July 23, 2006

“WHEN CEOs in the United States go to play golf, they hear that if you’re not in India, you haven’t arrived.” The world, it seems, is finally realising the economic potential of India. Cheap, educated manpower and the increasingly widespread use of technology have brought India to the forefront when it comes to delivering world-class services at almost a quarter of the prices that would have been incurred in most developed countries around the globe.

Parthasarathy, a renowned economic journalist based in New Delhi, who has written for well over 20 years on the Indian economy and its government’s economic policies, has now come up with The Backroom Brigade. In this book, she has condensed her research on one of the most interesting phenomena of the Indian economy over the past few years — the booming business outsourcing industry that had the world viewing India as more of an open economy rather than a closed one. According to the author, “[This industry] is also a very important segment of India’s booming service sector, growing at close to 10 per cent a year. If the Indian economy does, as the investment bank Goldman Sach’s celebrated report Dreaming with BRICs predicts, overtake Italy, France and Germany by 2015, this [particular] industry would have played a definite role in that achievement.”

The focal point of the book is the way a few brave entrepreneurs — the backroom brigade — took the huge risk of building an industry categorised as IT-enabled services (ITES) and business process outsourcing (BPO) in a country where it was unheard of and the policy makers were anything but certain about it. Resisting the opposition and friction shown towards the industry by regulators, the entrepreneurs were unaffected by the unwelcoming scenario and stuck to their basic goals. They had it in them to charter an alien territory and make a positive difference in an unfertile investment climate. Within a span of five years they did just that.

“These were not the businessmen of the pre-liberalisation Indian, who tweaked policy and bribed their way through the business landscape. There were the children of liberalisation, professionals who had worked in multinational corporations abroad and in India and knew the importance of not compromising on quality. And (most importantly) they had an immense belief in India,” writes Parthasarathy, explaining the situation.

It has been mentioned in the beginning of the book that the impetus to this industry was given by mere chance. A non-resident Indian (NRI) came to India in the early ’90s for a pilgrimage after having spent several years abroad and noticed a drastic change in his native country — the people spoke English much more fluently than they did before. This led him to set up a medical transcription unit in Bangalore. Little did he know that his first business outsourcing set-up of its kind would trigger the mushrooming of similar businesses on the Indian soil.

The first few chapters delve into the way the pioneers of this business such as American Express, British Airways, General Electric and the new set of confident Indian entrepreneurs defied all odds and did what they had to do. There were many other obstacles as well. Acquiring customers is an uphill task for any new business; however, for this industry it was all the more difficult because it was hard to convince western corporations that India could deliver quality.

Also, there were cultural shocks in store for multinational banks like American Express (Amex). The officials of this corporation were shocked to see construction labourers working without helmets on one side and their semi-naked babies playing in the dust on the other. Helmets were ordered for workers, a special place was built for children and some toys were also arranged for them to play with. However, within 10 days all helmets and toys were sold off.

The success of World Network Services (WNS), General Electric (GE) and Amex attracted other multinationals that were already operating in India to set up captive facilities. Soon, other multinationals started moving their back offices to the country after having been overwhelmed by the success of their competitors. The post-2000 outsourcing rush in India had big fishes like AOL, Dell Computers, JP Morgan Chase, HSBC and Standard Chartered setting up their backroom offices there.

The chapter “The bandwagon” illustrates what happened once the industry took off and business began to expand. The number of players in the game increased considerably and so did the competition. The effects of price undercutting and uneconomical pricing started surfacing.

Moreover, there were fears that the global outsourcers would gobble up their Indian counterparts. “When IBM bought Daksh, it was widely feared that the BPO terrain would be swamped by the multinationals, who would swallow up Indian firms in their quest for a global delivery model. Things didn’t quite work that way. Instead Indian companies decided to use the same weapons in the bitter fight for global market share. They started picking up companies abroad.”

Written in a highly non-technical language, the book should not pose any difficulty for readers who are unaware of business terms. The lengthy explanation of business operations and processes provided greatly disrupts the momentum. However, the author should be credited for her extensive research. One particularly admires the way Parthasarathy incorporates interesting anecdotes of groundbreaking entrepreneurs in the middle of the explanation of highly technical business concepts. Although the book is a bit lengthy, still the writing style is smooth and consistent.