Emerging Threats to the Indian BPO Sector

The previous articles in this module have touched upon the emerging threats to the Indian BPO sector in brief. This article looks at the issue in detail by considering hot emerging destinations like South East Asia and Latin America.

The first aspect here is the emergence of countries like the Philippines as an alternative to India. This has been helped by the fact that the Filipinos have accents similar to the Americans and hence, the problem of verbal communication, which is the case with India, is surmounted in the Philippines.

Indeed, recent studies have shown that the Indian BPO sector has lost nearly $10 Billion in potential revenues in the voice segment because of the inherent inability of the Indians to understand the American accents fully. Despite adequate training, the fact remains that Indians are unable to change their accents fully to cope with the ever-increasing demands from the Americans.

The next aspect is that while the Indian BPO sector incurs costs on transport, travel and other benefits, the Philippine BPO sector does not have to arrange for these benefits to its employees. This means that the Philippine BPO sector can do the same job for less. Moreover, the salaries in India have been increasing exponentially which puts a further strain on the ability of the Indian BPO sector to derive advantage from the wage differential. Apart from this, the government in Philippines is giving several tax breaks whereas the Indian government is withdrawing them. More than this, the employability of the labor pool in India is 10%, which means that only 1 in 10 graduates, is employable in the Indian BPO sector. On the other hand, the employability of the workforce in the Philippine Labor pool is around 30%.

The other region, which is emerging as a serious contender to India, is the Latin American region, which because of its geographical proximity to the US is able to reap the benefits of regulatory requirements in the US, which deem a certain portion of the work to be done in countries that are close to the US. All these factors portend a trend where the Indian BPO sector might have to innovate and stay ahead of the competition by moving into higher value adding activities. Indeed, these threats are a wakeup call to the Indian BPO sector to get its act together.

Considering that the South East Asian region and the Latin American region are emerging as frontrunners in the competition for alternatives, it is time for the Indian BPO sector to co-opt these countries and partner with them instead of viewing them as rivals. Already some Indian BPO companies have opened offices in Philippines, Vietnam, and Brazil and the future of the Offshoring market is in these next frontiers of the breakout nations or the next economic miracles.

In conclusion, the Offshoring market is going to be turbulent in the years to come, this fragmentation would benefit the Western companies as more, and more countries vie for their business.


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