India's new rules to boost domestic BPO market

Business process outsourcing vendors will benefit from relaxed rules on use of call centers in India.

Business process outsourcing players have applauded the Indian government's decision to relax the conditions for the sharing of domestic and international call center infrastructures in the country.

Virender Aggarwal, Satyam Computer Services' head of the Asia-Pacific, Middle East, India and Africa, welcomed the Department of Telecommunications' decision, describing it as "a logical development now".

Aggarwal told ZDNet Asia that the infrastructures installed in the Indian call center and BPO industry have become "very large", and there are "significant" under-utilization capacity issues. The new changes will ensure better utilization of investments.

Outsourcing rival Hewlett-Packard agreed. "This decision is a tremendous boost for HP and its BPO business in India as it would allow for better utilization of existing infrastructure," said Sanjay Singh, country manager for HP's BPO operations in India.

"Our engagements with the domestic sector are on the rise, and the relaxation of this condition would allow us to fully utilize our investment in infrastructure--optimally using it between our international and domestic clients," Singh added.

According to the National Association of Software and Service Companies (NASSCOM), which recommended the relaxation of the rules with the joint (Government - Industry) Standing Committee, the changes allow any ITeS (IT-enabled services)-BPO company with more than 50 seats to use its infrastructure for both domestic and international call center operations. NASSCOM is the top body overseeing software and services companies in India.

NASSCOM President Kiran Karnik said in a statement that companies that were using their facilities only or primarily in the night shifts to service overseas customers, can now use the same facilities in the day to serve the domestic market.

"Leveraging multiple locations will also [boost] disaster recovery and business continuity operations. Working round-the-clock to solve issues and also address a much larger market space becomes more feasible," noted Aggarwal.

All praise for the move, Aggarwal added: "It will be a springboard for a quantum jump in business for the industry as a whole."

Karnik said the DoT's decision "will now enable the industry to accelerate its growth in the domestic market, even as it enhances its cost-effectiveness in the global marketplace".

"We are hopeful that this announcement will encourage ITeS-BPO companies to upscale their existing operations and drive further investments into the country. It is a positive step towards convergence," said Karnik.

Indian services giant Tata Consultancy Services (TCS) believes the latest decision will help boost the country's domestic BPO demand and supply. "The recent ruling by DoT will lead to higher margins and more attractive cost advantages," said a TCS spokesperson. "On the supply side, domestic BPO vendors will find the market more attractive. On the demand side, domestic companies will benefit from enhanced services and will have more choices."

Sid Pai, a partner at outsourcing consultancy TPI, said the decision is another useful step in the deregulation of India's telecom sector. "It will help bring down telecom infrastructure costs and, therefore, increase BPO sourcing to India. This is good news for both the Indian and U.S. firms operating out of India."

According to Aggarwal, this is an opportune time for Satyam to focus on the Asia-Pacific market. "We view this as an opportunity for further growth," he said. "We have been more focused towards the European and North American markets. This could help us accelerate our focus in [India] and in the Asia-Pacific. This could include usage of centers in Thailand and Malaysia for BPO work."

The new changes could also attract new market players. Commenting on the news, Chong Yoke Sin, CEO of Singapore-based NCS, said: "It is definitely a positive step to retaining existing MNCs and attracting new MNCs to use India as an outsourcing hub."

Chong did not reveal if NCS plans to shift focus from China, which is one of its key BPO markets, but confirmed that India is on the radar. "We can safely say that India is a major market that we cannot ignore," Chong said.

According to TPI, India's BPO industry is currently estimated at US$3 billion and is projected to grow to US$8 billion by 2007.