Following my development of theScottish Outsourcing Initiativeearly last year,
which aims to place Scotland as a serious high-end business process
outsourcing destination for BPO businesses, I attended the Nasscom
BPO Strategy Summit in Bangalore with representatives from the
Scottish trade and development agency, Scottish Development
International. What we discovered was a step-change in India's
future business model,writes Andrew Rigby, head of
outsourcing atBrodies.
Despite the economic turmoil, which is having an effect on
Indian outsourcing and technology businesses, Nasscom still
predicts that BPO business will grow at between 6% and 8% over the
coming year. According to figures from Nasscom, the BPO sector has
already grown from the 2008 figure of $430bn to $500bn, and is
likely to continue to grow as businesses continue to seek ways of
reducing costs and, importantly, increasing efficiency and
quality.
However, the Indian industry recognises that the recession is
changing the way the world thinks. It has already experienced
elements of protectionism (some at grass roots levels - Mahindra in
the UK and TCS in the US), British Jobs for British Workers and
Obama's views on tax.
Accordingly, Nasscom has developed with McKinsey a vision for
2020, a perspective which has as its tag "Transform Business,
Transform India".
In essence, Indian BPO suppliers appreciate that in a time of
recession in which businesses around the globe are having to go
through great change, the longer term will be about strategy,
getting closer to the client, and addressing new markets and
understanding local cultural issues. In other words, Indian BPOs
will become global players, but with local delivery. They no longer
want to be mere solution providers, they want to be strategic
partners. No longer is India just about offshoring, it is about
outsourcing to businesses which happen to be owned by Indian
companies. India is in the process of going global.
According to McKinsey and Nasscom, the addressable market for
global sourcing will increase from $500bn today to between $1.5tn
and $1.6tn. It is predicted that by 2020, the split between
offshore and onshore will be in the region of 20% onshore and 80%
still in India.
Many of the Indian vendors I spoke to are cash rich and are
looking for acquisitions of or joint ventures with existing UK and
Western suppliers (they might also purchase captive processing
centres from banks). Many will also consider setting up centres in
the UK if led by customer demand.
High on their agenda for choosing locations are skills, work
ethics and foreign languages. Sustainable and relevant sources of
educated workers also scored very highly.
The BRIC countries (Brazil, Russia, India and China) may account
for up to 25% of growth up to 2020, and the increasing middle
classes in India will lead to greater demand for domestic
outsourcing services ($100bn). Interestingly, the Indian BPOs still
face difficulties penetrating Western Europe, they see this as a
relatively untapped market and part of their strategy will be to
turn this market, partly through offering onshore and nearshore
supply centres.
The BPOs have identified as new growth markets defence, public
sector, media, utilities and healthcare.
They also envisage that by 2020 India will have up to 15
tier-two cities providing world-class BPO services, and with a
talent pool of over 13 million people, it is not difficult to
imagine them achieve this.
Many of the large Indian suppliers are already moving into a
greater sphere of sectors, including oil and gas, financial
services, insurance, pharmaceuticals, design, creative industries
and tourism (interestingly all of the sectors currently identified
by the Scottish government as part of its economic strategy.)
Clearly the Indian powerhouse will continue growing and its aim
is to be among the top five innovation hubs in the world. However,
even in the face of this enormous growth and market penetration and
aspiration, there are huge opportunities for BPO suppliers in the
UK who participate in and join forces with Indian companies who
roll out this global vision. None of you will be surprised to learn
that I intend that Scotland is a part of this.