SA BPO sector expects to benefit from anticipated cost hike in India

The business process outsourcing industry in South Africa is preparing to utilize the benefits from an estimated cost rise in the Indian BPO sector. According to a study organized by PixelFaerie, a South African firm, the expense base of the BPO sector in India is likely to rise by 45 per cent during the subsequent two years owing to salary hikes as well as the depreciation of the Indian rupee vis-à-vis the dollar and euro.

Quoting the sales and marketing head at PixelFaerie, Marius Münstermann, an industry-related website reports that while the cost base in South Africa will continue to be stable during the next two years providing the BPO industry in the country an upper hand over its counterpart in India. Substantiating his view, Münstermann says that compared to the salary hikes in India, pay packages in South Africa will be fairly reasonable. At the same time, as inflation in South Africa is unwavering, it is unlikely that there will be any sudden rise operational costs. Citing the example of PixelFaerie which has not experienced any price rise in last six years, he says that the BPO firms located in Cape Town would be capable of maintaining their pricing arrangement for a long time.

According to Münstermann, his firm will increase its employee strength by approximately 30 per cent by the end of 2011 with a view to reap the benefits of an anticipated cost rise in India. Meanwhile, the Business Process Enabling South Africa – Western Cape (BPeSA-WC) acting CEO, Fargi Semaar, is of the view that they were observing a distinct inclination from the outsourcers who are considering South Africa to be a genuine option to India. Stating that rising costs in India is one of the major reasons behind the trend, Semaar hoped that the playing fields would be leveled with operational expenses expected to escalate in India. He is of the view that soon quality would be the main issue, as against cost, for the investors worldwide.

It may be noted here that for a long time, the BPO sector in South Africa has been pitching its claim to be one of the preferred outsourcing destinations globally and, hence, has been including more services like back-office management in its portfolio. The country also enjoys a number of advantages vis-à-vis time zone, language and cultural similarity to its prime market – Europe. Nevertheless, thus far, the BPO firms in the country have not proved to be cost effective owing to a number of reasons, primarily extremely high telecom expenses.