India flexes BPO muscle in international arena

Last week was a historic one for the Indian stock markets with the index scaling new highs. There was also the good news of the settlement between the Ambani brothers and Posco finally deciding to come to India after a very long wait.

All these make a positive contribution to the much envied Indian success story. It has caught the fancy of the Japanese who have been investing heavily in the country and that is one reason which many attribute for the stock markets seeing new highs.

India has a lot of sectors which provide enormous opportunities to those who want to invest. One such segment is the back-office process outsourcing industry, which is BPO in common parlance.

Indians have made a mark in the global arena with their ability to deliver services at much cheaper rates than what the developed nations have to shell out for in their own countries.

This is best demonstrated by the continuing controversy in the United States regarding job outsourcing to India. Critics say this outsourcing is destroying American jobs.

However, the protests have subsided to some extent because the Americans realise that without outsourcing they will not be able to survive in the global competitive scenario and lose out on the cost front.

Research done in the United States has also demonstrated that by outsourcing they stand to gain both in terms of competitive advantage as well as employment.

The Indian BPO business stands out globally and this fact has been recognised by the international community.

One of the primary reasons for the Indian BPO industry doing well is the fact that there is availability of cheap labour in the country. Along with this, the fact that Indians have highly skilled labour makes this combination of skill and cheap labour highly effective.

What also helped the BPO industry was the fact that in India a majority of the educated population is fluent communicators in English. With a majority of the west, especially the US, using English as their medium of communication India stands to be in a position to serve the needs of the global population.

India has exploited its natural advantage (if one can say that) and has emerged as the biggest player in this market.

The revenue from this segment has been growing consistently and was to the tune of $5.5 billion (Dh20.23 billion) in 2004 and is expected to touch $12.2 billion (Dh44.87 billion) by 2007.

It is estimated that large outsourcing to India is primarily because of cost savings to the tune of 40 per cent to 60 per cent.

Initially India got the lower end of the jobs as the reliability factor was absent. With the Indians doing well now, a lot of high-end jobs are coming into the country. The high-end jobs include security analysis, taxation handling and many others.

Indians possess a high work skill in these functional areas and this is why the western companies have started to transfer the jobs here. These high-end jobs will result in more revenues coming into the country. These areas have high margins, which augurs well for the players in the industry.

Over the past few years a number of players have entered the BPO industry but even then one can expect good growth from players who are already there in this industry and also from those who plan to enter it.

Many big players like Wipro, Infosys, HCL and Satyam have entered this industry due to its high growth rate as well as business it has to offer.

This industry is one to watch out for going ahead and with Indians being able to dent the high end market too this industry looks all set to scale new highs.

The Indian stock markets managed to go past the 7000 mark for the first time in its history with ease and also closed above that level. The BSE Sensex ended the week at 7,149 points, gaining 242 points or 3.51 per cent during the week.

The oil and gas sector stocks saw some rally last week as the government went ahead with its decision to hike the domestic oil prices. This move of the government came as a relief for the sector and the sector stocks saw gains in the region of 5-6 per cent during the week.

FMCG stocks also saw a rally last week as the monsoon arrived finally in the country. This rekindled the stocks as they are expected to gain because of the monsoons. The sectoral stocks were up by 5-6 per cent during the week.

Metal stocks saw a comeback last week after seeing some heavy battering in previous weeks. Stocks in this sector saw gains in the region of 4-5 per cent during the week.

Other sector such as pharma, information technology, banking also saw smart gains during the week.

The writer heads the Dubai office of Karvy Stock Broking Ltd.