Will the slowdown benefit BPO industry?

Indian industry will feel the real impact of the current meltdown in the US and other developed economies in the first quarter of 2009, with the business process industry likely to see job losses of up to a quarter of a million, said Samir Chopra, President, Business Process Industry Association of India (BPIAI).

Addressing delegates at a session on 'Surviving US Recession- Developing & Transforming Policies', Chopra, however, saw a silver lining in the ongoing recession for the BPO sector, saying that it would compel more companies in the US and Europe to look at outsourcing as a way cut their costs and improve efficiencies.

He said that urgent government measures were needed to boost the domestic business process industry, specially the medium and small enterprises. These included both fiscal and administrative measures, like extending the tax relief for the IT sector for another 5-10 years and export promotion steps, including a market development fund. The session was organised here today by BPIAI in association with Confederation of Indian Industry (CII).

According to him, the current situation had been impacted further by the recent terrorist carnage in Mumbai, which had hit sentiments across the board. "It has led to widespread cancellations of visit and even forthcoming international events. The government must now take suitable remedial steps to boost homeland security and the emergency response system."

For Anand Pillai, the current meltdown was an opportunity for the Indian BPO sector to add value to its services. This, he said, was important if they were to retain and expand their client base. Taking an optimistic view of the current slowdown, he said that a positive response and attitude would help shorten the recession cycle. "For this, it was important workplaces should engender learning, preparing employees for the turnaround, when it happens.

Citing the example of his company, HCL Technologies Ltd, Pillai said that "the core asset in any IT industry were its staff and cost-cutting through retrenchments was not the right policy to follow. The savings resulting from such job cuts are miniscule when compared to the damage they cause in terms of employee satisfaction and service delivery."

Disagreeing with Chopra that the current slowdown was temporary, Praveen Sengar, Head-Software, Services & Industry (Vertical Reserach), IDC India Ltd, said recovery from the last slowdown in 2001 had taken six quarters when the sectors affected were much less. "This time, I see a recovery only around the first half or the third quarter of 2010."

According to Sengar, the current slowdown was likely to slowdown expansion in the BPO industry, with the time taken for signing up new clients taking a longer period of time. "It will also result in greater consolidation and promote diversification into areas hitherto considered as non-core activities."

On his part, S N Zindal, former Director-General, Software Technology Parks of India, said that "it was not true that the Indian IT industry was in recession, though he agreed that there could be substantial decline in its growth rate. This is a period when the Indian IT industry, specially the BPO units, should build on their advantage by improving manpower, developing suitable infrastructure and having the right government policies in place."

Agreeing that the SMEs were the most vulnerable to any downturn, Zindal said that the right policies could help such units move up the value chain. He said that even as the slowdown continued in the US and other developed countries; such units could help tide over the crisis by expanding the domestic market.

Emphasizing the need for more reforms, Kiron Prabhakar, Partner, PAV Law Offices, said that amendments had been proposed several times to the Information Technology Act 2000, "but these are yet to see the light of the day". According to her, the other areas needing reform were Incomes Tax Act and the Stamp Duty Act apart from changes in the immigration laws.

Prabhakar also advocated doing away with the cap on royalty and knowhow fees, saying that were impeding technology transfer to Indian companies.Industry has been seeking a change in the labour regulations for quite some time and the government must ensure that these promote outsourcing, she added.

Proposing the vote of thanks, Deepak Ohlyan, Managing Committee Member, BPIAI, and Director, Dell International Services BPO, said that the recent terrorist incidents in Mumbai were a matter of great concern to Indian industry. He said that it was time for the domestic BPO industry to consolidate on its recent growth and prepare for the turnaround by upgrading both staff and services.

A panel discussion on the impact of the recent terrorist attacks on the business process industry was also organized on occasion, with participants seeking stronger government action and greater political will to tackle the situation.

Some participants in the discussion like Col K C Goswami, Consultant, Special Projects, G4S Security Services; Sanjog Gupta of NDTV, and Arjun Wallia, Founder & Chairman, Managing Director, Walsons -- A Securitas Partner Company, felt that the attacks were a wake-up call for the Indian industry to take immediate steps to improve physical security of their establishments. There was no time for complacency, they added.

Other speakers like Srinivas Pingali, EVP, Quatrro BPO Solutions Pvt Ltd, said that the BPO industry had been directly impacted by the attacks and "any such attack in the future could severely dent the prospects of the domestic industry. The immediate business impact has also been minimized by the forthcoming Christmas and New Year holidays."

Responding to a suggestion, Chopra agreed on the need for the association to come out with its own security standards for the BPO sector. This, he said, would reassure potential overseas investors and clients, even as they would enable domestic companies to be prepared for ongoing security audits and checks.

Source: Times of India