, is looking to grow by a massive 5 percentage points just because of the boom in the banking sector thanks to the drive towards financial inclusiveness of the rural population. Adding 300 million bank accounts will mean an unparalleled deluge of BPO-related work. Consequently, Aegis has already begun snapping up business from India's public sector banks including Bank of Baroda, Union Bank of India and Bank of India, including the setting up of a 1,200-seat delivery center in Bhopal and Gurgaon for Punjab National Bank earlier this year.
There's also another emerging trend boosting the fortunes of India's BPO future—one that leverages the very strength that made India an IT outsourcing hub in the first place. The days of pure-voice plays is fast fading. Companies are increasingly seeing a tech component to call center functionalities, starting off with email and chat integration into existing voice infrastructure setups and then more sophisticated and flexible delivery models such as Platform BPO and cloud based-Business Process as a Service (BPaaS).
Research outfit Tholons suggests that with these kinds of emerging innovations in the BPO realm, India will continue to dominate the world of BPO and in some ways prevent the demise of the sector that was otherwise imminent.