Wednesday, December 21, 2005

Will BPO hit a staffing crisis?

I wrote a column Will BPO hit a staffing crisis in Business Standard. One of the key reasons why India is doing well today is the revolution in services exports, where white collar staff in India are plugged into globalisation, thanks to improvements in telecom. Today, there are probably a million people working in export-oriented IT and IT-enabled services, giving exports of roughly $15 billion, for an average rate of roughly $15,000 per manyear.

But this sector is experiencing acute problems with recruitment. Employers find that an Indian college education generally induces unacceptable skills, so there is a large mass of unemployable jobseekers, coupled with a shortage of skilled people. Will high growth rates continue to come about, or will India's growth in this area get choked owing to the tiny output of a few good universities?

I argue that India will be able to grow from 1 million to 10 million workers in BPO; from $15 billion in revenues to $150 billion a year. But the rot in the universities hurts at two levels. First, India will be unable to walk up the value chain, to reach higher pricepoints than $15,000 per manyear. Second, we are likely to experience acute pain, two moves ahead, when the needs of the global economy change, and a large mass of uneducated Indian white collar technicians are unable to learn new skills.

On a related note, in 2001, I had done a Business Standard article on the consequences of globalisation of the labour market for India.

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