THE BIG QUESTION: With the US economy heading towards a slowdown, the issue before the BPO industry is — will it use the recession as an opportunity or will it slow down? (Pic by: Subhabrata Das)

Salil Parekh, Executive Chairman, CapGemini India “For the pieces of work that we do, the demand is very robust from everythingwe see today.”

Peter Bendor-Samuel: My perspective is contrary to others. We believe the slowdown of US economy will be a bump for the Indian BPO industry. It will lead to acceleration of offshoring. We clearly see that across a number of industries. The only business where we see a slowdown is mortgages, which may have some contractual issues. But, overall, we see a bounce and acceleration coming, driven by the necessity of cost savings. So my belief is that the BPO sector should be preparing for more growth.

Peter Bendor Samuel, CEO, Everest Group “The slowdown of US economy will lead to acceleration of offshoring.”

Ameet Nivsarkar: What may happen is that the discretion spending may get delayed. But a lot of revenue in the industry is annuities-based contracts which will continue. Secondly, the sector is diversifying and it is serving far more verticals, be it technology, telecom, healthcare, utilities, and people don’t stop using gas or people don’t stop using the internet. So the industry will continue to grow at 30 per cent-growth So really the impact will be minimum.

Rahul Singh, MD & CEO, Citigroup Global Services “The clients want to send more work out here, but they also want higher output for the same dollar spend”

In January, everyone has got a new budget and when they look at what their boss has given them is slashed by 20 or 15 per cent and say, “Oh my God! How am I going to do it?” So, at this point of time, our sense was that in the October-December period there was some sort of slowdown in decision-making which is probably what I hear Peter saying as well, but since the beginning of this year, actually the intensity has gone up so much that we are having a hard time putting up with meetings, leave alone handling the stuff that is coming. So, I personally think that this is actually very positive for us and the evidence is already showing.

Raman Roy, Chairman & MD, Quatrro BPO Solutions “Listed companies will be under pressure from their investors to take costs off from their balance sheets.”

Rahul Singh: Yeah, I think there are two trends and I agree with what Raman and Niraj said, but I would like to point out two things. Number one is that you know I think there is now enough flexibility in the industry. We are now seven years old. We have seen a lot of maturity in several other processes.

Neeraj Bhargava, Chief Executive Officer, WNS Holdings “The quality of relationship and trust you built over the years can only improve.”

Salil Parekh: I have a similar view essentially. I think we are not seeing any slowing in the demand on the BPO side. We have a broad portfolio and IT pieces, and different scenarios will emerge. Nothing has emerged yet but on the BPO side which is a smaller piece of our business, we see continuing demand. We think for some small elements, and we are not in that where there might be some transaction processing type of BPO which is, in general, very small in any case. There may be an impact if there are some consumer-related activities, but for the pieces of work that we do, the demand is very robust from everything we see today.

Rajawat: So there will be some impact on pricing or margins but the revenue momentum will continue.This seems to be the consensus. But coming to the maturity of the industry, is there any way to detect this maturity? Are there, for instance, any changes in the pricing away from per person or per hour charges?

Pavan Vaish, CEO, IBM Daksh Business Process “There may be some shrinkage in contract or transaction volume depending on the segment you are in"

Bendor-Samuel: What I see is an industry that has spread its offering across several industries. Having said that, it is still very immature, okay, there are enormous number of companies, in fact, it is defined by numbers. The potential is enormous and the demand is building up the push in terms of cost cutting. We have validated the offshore model. We have been able to move out of just input-based to more mature output. We have demonstrated that we have been able to migrate things from low scale to high scale in the industrialised components. We have just started here, we have a long way to go before we say that we are mature.

Rajawat: How do you think the captive BPO operations will evolve over the next few years? Do you see them turning into third party or being bought over as inevitable. Let Rahul start this discussion as he heads a captive.

Ameet Nivsarkar, Vice-President, Nasscom “The discretion spending may get delayed. But a lot of revenue is annuity- based contracts.”

Parekh: I don’t have a similar view on this one. I don’t think there is a place in this business in long-term for captives. I think there will come a point where there will be issues related to cost and which will lead the captives to make other choices.

Bhargava: I think (a) captives will continue to exist and prosper and (b) it is actually good for us because they bring more jobs here, they bring more scales here. So, that part is fine. I think the issue we have today is an economic one. I think people in captives have abused their privilege here, you know, misusing their shareholders money by creating cost structures which are not necessary.

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(Businessworld Issue 25 Feb-3 Mar 2008)