THE Business Process Outsourcing (BPO) industry in India has been growing at a robust pace, as an increasing number of companies in the developed world are outsourcing ordinary tasks to established IT enabled service players in the country. However, even as the industry grows at double-digit rates annually, the threat to its future also increases, especially in the US where lawmakers constantly try to raise a scare about Indian BPOs endangering American jobs, and seek to introduce bills that aim to impose severe restrictions on outsourcing of such tasks.

Earlier this month, New York Democrat Timothy Bishop and West Virginia Republican David McKinley introduced the US Call Center Worker and Consumer Protection bill that requires American companies to give 120 days’ advance notice before moving call centre jobs abroad. The bill also seeks to bar such companies that move call centre jobs abroad from receiving federal loans or loan guarantees for five years.

Moreover, the legislation would allow American consumers the right to opt to talk to someone in the US – instead of someone in India or the Philippines – when they call a customer service number. Importantly, the bill also seeks to impose a stiff penalty of $10,000 a day on US call centres for failing to report relocation to an offshore location within 60 days to the Department of Labour.

Bishop specifically referred to India, pointing out call centres in the country were also sub-outsourcing work to developing countries “with potentially corrupt or unstable governments,” thus complicating efforts to identify and prosecute fraud. He mentioned countries including Egypt, Mexico, the Czech Republic, China and Thailand.

Expectedly, the Indian IT and BPO sectors slammed the bipartisan move in the US House of Representatives. “We have seen attempts to present such bills in the past,” says Som Mittal, president National Association of Software and Services Company (NASSCOM), the leading IT and ITeS industry lobby. “However, the bill has only been introduced in the house, and there is a long way for this to become legislation. The possibility for the bill to become a law is very low. But it indicates the mindset of a certain set of policymakers and could set the tone for the next year, especially it being an election year.”

Mittal says it is disappointing to see the US adopting ‘protectionist’ measures like these that restrict free trade and establish discriminatory trade practices. “US lawmakers seem to have developed the practice of unfairly taxing companies working overseas, to pay for domestic issues. In case this bill is passed, not only will it see objection from India but Latin America, Ireland, the Philippines and Canada.”

Operating on a global sourcing model, says Mittal, builds efficiencies, the benefits of which gets passed to the common citizen. Laws such as these will increase the cost of service and will see a rejection from common citizens.

***** THE BPO sector is just one – but the most targetted – sector of the Indian ITeS business. BPOs include call centres, which attend to queries or complaints by consumers in the developed world on behalf of their principals. The BPO segment accounted for nearly $15 billion in export revenues last year and is growing at around 15 per cent annually.

Indian BPOs account for nearly a third of the global market and the country is the largest – in terms of revenue – in the BPO business. India managed to get much of the BPO (especially call centre) work, thanks to the large number of young workers conversant in English.

Hundreds of BPOs have come up across the country – from cities such as Chandigarh, Gurgaon and Delhi in the north, to Mumbai and Pune in the west to Bangalore and Chennai in the south. Though BPO employees earn decent salaries in India – ranging from Rs15,000 to Rs30,000 (about $275 to $550) a month, besides perquisites including free transportation and subsidised food at work, for western companies the savings in terms of wages is huge. Similar jobs in the US or Europe would cost at least five times more.

However, India is facing increased competition from countries such as the Philippines, Ireland and South Africa, which also have a large number of English-speaking workers. The Philippines, in fact, is gaining rapidly, as a growing number of American corporates prefer to frame out call centre tasks there, as Filipinos find it easy to adapt to American accent, unlike Indians.

But the ITeS sector also includes KPOs (knowledge process outsourcing), LPOs (legal process outsourcing) and a host of other PO firms. American and European law firms, airlines, banks and other financial sector firms, manufacturing companies, news agencies and a host of other players from other sectors are also discovering that it makes sense to outsource work to firms in India, which are able to deliver the same standard of service, but at a fraction of the cost.

The information technology sector is also one of the largest players in the outsourcing business. Many leading international companies have been outsourcing their IT and software services to Indian companies for years.

Ironically, the continued weakness in the US and European economies – and tougher visa rules in America – is forcing many of the global corporations to re-assign even more work off-shore to India. The top IT and software exporters – including TCS, Infosys Technologies and Wipro – are finding it difficult to send their executives to the US to coordinate with their principals and execute jobs, because of difficulties in getting visas.

The result: American companies are increasingly going in for outsourcing of their IT and related tasks to India, possible now because of technology. The growing popularity of concepts and technologies such as Telepresence has resulted in slashing of travel budgets, as Indian IT engineers provide solutions via video-conferencing and other facilities to counterparts in the US, instead of having to travel there and spending a few weeks or months.

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TYPICALLY, an Indian IT firm would execute nearly a third of its contract at its principal’s head office or other unit in the US. This meant sending its engineers abroad for periods ranging from a year to even five years. Of course, for the onsite projects, the Indian firm would bill its clients at rates that were four to five times higher than the rates charged in India.

But with the sharp slowdown in the US economy, resulting in companies slashing their expenses, Indian IT firms are also being forced to come out with innovative solutions – cut down on travel costs and overseas expenditure and execute the same task from India. Improved IT products and faster and more efficient telecom connectivity is ensuring that this is possible.

Of course, the high turnover rate in the Indian IT and ITeS sectors – and rapidly escalating wages – is forcing leading players to do a rethink of their existing business model. BPOs that had initially set up operations in cities such as Mumbai, Delhi and Bangalore are increasingly relocating to tier-II and tier-III cities including Pune, Mysore, Mangalore, Ahmedabad, Jaipur and Chandigarh.

But with real estate prices soaring even in these cities, many are relocating to rural India. RuralShores, a company set up by a few former top corporate executives – and which has attracted venture capital funding – is expanding its BPO operations in Indian villages.

Earlier this month, the company announced the launch of its first voice process at a centre in Chand in Madhya Pradesh, for a large telecom service provider. The company also crossed a threshold of providing employment to over 1,000 rural youth, by hosting an event at its first centre at Bagepalli in Karnataka.

‘Illuminating a Thousand Rural Families,’ was the theme of the event organised by the firm, which today has 10 centres across seven states. “This initiative is one of the most effective ways of creating rural employment, empowerment and development,” remarks Deepak Parekh, chairman, HDFC Ltd, India’s leading mortgage firm, which is also a strategic investment partner in RuralShores. “Endeavors like these will help secure a better future for India’s rural youth.”

According to Murali Vullaganti, co-founder and chief executive of RuralShores, the firm will focus on equipping rural youth, hone their skills and provide them appropriate employment while connecting corporate India to Bharat. “Our endeavors are supported by marquee investors and young professionals to build scale and impact.”

With the soaring cost of doing business in cities, Indian BPO outfits are seeking opportunities in the rural parts, where qualified personnel are also available. American firms, eager to cut costs, would welcome the development, despite pernickety US lawmakers.