Not so long ago, the news that HCL Technologies has won the largest ever business process outsourcing deal from a global leader like British Telecom would have been received with unalloyed joy as a sign that bigger and bigger orders are coming to India. But today the good feeling will be tempered by two considerations.
The lesser one is that HCL Technologies has had to compete mightily to get this deal and must have had to quote very fine prices. (Is it left with anything?) Primarily a software services company which is doing none too well in its main line of business, the BPO deal will be a shot in the arm for it.
If you read this along with the market expectation that the guidances to be issued by software companies for the just commenced year (2003-04) will be none too positive, a sobering thought strikes you: Is the BPO growth coming along with a sharp slowdown in software growth?
Considering the fact that billing rates for BPO are far lower than for software services, the development has its own implication. If overall software and services export growth (software plus IT enabled services) remains below 30 per cent for too long, then the grand goal of $ 50 billion exports by this sector by 2008, now five years away, will be missed. To ensure that it is not, two strategies have to be adopted.
One, get software services to grow faster and two, remove the impediments in the way of BPO services growing at 50 per cent plus for at least a few years. While the former is linked to global technology spend, over which India has little control, the latter is an opportunity that has effectively arrived for India. It is emerging as a prime destination for BPO and everything has to be done to make the best out of that opportunity.
The good feeling over the BT order has to be tempered for a second and very serious reason. A month ago the British trade union had made a strong protest against jobs leaving Britain through BPO. As Indian companies score more and more successes on the outsourcing front leading to job losses in the developed economies, resentment against the Indian IT sector is likely to grow.
This is going to find expression in several ways: public campaign and protest against outsourcing, lobbying for legislation to restrict it (outlawing it is not possible) and action against the visible face of Indian IT in the developed economies -- the professionals who work onsite with customers.
This brings us to the turmoil within the Indian IT sector created by the Dutch government action against Indian IT professionals. Indians have to be mentally prepared for more such developments which will be directly proportional to the success in securing BPO or software outsourcing orders.
IT Minister Arun Shourie has said that Indians must realise that in this matter India is a first world country (an exporter of competitively priced skills) and mentally prepare themselves accordingly.
The Japanese automobile industry has had to live with every conceivable accusation against its trade practices by the US automobile industry and bullying (fixing of export quotas) by the US government. What is needed now is mental strength so as not to get rattled and a proper strategy.
The strategy has to come mainly from the commerce ministry. India should strive for the right sort of provisions to be incorporated in the General Agreement on Trade in Services at the Millennium round of trade negotiations currently on.
It should work for GATS quotas for visas, over and above the visas currently being issued on a discretionary basis, so that professionals can move and work freely in WTO member countries. India has made proposals in this regard but so far no serious response has come from developed countries.
GATS was brought into the Uruguay round of agreements against initial opposition by India. It is a reflection of the changing nature of parts of the India economy that the agreement that developed countries sought and obtained to retain a degree of trade advantage, by opening up services as manufacturing activity slowly slipped out of their hands, should become a weapon in Indian hands.
Says trade expert Arun Goyal, "It will be much better to get something out of GATS with binding commitments and WTO rules behind them, rather than discretionary quotas given bilaterally and withdrawn arbitrarily."
Look at the German green card, issued with fanfare one day, and its withdrawal announced another day; or look at the US H1B visas whose numbers are altered at will.
Visas stand at the root of the disorientation currently faced by Indian IT firms and professionals. It takes inordinately long to get a work permit issued. So to do a quick services job the business visa is often resorted to. But views differ on what you can do with a business visa.
Senior IT managers say that the rules are that you can go and sell and implement a sale on a business visa, but if you have to do a maintenance job for which you are going to bill the client, then you should get a work permit. Visa issuing countries would tend to agree with this.
But they have so far willingly turned a blind eye to the so called misuse of the business visa, that is until the job market changed and Indian IT professionals working onsite became a domestic political issue.
So the solution is two fold. One, be mentally prepared to live with trade friction and two, work within the WTO with a long-term focus and not be brought shouting and screaming to the signing table for agreements every time.
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