For the IT industry, analysts’ predictions are akin to gazing through a crystal ball, as these very predictions promise to provide some indication of things-to-come. At the recent Gartner Summit 2003, the dominant flavor was the future of IT services and BPO- the emerging geographies that have potential, the verticals that hold a promise, and the technologies that would matter. 

For the Indian IT services exports industry beset with mounting pressure on billing rates, global clients getting increasingly hard-nosed on RoI, and an added measure of anti-India sentiments- the predictions were soothing. The Indian IT services market opportunity would yet grow by a compounded 29% from 2003-07 from the present $ 13.1 billion to touch $ 36.3 billion. Success would hinge on recognizing competition from other countries- especially in staple areas like application development and maintenance by developing market intelligence and adopting competitive marketing strategies. So, watch out for Canada, Mexico, Russia, Israel, and South Africa besides China, of course. Many of these countries would exploit the nearshore advantage being closer to either US or Western Europe. Moreover, companies in these regions are increasingly unreceptive to 

offshore service providers. Therefore, Indian service providers have to carefully target emerging opportunities by country, industry vertical, solution area and company size. To compete in a commoditized market, Indian companies have to form partnerships with lower cost providers/countries and add value to their base offerings. Said Rita Terdiman, vice president and director- offshore sourcing, “The future for Indian IT service providers is to consider co-opetition with the emerging nearshore destinations to garner a larger share of the global opportunity.” 

Bottomline: Be realistic about the threat posed by global service providers and start to create mainstream outsourcing contracts to compete. 

For the BPO industry, the immediate news is bad. Debashish Sinha, principal analyst, Gartner says, “Between now and 2007, there will be a time when the BPO market would hit a slowdown – a temporary phase of disillusionment after the current phase of euphoria”. Resource and pricing flexibility commensurate with quality, time-zone advantage and many other such factors that led to the BPO boom will not remain so. This would force the BPO players to seek new differentiators by demonstrating capability for handling one or more IT-intensive business processes with full ownership and management; something which is fundamentally different from the current situation where BPO companies are handling well-defined out-tasking processes that are inherently simple. It is also important to understand that offshore outsourcing is still not the norm- it is just one of the options amongst business process re-engineering, shared services, joint-ventures, and spin off processes to name a few. 

A panel discussion on the BPO scenario in India brought out its basic differences with the IT services model—unlike most of the IT services companies that had grown without any pressures from the American MNCs, the Indian BPO vendors are witnessing a serious challenge from both the captive multinationals and also the US BPO players on Indian turf itself. Even the forecast is not too rosy for the Indian players, as US and West Europe are soon expected to garner a lion’s share of the Indian market. However, one way out for the Indian companies could be through a spate of mergers & acquisitions, with the targets primarily in the US and other Western countries.

The other crucial suggestion put forth for Indian BPO companies was to seriously explore the idea of a proactive business process re-engineering, failing which the stated objective of $13.8 billion by 2007 would remain only a mirage. While this would address one aspect of the Indian concern, the need of the hour for most Indian players would be to look at sophisticated niche areas within HR like resume tracking/review or in healthcare like drug discovery. This has finally led to the realization amongst the serious players the need to have deep pockets not only to start the business, but more importantly to sustain and manage it in the long run. What this has also led to is a spate of consolidations happening within the industry—more of which is set to come in the near future. 

Easwardas Satyan & Rajneesh De in Mumbai

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