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BPO industry to grow at 33%
June, 10th 2008

The National Association of Software and Service Companies (Nasscom), the representative body of the Indian IT and Business Process Outsourcing (BPO) industry, on Monday held its tenth annual BPO strategy summit here. The two-day event attracted more than 500 delegates and was addressed by more than 60 speakers representing a spectrum of the BPO landscape in India.

In his welcome address, Nasscom President Som Mittal said that although the BPO industry had drawn attention for its rapid growth in the last decade, the maturity it had attained was much less readily recognised. One of the most important features of the road ahead, he said, would be the BPO industrys move into smaller towns and even rural areas, he said. The seven biggest centres for the BPO industry in India the National Capital Region, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and Pune were likely to grow four-fold in the next ten years. Mr. Mittal said the industrys move to smaller towns was motivated by the fear that bottlenecks of various kinds, particularly those related to the infrastructural kind, were likely to impose heavier costs on the industry. He pointed out that this was particularly serious given the declining margins in the industry.

Mr. Mittal said the BPO industry was likely to grow at 33 per cent in 2008-09 and remained fundamentally sound despite the U.S. economic slowdown and the decline of the rupee vis-a-vis the dollar. He pointed out that the industry provided direct employment to about 20 lakh persons and another 80 lakh persons indirectly. Nasscoms revenue target for the IT-BPO industry is $73-75 billion in 2010 against about $64 billion in 2007-08.

Intellectual arbitrage

Jainder Singh, Secretary, Department of Information Technology, Ministry of Communications and Information Technology, said competition from other countries cannot be simply wished away. This had to be done by moving up the value chain, he said. Intellectual arbitrage seems to be the buzzword in the Knowledge Process Outsourcing (KPO) space, he remarked. The industry needed more chartered accountants, doctors, engineers, lawyers and other professionals whose skills could help the industry reach new horizons.

Ganesh Natarajan, Chairman, Nasscom, discounted the fears of a U.S. recession affecting the industry. Even if the IT-BPO industry slips 3-4 percentage points, we will still be on target, he said. The future of the industry no longer lay in cost arbitrage but in new processes which add value, he said. India, he said, is becoming a hub for process expertise combined with technical skills. The industry needed to employ between one and two lakh graduates. Supply, rather than demand, is the constraint, he remarked.

Referring to the problem of skill shortage faced by the industry, Mr. Ganesh Natarajan said forging public-partnerships was the best way to address the problem of skill shortage. He called for major educational reforms to resolve the problem of shortage of skills.

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