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Last Updated: Monday, 9 February, 2004, 14:09 GMT
India dismisses outsourcing fears

By Zubair Ahmed
BBC correspondent in Bombay

Despite Western backlash against job outsourcing, the Indian software industry was in a buoyant mood as it gathered for its annual conference in Bombay.

The Indian software industry is optimistic as the pace of its expansion accelerates.

India's hi-tech sector is now growing at 30% a year.

Senior executives at a four-day international conference organised by Nasscom, the association of Indian software companies, claim the volume of work outsourced to India has increased by more than 50% in the last year.

The Indian software industry is in an upbeat mood
The Indian software industry is in an upbeat mood

That is despite an increasingly noisy campaign against outsourcing by British trades unions and some American politicians.

"Win-win situation" is the cliché often heard at Indian high-tech business conferences. But this time, Nasscom claims there's a ring of truth to it.

A recent study commissioned by Nasscom and widely publicised in Britain claimed the benefits of outsourcing outweighed the temporary social and economic cost of job losses.

"It's a win-win situation for countries which allow outsourcing and the countries which receive outsourcing", says Nasscom chairman Som Mittal.

UK government support

It was a theme the conference returned to over and over.

And there was unexpected support from a surprising source, the British e-commerce minister, Stephen Timms.

It's a win-win situation for countries which allow outsourcing and the countries which receive outsourcing
NASSCOM chairman Som Mittal

Despite the increasingly loud complaints from British trades unions against the jobs flight to India, Mr Timms told the conference that his government had no plans to prevent British firms outsourcing work to India or elsewhere.

"In the UK we believe in free trade and we practise what we preach," he declared.

Mr Timms also announced yet another hefty outsourcing contract for Indian companies to help modernise IT systems for Britain's National Health Service.

The UK government's hands-off policy was welcomed by delegates, given the increasingly frenzied debate over the flood of call centre jobs heading east.

American legislation

Neeraj Bhargav, chief executive of WNS Global Services, said that the change was inevitable:

"Thirty years ago, the same thing had happened in manufacturing in Britain. There were massive job losses. Has Britain suffered? Their economy for the last ten years has been doing very well," he said.

Interestingly, Indian industry also claimed not to be worried by new US government legislation prohibiting outsourcing.

Switchboard operators
There could be two million Indians in the industry in five years' time

These, they said, apply only to American government contracts, which account for just 1% of the total volume of India's outsourcing trade.

And Nasscom insists that the tide will turn.

"It's the election year both in India and the US and democratic governments have their own compulsions," says Mr Mittal.

Official projections for the Indian IT sector's exports at the end of the current financial year, ending March, are $12bn.

That's forecast to rise by another $3bn in the following year.

Nasscom ambitiously forecasts that the outsourcing sector alone will be a $15bn industry by 2008, up by a staggering $12bn compared to current earnings of $3bn.

New work

These optimistic forecasts come just days after Britain's busiest telephone number, its rail enquiry service, announced it was outsourcing half its 50 million calls per year to India.

That adds to the several thousand British jobs already created in India by 30 companies ranging from leading banks such as Lloyds TSB, HSBC and Abbey, to insurance firms such as Aviva (Norwich Union).

But even Nasscom admits to a pall hanging over India's sunshine high-tech sector.

It is the growing number of Western complaints about the quality of service in call centres.

Quality issues

Until now, the British and American media seemed amused by the way Indian call centre workers have been trained to speak in foreign accents to answer calls from customers in London or Los Angeles.

Now, Indian executives admit to a growing concern in the West that the accent training has not been good enough and Indian workers remain hard to understand.

They are also increasingly being blamed for an alleged inability to understand the Western way of life.

More important, says the industry, is the West's concern about security issues, notably data privacy laws and cyber-terrorism.

Raju Bhatnagar, head of ICICI's outsourcing business, admits the worries are real.

"In my view the concern is to a large extent justified. If you look at this industry, we have big players, medium-sized players and small players - some know the business, some others don't," he said.

Problems of growth

There are no easy answers.

But later this year, Nasscom will hold a conference on cyber-terrorism with its US counterpart, the IT Association of America.

But the biggest problem faced by India's fastest-growing sector is how to cope with rapid growth.

Demand for India's English-speaking, low-wage, highly-educated workforce is starting to exceed supply, executives admit.

The industry says India's fledgling outsourcing and call centre sector has expanded massively in just three years.

Hundreds more American and British companies are expected to jump on to the outsourcing bandwagon and the Indian industry says it will difficult to recruit enough high-quality staff.


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