Busted! Indian BPO Industry Myths
The BPO industry has been a very fast growing industry. From its inception about 20 years ago it’s grown to a $50 billion industry. Just like any other service industry which might not be well understood due to its lack of tangible products, it’s got its fair share of myths and doubts surrounding it.
Whatever be the reason for the myths to exist, here are four myths of the Indian BPO indsutry that need to be busted.
The first myth is that the BPO industry is doomed as the wage increase is tremendous and very soon the labor arbitrage will vanish.
This myth means that the difference in wages in India and the advanced countries like US is the only motivating factor for the Indian BPO industry. While this is true to a certain extent, there are other benefits that companies outsourcing their business processes enjoy like 24/7 work cycles, improving efficiencies by innovative process flows etc.
Wage increase in the labor market are driven by the supply and demand of BPO workers as in any other industry. As the fast paced growth in the Indian industry settles down to a slow but steady pace and the increase in the supply of fresh graduates joining the workforce, the shortage of workers may become a thing of the past.
Another myth is that the countries like Philippines, China and Vietnam are going to gulp down the market of Indian BPO services.
It is true that India is not the only country providing BPO services. But the fact that Philippines and Vietnam are relatively smaller countries, smaller than the Indian state of West Bengal limits their scale of threatening India’s prominence in the industry. China definitely has the scale and it would love to get the high paying IT-BPO jobs but India enjoys some inherent advantages. The most important one being the higher education system in India is largely English based. And also one more advantage India enjoys over China is how safe the clients feel with respect to the IP protection.
The third myth is that IT companies in India do not make any products, due to which they are weak.
There are a fair share of companies that have their own software products like Infosys’s core banking product that does quite well. A recent development reinstating the fact that there are Indian companies focused on developing software products is the new association called ” Indian Software Product Industry Round Table”, or iSpirt that plans to focus on the vision that India has the building blocks to create powerful software products to deliver solutions to the rest of the world.
Although developing their own inhouse product might not have been popular with Indian IT providers earlier, they’ve always had a strong business model of providing services that has been high in growth and profitability. The enterprise software business and the financial model for enterprise software both are different models of doing business and which in turn require entirely different skillsets. Both don’t mix very well, which is why very rarely you will find both business models in equal measure in the same company.
Lack of innovation is the fourth myth.
It is believed that there is no innovation in the BPO industry. The offshore delivery model is integrated into various enterprise services. Each and every new service that is off-shored has its own set of challenges and requires innovation. This is what Nirmalya Kumar, a professor at London Business School, talks about when he describes “Invisible Innovation” in Indian firms. Where there is process and management innovation taking place at the Indian companies catering to the back-end needs of the west.
These myths may seem vague to some and entirely true and factual to others. While we state our opinions by busting these myths, we are well aware that you might have a different outlook. We welcome such discussions, so please go ahead and leave a comment below!