Despite challenges to its leadership, India has deftly positioned itself as a major player in the global outsourcing industry. Today, India is one of seven countries looking to achieve 4 percent growth in its tech market sector.
With the outsourcing industry emerging from the aftermath of market turbulence, analysts are predicting the BPO industry will continue to grapple with short-term cost pressures and resource constraints.
US Immigration Clouds Hover Over India’s Tech Sector
The US Department of Homeland Security (DHS) is mulling a new raft of regulations one of which would prevent foreign workers from getting H-1B visa extensions while their green card applications are pending. Should Congress pass the proposal, it could potentially impact thousands of Indian skilled IT professionals working in the United States. The proposal reflects the US President’s “Buy American, Hire American” initiative promised during his 2016 campaign.
US Immigration Policy Aimed at Foreign Workers
Lest H-1B visa holders think they are being singled out for special attention. On January 8th, 2017 the Presidential administration announced it was stripping approximately 260,500 Salvadoran immigrants, many of whom have been living and working in the US for at least 17 years, since a 2001 earthquake of their temporary legal status as of July 2019.
Also, El Salvador is the fourth country the US administration has announced an end to TPS protections over its first year. In total, the administration has targeted more than 320,000 immigrants over the course of late 2018 and 2019 to lose their legal status.
Demographics Is the Key to Understanding India’s Growth Potential
The World Bank released its 2018 Global Economic Prospect report on January 10, 2018. The reports project India’s GDP growth to pick up to 7.3 percent in 2018-19 and to 7.5 percent for the next two years.
The report’s author Ayhan Kose, the director, of the World Bank’s Development Prospects Group, believes, India is well positioned to achieve its potential.
“In all likelihood, India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and the big picture is telling us that it has enormous potential.”
One of India’s strategic advantages is the country’s favorable demographic profile, rarely seen in other economies. Aside from reducing youth unemployment, “improving female labor force participation rate,” which remains low relative to other emerging market economies, “will make a huge difference” according to the World Bank.
“If these are done, India can reach its potential easily. In fact, we expect India to do better than its potential in 2018 and move forward,” confirmed Kose, adding that India’s growth potential would be around 7 percent for the next decade.
Bring on The Cloud
No-shoring continues to be one of the fastest-growing instruments for delivering business services. AT Kearney observed that anonymous data centers hosting cloud-based automation are increasingly replacing human labor in the BPO and ITO sectors.
Forrester’s latest global tech market forecast points to spending on cloud applications and cloud platform services growing at double-digit rates. However, this growth is poised to cannibalize spending on traditional software, hardware, and tech services.
Hence, the challenge for India’s thriving BPO sector is to make a move into cloud computing successfully. Given India’s strong performance in business technology, the CRM, eCommerce, customer analytics, and other technologies that help firms acquire service, and retain customers, it augurs well for India’s prospects.
Business technology is projected by Forrester to rise to 28 percent of total global tech spending, representing over half of spending on new projects with growth kicking off in 2018.
Post-Political Shock Economies Return to Growth
Economically, 2016 to 2017 were the years of living dangerously. During this time, the world’s economies gradually picked themselves up, dusted themselves off and set about returning to growth mode.
From a technology perspective, improving economic fortunes are anticipated to help drive growth in the global tech market. Despite some perilous wobbles on the political front, 2017 saw a return to comparative normality from the cumulative political and economic surprises that shook the markets so severely in 2016.
This new adjustment to the new political normal is contributing to improved economic growth. Analysts are anticipating this relative stability will encourage businesses and governments to be more aggressive in their tech spending plans in 2018 and beyond.
From a technology perspective, Forrester’s is projecting software and tech consulting services-related spending to see the strongest growth, with spending in both categories accelerating to over 6 percent in 2018.
Managing A Transition Is Always Perilous
The US administration’s proposed visa changes would have a dramatic effect, particularly on Indian visa holders. According to the Pew Research Center, over half of all H-1B visas have been awarded to Indian nationals. Estimates indicate over 1 million H-1B visa holders are waiting for green cards. Many of these green card applicants are from India, and many have been waiting for over a decade. However, currently the use of H-1B visas by Indian IT firms has fallen by 50 percent in the past two years, and the number of H-1B visa holders has dropped below 10,000.
Apart from prescribing higher minimum wages, the proposed US Bill – Protect and Grow American Jobs places the onus on clients that they will certify the visa holder is not displacing an existing employee for a tenure of 5-6 years. The proposed Bill’s onerous provisions are expected to greatly increase compliance and administrative costs.
Silver Lining
Lest you consider the thought of half a million former H-1B visa holders returning to India this year would be a forerunner to the four horses of the apocalypse, consider this for a moment.
The next generation of BPO will not be low-end body shop type outsourcing. Rather, it will revolve around high-end innovation-based models, which blend maturing technologies such as AI, machine learning, Big Data and cloud computing to drive the next wave of outsourcing.
Moreover, the availability of a pool of highly skilled workers could very easily act as a catalyst sparking the creation of the next Infosys, Wipro or HCL. This itself could also drive job creation and a cascading round of industry evolution, which would leave India well positioned to maintain its leadership position in global BPO.
Final Thoughts
A lot of angst has been generated by the US Administration’s proposed changes to the H-1B visa system. While this is likely to cause heartburn for existing visa holders, particularly those waiting for their green cards, strategically, India’s BPO sector has been weaning itself off its H-1B visa dependency.
India’s $150-billion industry is moving beyond its past cost arbitrage model in favor of embracing solutions anchored on the latest technologies such as cloud computing and business systems. If a digital transformation does indeed reshape the global BPO sector 22, India will need to leverage its demographic and educational advantages to aggressively adopt a significant thought leadership role in this dynamic evolution.
– BackOfficePro
