Several Indian BPO/ ITeS shifting base to Philippines

Recent developments in the southern regions of India unmistakably point to the fact that the country’s reputation as the globally favored hum for information technology (IT) and information technology-enabled services (ITeS) is eroding rapidly as several ITeS and BPO companies, particularly the medium businesses based in Hyderabad and Bangalore are moving or expanding their businesses in the Philippines.

A recent survey undertaken by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) found that the latest incidents are fallout of the concerns related to infrastructure, expenses incurred towards business operations as well as accessibility of expert labor.

A website report quotes ASSOCHAM national secretary general D S Rawat as saying that there are several driving forces, varying from ease of conducting business, accessibility of sufficient number of employees who are proficient in speaking English at inexpensive wages, improved infrastructure to incentives from the government. He added that it is very important for the Union as well as the State governments to undertake corrective measures on an emergency basis as well as rapidly to curb the loss since the flight of capital will have a severe impact on the development and employment as well as pose a threat to India's control in the IT industry.

The survey undertaken by ASSOCHAM has been titled “Sustaining India’s IT/ ITeS Leadership” and says that the current macro-economic as well as sectional situations are leading to the ITeS/ BPO industry moving away from India to the Philippines, particularly from the hubs like Hyderabad and Bangalore. A trend of this nature is yet to be noticed in the National Capital Region (NCR) and Pune – the other hubs of IT and ITeS industry in India.

The ASSOCHAM study further stated that it is an undeniable fact that the IT/ ITeS sector has advanced as a foremost contributor to India’s GDP and performs a very important role in generating employment as well as in promoting exports. This industry has assisted the country to create a Brand Equity.

As a fraction of national GDP, the revenues of the IT/ ITeS sector have increased from a mere 1.2 per cent in 1997-1998 to approximately 6.4 per cent during the 2010-2011 fiscal. The sector’s share of entire Indian exports (products and services) too has gone up from below 4 per cent in the 1997-1998 fiscal to about 26 per cent in the 2010-2011 fiscal. Currently, India is a leading destination for worldwide IT/ ITeS off-shoring market, contributing nearly 55 per cent in 2010 in comparison to 49 per cent way back in 2005.

However, Rawat pointed out that India’s prominence as an IT/ITeS hub is on the downhill primarily because of shrinking employable talent pool, expensive business operation owing to inadequacies of security, transport, power, and focus on metros owing to insufficient infrastructure in other urban areas and so on.

As a result, India is pushed in managing its competitiveness following escalating costs and intensifying competition. In effect, this sector is essentially ideal when there is less capital intensive and possesses plenty of flexibility in operations and, hence, it is possible to relocation in a brief time span.

Consequently, there is a genuine threat to India vis-à-vis its quick relocation to other contending locations, such as the Philippines, China, Vietnam, Hungary , Poland, Brazil, Egypt and Mexico, to name a few. By now, several MNCs as well as Indian companies are establishing their centers in the countries named here.