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“Indian IT/BPO Industry Is On The Verge Of The New 'S' Curve”
“Indian IT/BPO Industry Is On The Verge Of The New 'S' Curve”
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| If you look at the impact of the slowdown on some of the other industries, the impact of the economic downturn comparatively is very different on the IT/BPO industry, says Nitin Seth, managing director and country head, FIL India Business Services Pvt Ltd.
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Saturday, June 30, 2012:
IT/BPO industry is on the verge of the next 'S' curve. It's time to replace the old business models with the new ones. It's time for some new trends to come in. Trends like Big data, social media, mobile and analytics will be the order of the day and hence will cause a disruption in the older trends. The industry has no choice but to move this way, the discussion is how to go about it. We spoke to Nitin Seth, managing director and country head, FIL India Business Services Pvt Ltd about what exactly is this disruption all about and how should the industry be prepared to face it. Excerpts:
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Is there a better word than disruption for the current phase in the BPO industry?
I think it's more of an opportunity. It's a tipping point. It's an opportunity for the industry to move to the new 'S' curve. The industry largely has been in a back office, FT-based model. But for the 15-20 years that we have been around, the knowledge that we have built-in, not just of the processes that we are delivering but the businesses we are serving is quite outstanding. That knowledge can now be leveraged given these trends to deliver something very different from what we have been doing historically. That is the massive opportunity. It may be some kind of a tipping point that you have been building this expertise as a company and now along with that there are trends like cloud coming in. Cloud is really a disruptive trend. The mobile facilitates social media, social media helps create large amount of big data. So Big data is a consequence. Big data and cloud are the two pivotal trends for me. If you look at the confluence of these two and add the growing expertise of the Indian IT/BPO organisations, I think the combination of the two will make it real for us. If the Indian IT/BPO companies were at a point where they were 10-15 years back, it would have been a negative disruption. But because we have been building knowledge and expertise over the years, I think this can be a positive disruption.
But don't you think this disruption is concentrated only to the creamy layer of IT/BPO companies and is not penetrating down?
It will lead to a bit of a challenge to the current industry structures. Whenever, there are significant changes happening, there will obviously be some who will win, there will be some who will lose and then there will a set of new players. I would expect some of the larger companies to be very aware of these trends. See, one cannot deny that these trends need investments too. The services models are very simple. The companies sell FTs, they get money and make heavy margins. They don't really have to invest much. But with this change, you have to create a proposition and it will require investments. So I would expect the larger players to take it pro-actively because most of them are sitting on very healthy balance sheets. There will be some IT/BPO companies may of smaller or mid-size who don't have that capital and that kind of vision who might lose out. This is where the message needs to go out. We need to inspire the new generation which is going to be the new set of companies. There will be some totally new companies which may not need scale. The IT/BPO industry today works on scale. The scale works as an entry barrier and it is not easy to build that scale. With Cloud and Big data, it changes the dynamics around scale. So there is really an opportunity for the formation of new companies and new propositions, which can very quickly become quite relevant. So I think a fresh generation of entrepreneurs can leverage this opportunity very well.
An obvious question from what you have just mentioned that IT/BPO companies are sitting on heavy balance sheets. Does that mean the global economic turmoil has not affected us?
Whenever there is an economic slowdown, it does affect the industry. But what happens is that there are two forces at play. One force is when a company is facing economic pressure, they start looking at offshoring more intensively. There are some things that you don't want to offshore but when it really starts hurting you, you start thinking of it. It does encourage offshoring but at the same time what also happens is that to do offshoring, you require some investments. Second is that offshoring is driven by the growth of the company. So if the growth is not happening, the company is not offshoring that much. So there are two different trends that can happen- one which is positive that because of the economic pressure, companies tend to offshore more and the second is that the companies are a little wary of that investment particularly when the growth is not happening. So there are two different trends happening. The outcome of that is there is still growth in the industry but the rate of growth has come down. If you look at the impact of the slowdown on some of the other industries, the impact of the economic downturn comparatively is very different on the IT/BPO industry.
Industry is ready to welcome these positive 'disruptive' trends but talent has been voiced as one of the major issues. At a point in time when Indian BPO industry is considered to be maturing, one finds dearth of talent for the new trends. Isn’t this an ironical situation?
I think we tend to make more noise about it than is required. In Fidelity, I am responsible for global locations. If I look at different locations that I have, by far India still offers the most attractive talent. Locations like China or near shore locations in Europe lag behind from the talent perspective. The issue is that as the CEO of a company, if you are trying to manage the profitability and financial performance, the biggest challenge is still talent from the cost perspective. We are still looking from a wage cost perspective and inflation. From a CEO perspective, it is clearly one of the areas that we worry about. It is not stopping the business but it becomes a bit of a road block. That's why there is a lot of noise around this issue. Yet another perspective can be that the way industry has grown, it has largely been self-contained. The industry did not happen because of the government. Talent is an area where government could play a role. The industry is already trying to work with the government to improve employability in terms of shaping the curriculum and the quality of teachers that we have. It is a very grassroot process. This is where the government has to wake up. If we are able to leverage all the talent that we have in the country, we will never be talking about this issue. The major issue is that the education process and system does not prepare the talent that we have to make them employable. The government and industry needs to collaborate on this. But talent is not as big an issue which will destroy the industry. But if we get this right, it can certainly aid the development of the industry. |
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