The recent US federal law against outsourcing American support services to foreign shores has invited a series of protests from sources in the Indian government and the Indian corporate sector. Everyone wants to keep these BPO (business process outsourcing) jobs within India for a variety of reasons.
The most legitimate and valid concern comes from the Indian industry that provides almost 70 per cent of existing jobs through the BPO sector. According to the statistics provided by www.bpmwatch.com, which derives its data from the likes of McKinsey and Co and The Gartner Group, as on March 31, 2003, the Indian BPO sector employed 171,000 professionals.
It has an investment of $1 billion, creating about 100,000 smart cubicles in 7.5 million square feet of space. It generated revenues of $2.3 billion in 2002-03.
India has the largest number of English-speaking college graduates in the world, thanks to its 250-year stint being the crown jewel of the British Empire.
Contrary to popular belief in the West, the English language is the official language of commerce in metropolitan and corporate India and it is taught as a first language since kindergarten in most schools.
A large number of young and skilled Indian citizens between the age brackets of 21-27 work in the BPO industry catering to provide support services to foreign firms mainly from the United Kingdom and the United States.
The three-year-old US recession and the highest rate of unemployment (8.3 million Americans jobless per US Department of Labor Statistics as of January 2004) since the Great Depression of 1929 has had the US government hard pressed to act and alleviate some percentage of this unemployment. Moreover, this law applies to American companies using government contracts and funds only, for now.
The American private sector is not affected and companies like IBM, Microsoft and Oracle need not necessarily follow suit if the people they hire in India are through their own financial resources. The fear of the law applying across the board and including these corporations is what propels the Indian BPO sector to react in the way it has.
The second reason is merely political. Both India and the United States are in an election year.
In India, the Bharatiya Janata Party-led government is banking on strong economy at home through foreign investment and industry to win the general elections. A dent in India's economic strength at this point could seriously hurt the ruling party's chances.
In the United States, President George W. Bush and the Republican Party have been under fire for the war in Iraq. The US economy is just officially out of recession and the Bush government has yet to show a significant employment surge. More jobless Americans would mean fewer votes for the Republicans. The President is trying his best in the few months left to the presidential elections in November 2004 to limit the damage.
So, the BPO sector looked like the weakest spot to start with because there exists an equally skilled percentage of people in the United States who can do the job as effectively if not more, and who are currently jobless.
In crying out against the backlash against the 70 per cent revenue producing BPO industry, the Indian government and industry have been continuously ignoring the remaining 30 per cent highly skilled bunch of technically qualified young Indians.
The neglect has reached a sorry state where engineering, commerce and arts graduates have been forced to opt for call centre jobs, simply because there exist little or no opportunity for these youngsters after professional school.
Since age 22 (on an average) when these kids graduate, they spend about 3-5 years in the BPO industry trying to make a living and are quite content with the compensation standards offered to them bearing in mind the fact that they have skills and experience limited to what they have learnt in school.
At the end of their stint in the BPO industry, they find themselves jobless and skill-less and therefore back to the starting point of their career -- trying to hunt for a job. A job that fits their education, does not exist!
The 'why?' can be answered in very simple and logical terms. The Indian government rode too long on the BPO boom. It never learnt from its mistakes and experiences in the IT sector. After the dot-com boom-to-bust, Indian employment growth has been fueled by the BPO sector and supported by sops provided by the government.
Little attention has been paid to providing an environment for technological research and development. On the initiative of the Karnataka state government, Microsoft is setting up a 7,000-seat support centre in India to cater to 5.2 million worldwide users of Windows XP.
If the example of the Andhra Pradesh and Karnataka state governments had been followed by the central government, more and more foreign technological firms would have figured among the likes of Microsoft and IBM.
India needs a solid infrastructure in the fields of telecommunications, manufacturing, finance, education and the arts. The 'Nasscom-McKinsey Study: India IT Strategies' predicts the global market for IT-enabled services to be over $142 billion by 2008.
Of this, customer interaction services account for $33 billion, finance & accounting services $15 billion, engineering & design $1.2 billion, data search, integration & management $44 billion, remote education $18 billion and networking consulting and management $15 billion, among others.
Note, as opposed to $33 billion in customer interaction services, the other factors account for a whopping $93.2 billion.
The United States and the likes would only find it lucrative and economical to invest in India in these core sectors for many reasons. The primary of them being the still prevalent lack of highly technical know-how in the US. By having the R&D outsourced, America stands to gain in monetary terms if global compensation standards and work environment quality can be duplicated in India.
Moreover, American and other foreign nationals can be employed wherever there is a deficit of highly skilled and experienced Indian labor, on short-term periods, to increase the global diversity of the workplace and the opportunity to Indians and foreigners to learn from each other. Learning is a two-way street. You impart and imbibe knowledge.
To fuel this growth in core infrastructural industries, India would need more than just a handful of Indian Institutes of Technology and Indian Institutes of Management.
At present, you have 2 million candidates for 2,000 student positions in the IITs every year. Not surprisingly, the graduates of these premier institutes have been the creme de la creme of India and the world. The fortunate among the rest of the candidates join other comparable institutes like BITS Pilani, Roorkee University, and the regional engineering colleges, to mention a few. The vast majority of the remaining candidates find a place in one of the ever-mushrooming private professional institutes.
This would need to shift at a steady pace, if India needs to provide global quality standards in the industry. Sub-standard educational institutes like run-of-the-mill engineering and medical schools need to be shut down. New and strict regulations and means to enforce them must be introduced.
Most of them were established to channel illicit earnings of corrupt politicians. They are like a malady churning out low quality products annually at a steady rate. Anyone who has been to such institutes can vouch for this fact.
Foreign educational institutes must be encouraged to offer on-site distance learning and/or other degree programmes at a reasonable tuition rate that is commensurate with the country they target. Collaborations with the IITs and IIMs could be a very practical beginning to this approach.
India also has a television, media and movie industry that is second only to Hollywood in terms of revenue. If marketed and nurtured well, this sector can turn into a cash cow for the Indian economy by shifting its focus globally instead of regionally.
The taxation on foreign companies needs to be minimised to a level that is comfortable both to the Indian government (which provides the necessary infrastructure in terms of land) and also to the investing foreign firm that needs to make profits out of investing in India. Age-old regulations on customs duties and taxes on import or export need to be revised to help the 'Made in India' label to be globally competitive in terms of price.
Business and corporate laws need to revised and rewritten if necessary to provide security to foreign and Indian firms alike.
A very valid question would be "where would all the folks who might be jobless from the BPO backlash go?" The answer is simple. One must do what one is educated for and is best at. You can't have a commerce graduate code software programmes unless he or she is really good at it and likes doing it and there is a company that is willing to hire him or her.
India needs its accountants, engineers, doctors, pharmacists, service professionals and other professionals. And, they need to do what they are best at. What sense does it make for a parent to send every kid to med school or engineering school and then if the kid does not make it, or is not inclined to, label him or her as incompetent?
This attitude has to be done away with. It has to happen from within the minds and hearts of people. Yes, there will be a period of instability and unemployment when the paradigm shifts from the focus on one sector to a structured approach towards building a robust core industry and economy.
Success always comes at a price. But it is better than having an entire generation of skilled youngsters rusting away their knowledge and spending their energies in an industry that holds no promise of a future. It is healthy for India. It is healthy for America.
Ranjan Nambiar is technical consultant at Datasôrs Consulting L.L.C., Houston, Texas.
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