Indian BPOs unfazed by New Jersey's anti-outsourcing law

Tuesday, 26 November 2002, 08:00 Hrs
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The burgeoning Indian business process outsourcing (BPO) sector does not seem too perturbed over a proposed bill in the U.S. state of New Jersey to block outsourcing to other countries, including India.

BANGALORE: Industry officials termed the bill as an "isolated" instance in a globalised business environment, in which outsourcing to India cuts costs, provides quality and improves efficiencies.

Initially, eyebrows were raised in the IT industry following reports that Senator Shirley K. Tuner has introduced the bill in New Jersey to prevent outsourcing of government contracts to citizens outside the U.S. in a bid to prevent loss of jobs to foreign countries.

"Moving of processes to India does not mean money so saved is saved or diverted to India. On the contrary, it saves and creates more money for U.S. companies to invest and create other jobs there. It is, actually, their economy that improves with our efficiencies," ICICIonesource president K. Ganesh said.

TransWorks CEO Prakash Gurbaxani added: "If at all it has any impact, it will be on two or three Indian BPO companies with contracts from governments in U.S. states. It is, largely, private U.S. companies that outsource work to India."

Raju Bhatnagar, head of BPO at Cognizant Technology Solutions, said: "The lessons of the manufacturing sector are there for all to see. Ultimately, economic forces will play their part, even if it means over a period of time, to see that outsourcing to India is not affected."

New Jersey-based Cognizant is also setting up a BPO unit here to exploit growing opportunities in the financial sector, by initially opening a 150-seater call centre-cum-back office process centre in the first quarter of 2003 -- January-March.

Industry officials quote the example of Nike, which outsourced manufacturing of its shoes to Asia and reaped the benefits to record sales of $2 billion.

"The prices of shoes went down and sales went up in the U.S. There is a huge benefit from outsourcing that private companies in the U.S. realise," said Ganesh.

Gurbaxani added: "The perception that jobs are being lost existed when manufacturing shifted to Asian countries. But the same perception did not exist when software was outsourced because it was need-based.

"Ultimately, competitive pressures will play their role. It is nothing to be perturbed about."

Ganesh said jobs were not being cut in the U.S. to outsource. "Availability of people and high rates of attrition are critical factors that have led to outsourcing.

"What Indian BPOs have provided in exchange is cost effectiveness, quality and productivity. It is efficiency that improves economy."

The other factor, officials who did not want to be identified say, is that it is difficult to prevent outsourcing because unions in America, unlike Britain, are not strong in the services sector.

"It appears more a political move now, but hard economics will ultimately benefit Indian companies," said an official of a BPO, requesting anonymity.

"Don't forget that the U.S. is leading the globalisation process in the world. It can't afford to block its own progress. It is the bottom-line that matters and the private sector in the U.S. is strong enough to influence such decisions," said another official.

As Wipro chairman Azim Premji told an International Data Corp. (IDC) meeting last week: "The fundamental truth is that outsourcing is no longer a desired choice but an absolute strategic necessity. Services and functions that can be done at greater efficiencies and effectiveness are best outsourced."

Premji quoted the Nasscom-McKinsey report 2002, which predicts two million jobs that outsourcing centres in India will provide in six years. By 2008, the revenue predicted is around $24 billion, which will be three percent of India's gross domestic product (GDP).

The growth rate achieved by the sector was 71 percent last year making it the fastest growing industry. In the last five years, more than 336 centres have come up in India.
Source: IANS

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