This can be more than just an irritant as vouchsafed by Dell Inc, the world’s largest computer seller that decided to shift its customer support service for corporate clients back to the U.S.. Earlier, Lehman Brothers also decided to take back its internal computer help desk, outsourced to Indian IT major Wipro, due to the dissatisfaction with the skills offered in India. One of the dissatisfied customers widely quoted in news reports is Ronald Kronk, a Presbyterian minister from Pennsylvania, who said that he spent the last four months trying to solve a problem that resulted in his being billed for two computers.

Kronk has been quoted as saying: “They’re extremely polite, but I call it sponge listening — they just soak it and say — I can understand why you’re angry — but nothing happens. I even said to them once that I’d like to speak to someone in the U.S. They gave me a number but it’s a recording and I can’t speak to a human being.”

There are even reports of racial customer screams — “You bloody Indians, you don’t get it, do you?”

These problems, at one level, seem inevitable. In spite of TV and e-mail, people living thousands of miles away and without local knowledge cannot always answer inquiries authoritatively. According to reports, England is full of jokes about operators in India who master Scots or Midland accents but falter over small physical details. Kate, a doctor based in England, recently on a visit to India, told this correspondent that grappling with rail inquiries in the U.K. can be quite onerous as often the information is incorrect, as the person at the other end just does not seem to understand the queries.

The fear here, as exemplified by the Dell and Lehman Brothers example, is the doubts that have been creeping in about the quality of the Indian Business and Process Outsourcing — BPO — industry. Indeed, the threat to the BPO industry is generally seen as one of resistance in the developed world to jobs shifting to countries like India. But, there seems to be an increasing consensus in India now that the economic benefits in terms of lower costs are so substantial that firms cannot be prevented from tapping this potential. And, the foreign companies should be able to withstand the political backlash at home, which is a matter of time. A recent instance being quoted is the Indiana Senate panel’s refusal to support a sweeping bill to limit foreign workers (read Indians) out of American state contract jobs. Union Commerce and Industries Minister Arun Jaitley said in Parliament that the Indian government has been assured by the U.S. government as well as industry that they would not approve opposition to business outsourcing to countries like India, brought in through legislation in New Jersey and some other states. The problem lies elsewhere.

The Indian BPO industry has been growing at a mind boggling 60-70 percent annually with revenues growing from $565 million in ’99-00 to almost $2,400 million in ’02-03. The future projections look brighter — employment to over a million people by 2006, up from the current 200,000. Revenues are estimated to increase to $2,400 million by 2006. It is said that while the Indian IT industry took 15-20 years to start making its presence felt, the Indian BPO industry has done it in less than 10 years. According to the Economic Times Intelligence Group study ET Knowledge Series, call centers account for almost 65-70 percent of the Indian BPO industry in terms of revenues and numbers. And, herein lies the problem, as most of the growth has been at the lower-end of the skill pyramid.

Indeed, according to observers here, dissatisfaction with the quality of manpower here which is employed in relatively less-skilled services could result in an immediate flight of jobs, should even a slight price differential happen. Examples quoted are the trail of Nike shoe manufacturing that moved from South Korea to Malaysia to Indonesia. Another instance is the competition that a country such as Bangladesh provides to Indian export of lower-end of the garment industry due to lower infrastructure and labor costs. The writing is for all to see — that no resting place is permanent. Each is determined by cost effectiveness. India must guard its lead, which is the essence of globalization.

The warning has been sounded by Singapore’s Prime Minister Goh Chok Tong who recently said that the next round of the globalization of jobs might see China, Malaysia and the Philippines competing with India in what Tong called the world’s “information technology and back office.” HSBC, Citibank and Standard Chartered already have service centers in Shanghai and Guangzhou in China, and Cyberjaya and Penang in Malaysia.

The prescription is two-fold — re-training call center employees adequately to retain the current business as well as moving up the value-chain in terms of the quality of jobs outsourced.

According to Sabira Merchant, speech-voice consultant, “Indians have excellent control over written English, yet when it comes to pronunciation, we do not always sound right. The problem is while Americans think in English, we think in our mother tongue and translate it while speaking. As a nation we do speak good English. That is why most Indians score easily over people of other nationalities. But, it will still take time for Indians to speak with a polished accent and fluency.”

Yet, call center executives are confident that business is not going to move in a hurry to other Asian countries. As Prashant Bhardwaj, a manager with a leading call center says, “By the time the other countries produce the required English speaking manpower, the world will be used to the Indian-way of speaking and business wont shift unless there is a substantial cost differential. A Chinese speaking English will take a whole lot more time to get used when Indians are already being spoken to on such a large scale.”

However, experts warn that the Indian BPO strategy that concentrates only on the less-skilled jobs is fraught with risks. At the lower end, competition tends to be entirely in terms of price. And it is quite possible that in the near future countries with much lower labor standards could become price competitive leading to large-scale cuts in wage and infrastructure costs.

The long-term solution to sustaining the ongoing BPO boom will have to provide for opportunities of career growth within the industry and working conditions will have to be kept at levels that keep attrition rates to a minimum, in the face of price competition. In the more traditional IT industry, even if local firms offered lower end jobs, individuals always had the option of moving to greener pastures abroad. But, the value of the BPO lies in location. Hence, the long term-sustainability of the BPO, will thus depend upon the quality of outsourcing, industry specific training and a constant endeavor to move up the value chain, instead of being counted just by numbers and cost. And inculcating the right diction.

- Siddharth Srivastava is a freelance
journalist based in New Delhi.

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INFOTECH INDIA



Indo-Israel Space Ties... Barclays to Move... Second Dell Center...
Touchtel Audio Conference... New Science Awards... PM to Discuss Tech Ties...
ESS at CMM Level 3... Some BPOs Tax-exempt — Here is the latest on information technology from India

Indo-Israel Space Ties

Israeli and Indian technical space science teams will meet in New Delhi in January to prepare a timetable for launching an Israeli TAUVEX experimental ultra-violet research telescope aboard India’s GSLV GSAT-4 satellite by September 2005.

The development follows on the heels of the recent signing in New Delhi of an accord between the Israel Space Agency and the Indian Space Research Organization.

ISA has allocated $4 million to finance the project’s new interface programs. These will adapt the TAUVEX’s (Tel Aviv University Ultra Violet Experiment) three, 20-cm wide field identical co-aligned Ritchley-Chretien UV telescopes to India’s 6.5 telescope. GSLV will hurl GSAT-4 into space from the Antariksh Bhavan space satellite station.

Israeli and Indian science and industry teams will fly between New Delhi and Tel Aviv in efforts to complete the technical adaptations by June 2005 when the 32 kg telescope is scheduled to arrive in India for final tests prior to the launch.

To date Israel has invested $14 million in developing its UV telescope to probe the secrets of the universe. Its Israeli manufacturers, Electro Optics Ltd, claim it is superior to previous generation X-ray telescopes developed also by Israel, Denmark, Italy, the U.S. and France.
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Barclays to Move

British bank major Barclays is reportedly set to move call centre jobs abroad — nearly 5,000 of them, mainly to India.

The move will involve transferring about half the bank’s call centre activities.

The most likely destination for the outsourced Barclays call centre is India although South Africa may also be considered as an option.

“Barclays is moving part of its call centre operations offshore and as many as 5,000 jobs could be involved,” the London Evening Standard quoted a source.

However, a Barclays spokeswoman denied this. “We have no precise plans at this moment in time,” she said, although she refused to rule it out for the future. “Off-shoring is something everyone is looking into at the moment. It is a very complex issue,” she said.

Reports say British companies have been slower than their American counterparts to take advantage of the lower costs that call centers in the developing world can give.

Less than 15 percent of top British companies have taken the plunge so far, against 35 percent of leading U.S. firms.

As many as 50,000 British jobs have been transferred to Indian centers in the past two years. The industry, which still employs nearly 600,000 people in Britain, is expected to shed 100,000 more jobs in the next five years.

British Trade and Industry Secretary Patricia Hewitt has ordered an independent study of the phenomenon. The study starts in January and is expected to last three months.
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Second Dell Center

Dell International, recently embroiled in a controversy when it decided to shift some of its overseas business customer service back to the U.S., is planning to set up a second subsidiary in India.

Dell’s second Indian venture would be for undertaking specialized services of high technology computer systems, storage devices, computer consultancy and solutions.

Significantly, Dell plans to shift all the domestic sales and marketing activities of its existing subsidiary to the new venture. It is, however, not clear what Dell’s existing subsidiary will do once these functions are transferred to the second venture.

Though the details of Dell’s investment plans for its second venture in India are not available, sources said the second subsidiary will be set with minimum capital, which would be increased depending on the business requirements from time to time.

Sources said Dell has already obtained a no-objection certificate from the existing subsidiary in India for setting up a second venture. Dell has also got conditional government clearance.
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Touchtel Audio Conference

Bharti’s Touchtel Dec. 31 announced its plans to target 500 corporate customers in Tamil Nadu to subscribe to its audio conferencing solution IndiaOne MeetXpress service.

The solution was specially designed to meet the needs of the corporate customers, Touchtel, the country’s first private fixed line service providers, said in a press release in Chennai.

“Corporates using the IndiaOnline MeetXpress solution are set to save substantially both in terms of time and also in their travel costs. In addition, the audio conferencing solution also offers other intangible benefits like ensuring uniformity in communication and transparency in business operations,” company CEO K. Krishnan said.
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New Science Awards

Two new awards for scientists, one of them for a woman, for best scientific papers, were announced Jan. 3 at the Science Congress in Chandigarh.

The Rs .50,000 award will be given from next year and the Department of Science and Technology and the Indian Science Congress will select the candidates, Science and Technology Minister Murli Manohar Joshi said in his address at the 91st Science Congress.

Joshi said the first winner of the Indian Science Award, instituted last year, would be announced later this year.

The Rs. 2.5 million award is the highest and most prestigious national recognition in science in the country, he said.

The minister also released a logo for “The Year of Scientific Awareness” being observed this year and a “roadmap for plant genome research.”

Joshi gave away awards for excellence in science and technology to 10 scientists, including noted space scientist and Rajya Sabha member Dr. K. Kasturirangan.
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PM to Discuss Tech Ties

Prime Minister Atal Behari Vajpayee said Jan. 3 he would discuss expansion of regional cooperation in science and technology for mutual benefit during the SAARC Summit in Pakistan.

“I am going to Islamabad to take part in the SAARC Summit. I shall discuss with my counterparts how we can expand regional cooperation in diverse areas of science and technology for mutual benefit,” Vajpayee said in his message to the 91st Science Congress, which opened in Chandigarh Jan. 3.

Reading out the prime minister’s message in his absence, Science and Technology Minister Murli Manohar Joshi said Vajpayee could not inaugurate the Congress this year due to “unavoidable reasons.”

Vajpayee said, “We will have to strengthen the alliance of moving on the four wheels of science, technology, business and government for further toughening the competitive muscle of the Indian economy.”

He said the country was actively helping other developing countries in biotechnology and Indian companies in this frontier area of science were “poised to ride the bio-industrial revolution now on the anvil.”

“I very recently inaugurated with the president of Syria a national biotechnology centre in Damascus,” he said.
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ESS at CMM Level 3

Enterprise Software Solutions, a division of the Chennai-based Accel ICIM Systems and Services Ltd, has been successfully assessed at Capability Maturity Model level 3, a company release said Dec. 30.

The division is engaged in software development projects and ERP implementation.

“Through this assessment, Accel ICIM has shown its commitment to deliver high quality products and services to their clients which will be on par with international quality standards,” R.S. Prasad Rao, director of the company, said in the release.

The assessment was carried out by Dr. S. Ravichandran, the Software Engineering Institute’s authorized lead assessor.
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Some BPOs Tax-exempt

The Indian government said Jan. 2 there would be no income-tax on BPO firms providing only “incidental services” through call centers to companies abroad, while those offering core services, including software maintenance and development, would be taxed.

BPO units offering incidental services do not generate income separately and that it was difficult to determine the profits generated by the Indian BPOs to the foreign company, which had outsourced the services, the Central Board of Direct Taxes said in New Delhi, explaining the tax exemption.

Moreover, the services rendered by such BPOs resulted in an “insignificant” profit to the principal company abroad, the CBDT noted. The government, however, has put up a pre-condition that charges paid by foreign companies to Indian call centers should be at arm’s length/fair market price.

The decision to exempt tax, which would help many call centers catering to IT, banking and insurance sectors, comes in the wake of apprehensions over a certain section of the Income-Tax Act which laid out that profits of the foreign companies attributable to business activities in India become taxable.

However, in the case of BPO entities undertaking core activities as software development and maintenance, debt collection service, investment consultancy and travel agent services for the principal foreign companies, such firms will have to pay income-tax, CBDT said.
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