India?s $16-billion business process outsourcing (BPO) industry is going through a rough phase with increasing pressure on margins and diminishing cost arbitrage. India?s cost advantage as an offshoring destination, its trump card, has dropped by 30-40%.
Quicker response time, better technical support and near-shore advantages are driving businesses to other outsourcing destinations, say experts. In addition, wage inflation over the years, forex losses and poor hedging strategies have impacted the margins of BPO companies further.
Despite the aggregate revenue for FY12 expected to cross the $100-billion mark, industry watchers feel the sector is facing an acute identity crisis, with the lack of vision and innovation dragging down business volumes. Adding to the challenging climate is the high attrition rate. The sector, which used to attract employees in droves, is now finding it difficult to hold on to them due to the absence of a distinct career graph and dipping perks.
?The margins are extremely under pressure and it will continue with rising labour costs. BPO is a very operation-intense game and today there is not much of differentiation among service providers. The conventional BPO service has become extremely commoditised,? says Canaan Partners, India, MD Alok Mittal. The California-based venture capital firm focuses on technology and BPO firms.
Source: http://www.bpo.biz/bpo-news-blog/2012/12/15/bpo-cos-stare-at-slipping-growth-losing-cost-advantage/
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