Following hot on the heels of "34% Buyers Axe Their BPO Deals", I woke up to an even more breakfast-choking shocker this fine morning with Forbes.com’s Sramana Mitra declaring "The Coming Death of Indian Outsourcing" .
So I checked out the credentials of the author. I couldn’t find any other outsourcing literature, but plenty of Yahoo-Microsoft commentary, which was pretty informative. However, I did find Sramana’s blog where she comments that the "Indian BPO industry is very much at risk because of the SaaS trend, and if they do not start to get their act together and respond to the trend, they are going to get punished". This is incorrect. SaaS applications actually enable delivery of BPO services for certain processes. Where software can be delivered as a pure web application, and does not require onsite maintenance and development, what better for a global delivery model where services are delivered from remote locations? True, SaaS threatens the traditional software model, but it actually compliments an outsourcing model. And surely SaaS is much more threatening to software providers than services firms, which dominate India’s outsourcing economy.
Moreover, Sramana claims "Yet, India, for all its glory, is still the world’s back office. India’s tech industry is a "services" industry. The Indians don’t do the thinking. The customers do. India executes". Er… isn’t that the point? However, what she plainly fails to discuss is the fact that the better the Indian services become, the greater the number of services that require the "thinking". It is no coincidence that IBM, Accenture and HP have employed 10% plus of their workforces in India today to perform tasks that go beyond pure execution work. When you look at the scale and type of services being delivered from India today, as opposed to 5 years’ ago, the move up the value-chain of services being delivered from India is impressive. Services such as remote infrastructure management, financial reporting, insurance claims adjudication and industry-specific application development were a far-flung fantasy back then, but today are high-growth outsourced services being delivered for enterprises today.
Sramana picks on on ADP’s global sourcing model, which only has 2,500 staff in India. However, what she doesn’t comment on is that fact that very few firms outsource payroll to India, largely as this industry was established long before India came to prominence, but also because of the regulatory and privacy concerns tied to sending payroll data offshore.
I empathize with her concerns over wage inflation, staff attrition and rupee appreciation. These are the challenges the Indian industry is dealing with, which we discussed here last year, and it will slow down the breathtaking growth in the long-term, however, to proclaim the "coming death" of Indian Outsourcing is absurd.