Following my development of the Scottish Outsourcing Initiative early 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 at Brodies.
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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.