BPO: China the biggest threat to India

Despite the emergence of China and Philippines as competitors in the business process outsourcing space, India is well placed in terms of parameters like cost savings, competency, technical infrastructure, language and skill pool, according to an industry report by ICRA.

In the BPO field, China is perhaps the biggest challenge in the future and the largest threat to India, and with the largest population and fastest economic growth, the Chinese have at least two advantages in the global outsourcing market -- manufacturing and IT -- the report said.

In terms of outsourcing options, India has a significant cost savings model with multiple competencies in various areas, an emerging technical infrastructure, highly rated skill pool with English language and extensive cultural fit, the rating agency said.

The main disadvantages of China are lack of good quality record in software, whereas India has a better image as quality supplier, ICRA said in its BPO industry report.

With low percentage of Chinese population speaking English and a less mature and relatively new BPO industry, India stands tall in these areas vis-a-vis China, it said.

However, China has certain advantages in offering low manpower costs compared to India, and being close to Japan, its BPO market is also likely to grow through the Japanese outsourcing route. As India currently offers no BPO services in Japan, China will capitalise on its proximity to it, the report said.

The report also mentions the proactive approach of Chinese government towards BPO sector.

"The Chinese government has invested over $5.4 billion in nine universities to promote English language and other skill sets," it said, while adding China could also leverage on its strong manufacturing base image.

As regards Philippines, the disadvantages are low graduate turnout with only 400,000 graduates per annum which puts it unfavourably with India, poor record on quality vis-a-vis India, and political instability resulting in lack of uniformity in policies, ICRA said.

There is also an absence of multi-location facilities in Philippines and the country faces the important issue of scaling up. The largest call centre in Philippines of AOL has only 800 people and the size of the industry there is only $100 million, the report noted. India's BPO industry size is $2 billion.

Philippines enjoys advantages in being a former United States colony that helps in emulating US culture and language, well developed IT skill set, third largest English speaking nation in the world and large scale technical training programme.

Though countries like Australia, Canada and Ireland are the other players, they are not serious competitors to India due to a small population base, ICRA said.