In the general euphoria in India over its emergence as a preferred business process outsourcing destination, there is one lone voice advising caution and asserting that Indian companies have a long way to go.
Avinash Vashistha, managing director of neoIT, an offshore IT consultancy, feels that at a time when "clients are really wanting to come offshore with entire processes, Indian vendors are finding it challenging to even meet the base level requirements of domain and process knowledge."
Being able to meet the requirement of scalability comes later. There are far fewer than 20 Indian companies which can claim to have the high-end expertise, Vashistha says.
And in many instances, the high-end work is a small fraction of the total work handled by a company. Customers are increasingly looking for transaction processing skills in areas such as HR, accountancy and finance but there are not many who fit the bill.
"Customers are coming with a lot of expectations but getting disappointed soon. They are finally giving work to small companies with the necessary expertise in small doses."
These are mostly companies which were formerly part of the captive operations of early outsourcers like World Network Services which was a part of British Airways, EXL Services which was a part of Conseco and eFunds which was a part of Deluxe Corp.
Other than these, transaction processing work in some volume is being done by companies such as Transworks and MsourcE.
Most significantly, the neoIT chief reeled off name after name among large Indian BPO operators to insist that they mostly offered simple call handling services, which required precious little processing.
On the other hand, it is only the ability to handle more and more complex transaction processes which will allow the business to meet the challenge of price competition at the low value end of the work.
Such competition is coming not just from the Philippines but also Ghana which has some English language capabilities. The saving grace right now is that the Filipino companies had even less of transaction processing capability than their Indian counterparts.
In Vashistha's opinion, it is still early days for the third party Indian players in the industry who are crowded at the call handling low end of the business and have begun to compete among themselves on price.
This has put margins under pressure and commoditised the business. This depiction helps explain why, despite there being more business than anyone can swallow, there is price cutting. Many cannot land the higher end work on offer and so are left to compete at the lower end. This is raising the attrition rate already.
The neoIT chief also has an explanation as to why many captive operations of MNCs are currently expanding very fast. Like AOL, they also are mostly ramping up call handling capabilities.
American Express from day one and GE from soon after it came in, are in a class by themselves in handling increasingly complex transaction processing work.
To do serious BPO work, a company needs to access skills, domain knowledge and a lot of capital to have imaging, telecom and CRM technologies.
This explains why software market leaders who are late entrants into BPO are stealing a march on the Indian stand alone BPO operators.