Neighbors' envy, India's pride - that's how the BPO industry was for India in all these nine years of its existence since 1999. But currently, the pride of India's status as the world's back-office and service hub is on the verge of collapse, due to the heat of the recession in the U.S., rupee appreciation against the U.S. dollar, and an escalating competition from China and other developing countries. Further, a steep upswing in wages, a scaring talent crunch, and soaring attrition rates have added fuel to the crisis.

Still, Indian software and services industry body NASSCOM predicts that the country's revenue from back-office outsourcing is likely to grow nearly five-fold to $ 50 billion by 2012, from the current $ 11 billion. Som Mittal, President, NASSCOM says, "There will be some slowdown but growth will happen." Also, he expects the BPO industry to grow at 22-23% in future to achieve the $ 60 billion export target.

In fact, nobody has a clue to what kind of affliction the U.S. recession will bring to the BPO industry in India. The initial jolt came when WNS, an Indian BPO, reported 23 percent decline in income in Q4 last year, as its clients' earnings suffered because of the U.S. subprime crisis. WNS lost its key client First Magnus in August 2007 when it filed for bankruptcy. Since then the U.S. subprime crisis has seen many mortgage companies file for bankruptcy, leading to loss of business for some Indian BPO firms.

Bangalore based iGate Global Solutions and Infosys BPO both serviced GreenPoint Mortgage, the mortgage arm of CapitalOne that declared bankruptcy in late 2007. About 5.5 percent of iGate's revenue in the quarter ended September 2007 came from U.S. mortgage companies, down from 7 percent in the previous quarter. The impact on Infosys BPO was not much, because the firm offered services to different segments in banking and finance and the subprime crisis did not have a remarkable effect on it. The latter part of 2008 will be a testing time for the Indian BPO community, as they are expecting the downtrend to continue.

Yet, they are hopeful of bouncing back. "In spite of a significant customer loss, we continue to see strong growth across many sectors. The overall BPO growth story is spreading across many other industries, including consumer products, retail, and manufacturing," says Neeraj Bhargava, CEO, WNS.