October 09, 2006	Monday	Ramazan 15, 1427

POLITICIANS in India have a knack for scoring a self-goal for the nation. Last week, even as the booming Indian ITES (information technology enabled services) industry was battling charges of security breach and data being stolen, politicians in the southern state of Karnataka decided to add their mite to the destruction of the sector.

A rag-tag coalition of chauvinistic politicians called for a strike in Karnataka, and hundreds of thousands of IT and ITES professionals were forced to stay at home, resulting in losses of billions of rupees for the industry.

Worse, India’s credibility as a reliable back-office and outsourcing hub took a severe beating, and international firms – who have farmed out billions of dollars worth of assignments to India over the years – may go in for a serious review if such strikes disrupt their back-office operations.

International clients – attracted by the presence of an army of skilled personnel, well versed in English and mathematics, and available for extremely competitive wages – have over the years contracted various business processing tasks to the call centres and BPO units in and around cities like Bangalore, Mumbai, Pune, Delhi and Hyderabad.

According to the National Association of Software and Services Companies (NASSCOM), the industry lobby, India’s ITES revenues amounted to a whopping $6.3 billion for the year ending March 31, 2006. This year, the sector is expected to expand by over 25 per cent, and revenues are estimated to add up to over $8 billion.

The industry - also known as the business process outsourcing (BPO) sector – has generated half a million jobs, and a million more young Indians are likely to find employment in the sector over the next few years. Amazingly, the ITES industry has emerged as a significant foreign exchange earner for the country, without the government (and politicians) offering any incentives, or interfering in it’s functioning.

But looking at its phenomenal growth, political parties are now trying to create problems. Last week’s state-wide strike in Karnataka – of which Bangalore is the capital – was called on some irrelevant issue. A festering border dispute with the neighbouring state of Maharashtra – over the fate of Belgaum, a small city, and some villages – has been dragging on for about 50 years.

The Karnataka government, reacting to the state government’s move to take the matter to the Supreme Court, decided to hold a special session of the state legislature in Belgaum, and also declared it the second capital of the state. This raised the hackles of some politicians in Maharashtra.

But chauvinistic parties in Karnataka decided to exploit such sentiments and called for a state-wide ‘bandh.’ The state government, led by H.D. Kumaraswamy – who is the son of a former Indian Prime Minister, H.D. Deve Gowda – is being propped up by the Bharatiya Janata Party (BJP). But serious corruption allegations against Kumaraswamy and his family have forced the government on the back-foot, and even inconsequential parties and organisations are able to blackmail it.

Instead of standing up to the elements who called for a strike, the government meekly succumbed to the pressure and banks, offices, IT parks and BPOs remained shut in Bangalore, much to the glee of the ITES sectors in the Philippines, Sri Lanka and China, who are hoping to lure away a significant chunk of the ITES business away from India.

TWO factors are crucial for the growth of the ITES industry: reliability of service (which perforce has to be 24x7x365) and credibility or security of data. Unfortunately, the last few days have shown the Indian ITES sector wanting on both these crucial counts.

The strike in Karnataka, which crippled the industry in Bangalore – nearly 2,000 firms ranging from international biggies to small outfits, operate in the city – was a major blow to the reputation and reliability of the industry in India.

The next major threat is from trade unions, who have been doggedly trying to get BPO employees unionised. The Indian ITES industry pays handsome wages – teenagers graduating out of junior college, and fluent in English get jobs that fetch Rs10,000 to Rs15,000 a month – so most employees have snubbed union leaders.

But all the major trade unions – which are wings of political parties – are redoubling their efforts, wanting to set up base in the industry. The industry feels that once unions get a foothold, there would be internecine fights, unrealistic demands, and delays in executing projects, which could be disastrous for the sector.

Flexibility on the part of employees and employers is important while servicing clients based in the US, Europe and other developed countries; interference by the government, trade unions and other rent-seekers would only result in business getting diverted to other countries.

Already, the ITES industry has a high turnover of employees, as new players lure away existing talent, offering them higher salaries. Most trade unions in India still function with a 19th century mindset; the movement suffered a blow after a crippling strike in Mumbai’s textile industry in the 1980s, resulting in the destruction of the sector.

The ITES industry fears that the entry of trade unions could spell the death knell of the buoyant sector, as international companies would rethink their strategies and decide to go to some other ‘safer’ place, where services will not be disrupted by strikes and agitations.

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PERHAPS the most daunting task before the ITES industry is to convince principals abroad about the security measures that are in operation in India. Last week, Britain’s Channel 4, which conducted a year-long undercover investigation – claimed that criminal networks in India had traded details of bank accounts, credit cards and other sensitive information of UK-based customers for a price.

NASSCOM, which despatched a senior executive to Britain on a fire-fighting operation, sought more details about the sting operation, but the British network refused to part with information, claiming it’s job was not to act as a police agent.

Kiran Karnik, president, NASSCOM, claimed that security was top priority in the industry in India. “We have established an excellent international reputation and under no circumstances will we allow this to be compromised,” he said. The industry viewed every allegation of a breach in security ‘extremely seriously,’ added Karnik.

But he raised questions about the ‘verifiability’ of such stories, especially sting operations, where monetary inducements had been made.

NASSCOM is seeking the setting up of a regulatory body for the sector, which will establish security standards. It has already set up a national skills registry, an online registry of employees working at call centres. The registry contains information about an employee’s educational and professional background, and also personal details. About 25,000 ITES industry employees have already registered, but there are hundreds of thousands more whose data is to be recorded.

The lobby also plans to launch its NASSCOM Assessment of Competence from next month, and three partners have been short-listed for conducting these certification tests.

India’s BPO sector, which is largely unregulated, has had problems with security breaches in the past. A few months ago, an employee at a Bangalore call centre was arrested after he siphoned off funds from the accounts of some British bank customers.

Earlier, a British tabloid had claimed that it had paid between three and five pounds each for banking details about a thousand customers based in the UK. Last year, there was a half a million-dollar credit card fraud involving a BPO employee.

Of course, the outsourcing of thousands of jobs from Britain to India has caused a lot of concern there. The media in the UK has noticed the anger among many unemployed people, about jobs being ‘Bangalored’ to India.

But many banks, insurance companies and several other firms across different industries in the UK and the US – which are saving billions of dollars by outsourcing routine work to India – appear to still have confidence in the Indian industry.

India’s ITES sector is also upgrading itself, from providing routine BPO services, to Knowledge Process Outsourcing (KPO) services, ranging from analysis of X-rays, to filing of patents, preparing legal briefs, doing medical and bio-tech research, and a host of other hi-tech jobs.

It becomes all the more important then for the industry to ensure that its credibility is not eroded internationally. Measures being taken by NASSCOM are long overdue, and should hopefully restore confidence in the industry.