The India’s revenue from the back office outsourcing is expected to surge nearly five-fold to $50 billion by 2012 despite a possible recession in the key United States market. However, a skills shortage, creaky infrastructure in smaller towns and cities and rapidly rising wages are major challenges. With the bulk coming from exports, the sector has logged 35 percent annual growth over the last five years to hit annual revenues of about $11 billion with the bulk coming from exports, this is according to the study by leading Information Technology lobby group Nasscom and consulting firm Everest.
They have seen that when there is a recession and when there are costs pressures that come in, the companies still want to cut costs. The India’s back-office firms like Infosys Business Process Outsourcing is a unit of No.2 software firm Infosys Technologies that have thrived by providing Western firms with the services such as processing insurance claims, managing payrolls and the customer support. The boom in the business process outsourcing or the Business Process Outsourcing it is built on a large skilled and a cheap English speaking workforce. The sector employs 700,000 people and is expected to provide direct employment to about 2 million by 2012. The mittal in spite of all the wage inflation and so on, the India has still a fairly large cost advantage. They are still ahead of the curve, while competition is emerging.
The domestic market also offers a huge potential for Business Process Outsourcing companies as banks, retail, insurance, telecom and the government departments look to cut costs and boost efficiency. The study said while the United States would continue to be the largest Business Process Outsourcing opportunity for the India up to 2012, there were significant untapped opportunities in the Britain, Europe and Asia Pacific. Talent is an issue, about the four fifths of the world’s 500 largest companies already farm out some work to India and outsourcing to Asia’s third-largest economy can typically generate cost savings of between 35 and 50 percent.
The skills shortage has stoked wages that are rising by 10-15 percent a year. The India produces about 2.5 million graduates every year, but this is only about 15 percent are suitable for the employment in the Business Process Outsourcing sector. The skills shortage has stoked wages that are rising by 10-15 percent a year. This is to capture the opportunity, the first and the foremost that they need people. They need people who will do the services, they need people at the entry level and they need people at the middle management level. They said that they dare top educate system is focused on creating educated unemployable people. They have to fundamentally revamp that to create education system to cater to not only domestic but the international demand.
The study said that India would also have to gear up to face increased competition from emerging back-office services destinations like China, the Philippines and Vietnam. The leading Indian Business Process Outsourcing firms include Genpact Ltd, WNS Holdings Ltd, Firstsource Solutions, EXL Service Holdings and Wipro Business Process Outsourcing a unit of the third ranked software services firm Wipro Ltd.
REFERENCE:
http://www.reuters.com/article/2008/01/29/india-outsourcing-study-idUSBOM14477620080129
