NASSCOM Announces Roadmap for FY 2009
NASSCOM, the premier trade body representing the Indian IT-BPO industry, today announced its roadmap for FY 2009 with key focus areas outlined. These were shared at a press conference addressed by the recently appointed Chairman - Ganesh Natarajan, Vice Chairman - Pramod Bhasin and NASSCOM President, Som Mittal. Speaking about the roadmap for the year, Dr. Ganesh Natarajan, Chairman, NASSCOM and Global CEO, Zensar Technologies said ―NASSCOM has identified six underlying themes for the year which will work as vectors for us to plan initiatives and focussed programmes around. Today, the IT industry is well on its way in making the transition to process quality and innovation, and we believe these themes will help us in charting the way forward and maintaining a steady growth curve for the industry‖. Elaborating on the themes, Dr. Natarajan added, ―We are looking at Creativity to enhance the existing opportunity to add new revenues over the next five years through product, process and business model innovation. In addition to Community and Collaboration, the new thrust areas we have identified – include Societal development and inclusivity, Green IT and Education & skill building - are all extremely critical for sustaining the long term global leadership that this industry aspires to achieve.‖ Talking about the enhanced focus on BPO sector, Mr. Pramod Bhasin, Vice Chairman NASSCOM and President & CEO, Genpact said ―at this interesting growth curve and with the growing maturity of the industry, we now see the need for increased collaboration of the IT and BPO sectors. We also plan to focus on education and security, through various initiatives already underway since these are very critical pillars for the realization of the industry‘s objectives.‖ Mr. Som Mittal, President, NASSCOM said, ―NASSCOM has always been at the forefront of leadership for the industry and taking the first step in adopting and raising awareness about issues and initiatives that are critical to the industry and the country. Towards this objective NASSCOM will be encouraging environmental responsibility aided by the search for greater productivity and competitiveness, reducing waste and increasing efficiency under the ‗Green IT‘ initiative, which is one of the 6 point agenda for NASSCOM. Additionally increased focus towards scaling and continuing initiatives towards education and skill building, global trade development and synchronising NASSCOM‘s education initiatives with Government‘s Skill mission are key areas.‖ He further added ―We are pleased to announce the appointment of Mr. Raju Bhatnagar as Vice President NASSCOM. His domain expertise in the BPO sector will be of great value to NASSCOM and the industry. We are also looking to further scale and continue the momentum on initiatives underway like NAC, NAC Tech and NSR‖. NASSCOM’s 6-point agenda for FY 2009
Creativity o Tap the opportunity to add new revenues through product, process and business model innovation Community o Build communities of best practices that enable professionals to interact across organisation and geography barriers Collaboration o Continue the collaboration between firms and with industry associations in key markets and collaboration countries Adoption of Green IT o Encourage environmental responsibility aided by the search for greater productivity and competitiveness, reducing waste and increasing efficiency Societal development and inclusivity o Strengthen rural India as a complementary force to Urban India‘s capabilities in the Industry. Gender inclusivity and inclusion of differently-abled workforce in the IT-BPO sectors Education and skill building o Continue to undertake focussed efforts towards developing an employable workforce through scaling of various ongoing initiatives
The BPO golden goose
By Neeraj Bhargava, MINT Nations very rarely get an opportunity to develop and nurture an industry that grows at high double-digit ates for two decades; provides massive foreign exchange gains; generates direct employment at levels way above the per capita income; catalyses the creation of four times the jobs in other industries (Source: Nasscom Strategic Review,2007); becomes the basis for development of new suburbs and cities; spurs migration of people from smaller towns in huge numbers; and, in short, lifts an entire economy. Today, the business process outsourcing (BPO) industry is all of this and more for India—it is our gold, our silicon, our oil. And instead of feeding and nurturing it, we are doing everything possible to strangle it. Over time, the stronger rupee, the likely discontinuation of export tax benefits, rising infrastructure costs and inadequate government investment in developing ―employable‖ educated talent will take their toll. There is an acute need for active support to the BPO industry. Let us look at some basic facts on how the BPO industry is vital for India. It doesn‘t take much to figure out the impact of the BPO industry on the Indian economy. Just take a walk or drive around in Gurgaon, Powai, Malad, or almost anywhere in Pune. A very large percentage of the new and glossy commercial real estate is occupied by BPO companies (45%, according to the latest real estate survey I have seen). Who lives in the new housing complexes around them? Employees of BPO companies. What about the BPO-driven consumer spending that has spurred growth in the auto industry? Who is shopping in the malls in those areas, taking mortgage loans, eating in local restaurants and buying new insurance policies in large numbers? BPO employees and their family members. Who employs round-the-clock security guards and facility management staff, many of whom come from rural areas? BPO companies. These firms are also handing out billions of dollars in contracts to telecom companies, legal firms, accountants, catering companies, and HR consultants. The ―BPO economy‖ in India today is anywhere between $25 billion and $50 billion and growing 30-40% a year. According to Nasscom estimates, it employs about 550,000 people, about the same as the IT industry now, but BPO employment is growing faster than IT and touches a much wider spectrum of society. A number of industries that benefit directly or indirectly from BPO, particularly real estate, are anticipating that the BPO industry will continue to grow at such a rate. India‘s BPO companies today support large and world class infrastructure and diverse supplier communities in Mumbai, Pune, Gurgaon, Nashik, Bangalore and Coimbatore. Over the last five years if one also includes ex-employees, the top five BPO players would have influenced the livelihood of more than 400,000 families. Indian BPO players are ranked among the top global players in every single segment that they participate in. We invest massively in training, quality assurance, productivity improvement and information security. Our employees get free or subsidized food and transport. We work tirelessly to meet the demands of top global corporations day after day. We run awardwinning corporate social responsibility programmes and actively support our communities. We are proud of what we do for our customers and what we achieve for our people and our communities. Yet, we get a feeling that we are not getting the nurturing and support we need. Something‘s wrong here. Today, the economics of the Indian BPO industry are getting significantly challenged by changes in currency, rising people and infrastructure costs, and the potential removal of export tax benefits in 2009. The simplistic view is ―You guys are big boys. You make enough money. Figure it out, and pay your dues.‖ Some of that is true. But let‘s look at the other side of the story. If an industry has nearly half its margins erode in just two years, then a few natural and obvious economic events occur. Smaller companies close down or get bought for peanuts. Big companies go to other countries where the economics are better or, at the minimum, allow BPO firms to hedge their bets. Today, China, the Philippines and even neighbouring Sri Lanka are offering long-term tax benefits to the BPO industry, and WNS, a leading BPO company, is listening. If the BPO industry growth has a catalytic effect on the rest of the economy, then there is a larger problem of a hit on a major part of the Indian economy. The BPO industry needs a stable or a gradually declining currency, more government support on education and, at the very least, a gradual phasing out of the export tax benefits. The special economic zones (SEZ) programme as designed today is insufficient to mitigate the impact of the ending of the 10A/10B tax benefits, and SEZs do not yet offer attractive options for smaller and mid-sized players. Strangulating it, through an almost overnight change in economics, will create opportunities for Jack (read: China or the Philippines) to steal the golden goose while the complacent giant sleeps.
BPO Bearhug
TR Vivek , The Economic Times, April 4 2008 The Economic Times organised in Delhi days after the Budget where the finance minister addressed select CEOs and spoke about his vision for the economy and India Inc., Raman Roy, widely regarded as the father of Indian BPO industry, and the chairman of Quattro BPO raised a question that‘s been giving Indian BPO honchos sleepless nights. The query was about the government‘s unwillingness to extend the STPI tax holiday for BPO units beyond 2009. Roy‘s contention was that the decision would saw-off India‘s competitive advantage in the business. Even before Roy could finish his question, the FM flipped through his yellow Budget booklet and rattled off the numbers to suggest that the BPOs shouldn‘t be crying foul just yet. ―5525 BPO firms in India paid a tax of Rs 1352.9 crore on earnings of Rs 18391.3 crore at the rate of 7.36 percent. If you think that‘s high, then..,‖ the FM trailed off with a characteristic smirk. The BPO companies estimate that the effective rate of tax post the tax exemption era will be in excess of 20 percent putting their margins under extreme pressure. After the FM made an exit, the BPO honchos present at the event sounded rather miffed by his response, and many privately exchanged notes about the near unviability of doing business in India. ―Other countries like The Philippines are rolling out the red carpet of BPOs providing us world class infrastructure, investing in human resource and offering 10-year tax breaks. Here we grapple with poor infrastructure, produce our own power, spend on transporting people, and now there‘s not even the incentive of low taxes. Does it make sense to be in India? Surely not,‖ railed one high-profile BPO chief. But that‘s just one part of the three pronged attack India‘s $11-billion BPO industry is facing. The fears of a prolonged global recession and the particularly messy state the US financial services sector—the lifeblood of BPOs—is currently in, the notso-friendly domestic policy environment, the rising Rupee and worsening infrastructure pose a serious threat to Nasscom‘s prediction about the industry growing five fold to $50 billion by 2012. Did you say the pigs might fly? ―The Indian BPO industry is at an inflection point. The challenge for them is how to move from the tried and tested labour arbitrage model to value added services. The larger players seem to have understood that, but there‘s a lot of pain in store for the smaller ones,‖ says TJ Singh, research director, Gartner. On a day when JP Morgan was set to acquire investment banking giant Bear Sterns in a basement bargain deal worth $270 million, Raman Roy is busy exchanging near-panic BlackBerry emails with colleagues in the US, investment banker friends and prospective clients. Despite joking that his company could have put in a bid for Bear Sterns at that going rate, Roy is concerned about the lack of new business coming out of the US, at least in the short term. ―Bear Sterns was this huge iconic client for all BPOs in India. If you had them in your clientele, it was a cause for celebration and would give you massive bragging rights. The cat is among the pigeons now. If it can happen to Bear Sterns, there could be several other casualties. Most senior managers who take the decision to outsource aren‘t sure if they‘ll have a job,‖ says Roy. His follow up calls to most prospective clients in the US yield answers such as this one: ―The business is yours for sure, if I manage to save my job.‖ Sitting in his glass cabin strewn with cricket and football trophies his company teams have won, Pramod Bhasin, the CEO of the largest India based BPO firm Genpact bristles at the stifling conditions he has to operate in. ―The amount of additional costs I have to bear to do business in India is massive. In The Philippines I don‘t have to spend a dime on transporting employees—a luxury I can‘t afford in India. The government there spends $100 million exclusively to train people specific to BPOs‘ requirements and we get a tenyear tax break. I won‘t say we can completely shift operations somewhere else in the near future, but it is a definite Plan B,‖ says Bhasin. Genpact‘s Philippines centre currently employs 800 people and there are plans afoot for a significant ramp up. Many small and medium STP Units were planning to move into SEZs to avail tax holiday after 2008-09. They now claim the Budget proposals have dealt a body blow to this plan by amending Section 10AA to provide tax holiday only for new units to be set up, under the SEZ scheme. Thus, STPs planning to move into SEZs for tax holiday purposes, say they would no longer find this option logical. ―Of course we will go to SEZs in the future, but it [the proposal] significantly restricts the number of tier-2 and tier-3 cities with a reasonable talent pool such as Dehradun or Roorkee, we could go to,‖ adds Bhasin. BPO Blues With customers expecting to pare their costs on outsourced processes by at least a third if not more, and the cost of operations going up in India, Mittal says the margin for BPOs could dip to low single digits. ―India‘s attractiveness has certainly diminished. And if you take away tax sops, it will get even tougher. That being the case, the growth projections certainly look optimistic. It is forcing us to look at places like The Philippines and Srilanka more seriously,‖ agrees Rohit Kapoor, president and CEO, EXL Services, another Nasdaq listed, India Centric BPO player. EXL employs already has a 900 strong workforce in The Philippines. Neeraj Bhargava, one of the co-founders and CEO of WNS Global Services agrees that demographics puts India on top despite a plethora of infrastructure bottlenecks and increasing wages. ―Also, the cost arbitrage story is still very much alive. That‘s one of the reasons why the Indian players have demonstrated considerable resilience during the mortgage crisis, and with a sharply rising Rupee,‖ says Bhargava.
Reference site : http://www.nasscom.in/ Warm Regards, Kaushal Patel Kaushal312@gmail.com