| indiaBPOking 2006-03-29, 6:58 pm |
| http://economictimes.indiatimes.com...how/1470229.cms
NEERAJ BHARGAVA.
TIMES NEWS NETWORK[ THURSDAY, MARCH 30, 2006 12:00:37 AM]
President Bush's visit to India is creating a new momentum for
Indo-US relationship on multiple fronts. While we will witness a lot of
discussion on the nuclear agreements and the implications of this visit
on the WTO discussions, it is hard to ignore the (still) rapidly
growing IT and BPO exports from India to the US occurring from a
phenomenon commonly known as "offshoring" or "outsourcing".
Arguably, offshoring along with the changing global political landscape
are the two most important factors behind the new found respect that
India has earned in the eyes of the US.
President Bush's recent speech at the US India Business Council is
spot on. India's offshoring success is creating new affluence in
India and finally making the "great Indian middle class" potential
- that has been talked about for nearly two decades - come alive.
IT and BPO exports of $15.2 billion in 2004-05 from India are now 4.1%
of India's GDP and 25% of India's exports. While these industries
directly employ less than 1% of Indian population, the multiplier
effect is perhaps 10 times.
In the Indian context, IT and BPO jobs are high-paying and those
employed in the industry are true global customers. Over 60% of the
commercial real estate in India in the last 3 years was leased to the
IT and BPO industry players.
The automobile, hotel, airline, catering, computer, telecom and
construction material industries and many professional services
industries like legal, recruiting and accounting get a major boost from
the IT and BPO growth.
And the new "global" Indian is travelling more, buying more
overseas, s ing educational and healthcare options outside India and
becoming an increasingly early adopter of global products. American
products and services are highly regarded and popular among this new
breed of Indians creating growth opportunities for US businesses in
many spheres.
Undoubtedly, the market share of US outsourcers is declining and
certain categories of American jobs are getting affected. But getting
worried about that on a macro level and becoming protectionist would be
foolish and reflect a very narrow and short-term view of the offshoring
phenomenon.
Picture this scenario in the year 2020. The dollar buys Rs 20 and the
exchange rates are more volatile. Indian tourists and students visiting
the US have gone up 10 fold compared to 2005. The US healthcare costs
have dropped by 30% since all the data is processed in low-cost
locations.
Indians shop freely on eBay and Amazon and get three-day delivery of
innovative products from the US. Indian BPO multinationals set up large
near-shore centres in Arizona and New Mexico to judiciously combine
operational and technology skills to deliver new generation business
products and services.
Tunes sells 50 songs a year to 100 million Indians. An Indian fast-food
restaurant chain sets up 1,000 restaurants in the US employing 15,000
people.
Sounds like the US-UK today or even a bit like US-Japan, right? This is
the vision we must embrace and not a misguided one that protects the
most optimal use of global resources and challenges the benefits of
trade based on comparative advantage.
The reality has been exactly what it was in automobiles: the US
outsourcing industry had become uncompetitive on many dimensions.
Traditional benefits to IT outsourcers were based on benefits from
lower costs of IT hardware and growth in packaged software.
The offshoring phenomenon offered a lower-cost answer to what were
lower value-added business problems. And people who understood that
reality built growing businesses and prospered in the stock market
(read: Infosys and Wipro) but there were others who lost the plot and
struggled to create value.
Now the playing field is more level and Indian and US outsourcers are
fighting a more even battle and converging on capabilities. Winning
will depend on good management and strong execution. And it is
decidedly un-American to walk away from a fair fight and become
'protectionists'.
As for the competitiveness of America's talent pool and industries,
the challenges are not only in IT and BPO. Las Vegas has to compete
with Hong Kong. Hospitals in Thailand are attracting patients for
advanced treatment and could take market share away from US hospitals.
Australia is far more aggressive than the US in marketing to Indian
tourists. Canada, New Zealand and Australia are targeting prospective
Indian students aggressively. And the lure of Bollywood is growing.
The real issue for President Bush is to get America more focused on
what it is the best at. Innovating and creating new businesses and
industries and marketing them aggressively - and even creatively.The
author is Group CEO of WNS.Among the drivers of that will be a
reinvigorated educational system in the US.
Remember, the new India (or Asia) will not just rest on low cost
products and services. It will also innovate and that's where the
real battle will be fought. Offshoring is just setting the stage for
true free-market driven global competition, something that America has
always preached.
It is time for Americans to adjust to the new world and learn to love
it, and thrive on it. President Bush is also fair in sing a more
open Indian market. And Indians benefiting from an open American market
on offshoring should embrace the openness as well.
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