Outsourcing Business demands Differentiation and Value Addition

Is slowdown gradually spreading to the services sector in India? There are different views and perceptions, which propose and oppose such hypothesis. For instance, bankers feel the pinch of a low credit intake by the industry is much due to the spiralling interest rates, which are being pegged up almost every month. Hoteliers complain about the dithering bookings. But one has to see whether such a dip in bookings is only for the off-season or threatens to continue to the peak season. What about the IT and ITeS, which have emerged as the mainstay of our export earnings? Happily, there is no such furore of a slowdown, though there are sporadic apprehensions being aired on the heavy margin squeeze? Could that be a forerunner of the approaching slowdown?

Happily, the body of evidence and results of various analyses undertaken in India and abroad are indicative of the buoyancy in the IT and ITeS segments. No longer do the CEOs suggest Business Process Outsourcing BPO) as a cost-cutting measure alone. For them, the main reason for outsourcing is to improve the company’s focus, and reduction in and control of operating costs is only the second most important reason for outsourcing. Cost cutting’s diminishing role in the outsourcing process also reflects the rise in the popularity of BPO. Equally significant is the gradual erosion of information technology as the dominant area to outsource, as was in the past. Now that trend is being referred to as traditional. The buzzword in BPO is value addition. Companies have been seeking out BPO for enhancing their competitiveness. This ranges from anything like hiring companies to process insurance or medical claims to efficiently running accounts and pension schemes. The underlying premise is that their existing core team can stay focussed on the fundamental issues of the company rather than the peripheral activities. Yet another advantage is that the companies need not have to recruit personnel for peripheral jobs for a particular project and release them once the work is over.

Equally significant is the changing paradigm of what is the core business and peripheral operations for the companies. As companies move to improve quality and customer service, they can only focus on what they can do best. They are outsourcing what they are not good at. While information technology still leads the list of areas that are outsourced, the percentage of companies outsourcing administration, distribution and logistics, finance, human resources, manufacturing, call centres, sales, etc. is increasing.

Against this backdrop, it is unlikely that the quantum of BPO will come down in the coming years. But what is imminent is the increased competition for commandeering the outsourced work. The list of countries that are equipping their human resources for handling BPO activities is increasing. There is a phenomenal increase in the number of students enthusiastic about learning English in China, Japan, Korea, Israel, Latin America and Africa. They are not focussing only on the low-end works like call centres but also the high-end operations like insurance, finance, medical transcriptions, etc. That would mean that the margins are going to be strained in the coming years. That is the single point that we have to address in the coming years to stay ahead.

But we should not take BPO as a continuing boon to us. Sooner or later, there will be strains on that business model. That is the natural law. Earlier, export potential of a country was typically dependent on the availability of abundant natural resources, cheap labour and strategic location. But that model was replaced. Now, it is dictated by technology, innovation and knowledge base. In the times to come, these concepts will also undergo a change. We have to be prepared for this change. That can be achieved only through constant innovation. From technology takers, we have to consciously move to technology leaders. That can only help us to maintain our lead as the powerful area for outsourcing.