4 August 2008: CEO's Laptop: Optimism and frustration
By DAVID WONG

The business process outsourcing (BPO) industry has, over the last five years, grown many times in size and matured in terms of service delivery capability and footprint. While it continues to log in high growth and maintain momentum year on year, it is also being challenged by concerns related to economically recessive conditions in the US, a weakening dollar, and the ability to maintain competitiveness and building skills in a growing workforce.

However, when I was at the recent Nasscom BPO Strategy Summit in Bangalore, India, with several colleages, it was clear that if there were any worries of a recession, it did not show at the event. Instead, the dominant mood was one of optimism. The general feeling was that the slowdown would at best shave off about 4% to 5% from the 29% growth in revenue the BPO industry in saw last year.

According to Nasscom (the National Association of Software and Service Companies), the Indian IT-BPO industry is on track to achieving its target of US$60 billion (about RM198 billion) in exports, and revenues of US$75 billion (about RM247 billion), from overall software and services. During the same period, direct employment in the sector reached two million, with an addition of 375,000 professionals over the previous year.

Nasscom chairman Ganesh Natarajan says growth can be sustained if the country gets its act together in education reform and infrastructure initiatives. And for this to happen, a private-public partnership is required. One thing for sure, India is certainly not resting on its laurels despite its position as the world's top outsourcing destination of choice (about 35% of global BPO offshore services are executed in India.

BPO is a convenient catchword used by the industry and media but it is meaningless now. It no longer reflects the expertise of the global industry in which the players are now. Cost as a differential is passé. Process expertise is what the industry offers today. The industry specialises in various streams, from supply chain to financial accounting, and requires domain expertise, investment in R&D and true process expertise.

The industry has clearly moved beyond price. It's about delivering efficiencies and productivity. This has put significant constraints on the supply side and also pressure on talent availability at all levels.

Thus, there is urgency to increase employability and access to untapped talent pools by creating greater lingkages between the current education system and the needs of the BPO industry, and facilitating the development of BPO-specific education models.

Initiatives related to education are required to expand the employable talent pool. In India, the industry works very closely with the government to create greater linkages between the current education system and the requirements of the BPO industry. This is done by policy changes like the liberalisation of higher education; increased collaboration between industry and academic instituitions such as the introduction of BPO-specific curriculum and improving students' access to funds for higher studies; and introducing coursework changes and teacher training at school level in accordance with future requirements of the BPO industry.

BPO education is based on creating longer-term training programmes to improve communication and other skills required by the BPO industry. Specific training programmes were developed to create several intermediate levels of skills and specialisation (between generalists and highly trained specialists) and to bring alternative talent pools (for example, high school graduates and educated housewives) into the BPO workforce.

During the summit, Nasscom also released another study on "Location roadmap for IT-BPO Growth Assessment of 50 Leading Cities in India". The top seven centres contribute about 85% of the IT-BPO industry work, while all the others contribute just 15%. As part of its strategy to expand the talent pool, particularly from tier 2 and 3 cities, the Union Ministry of IT (MIT) approved a policy this May to set up information technology investment regions around the country.

These are specifically delineated investment regions with a minimum area of around 40 sq km planned for the establishment of IT/BPO and electronic hardware manufacturing, along with associated services and infrastructure. There would be a combination of production units, public utilities, logistics, environmental protection mechanisms, residential areas and administration services.

All the above initiatives are mind-boggling, especially when executed in a nation with a population of more than one billion. After listening to many renowned speakers during the Nasscom BPO Summit, I can only sum up my feelings as one of optimism as well as frustration (most of my colleages felt the same way). For Malaysia, being a new kid on the block in the BPO industry, we have lots of catching-up to do. Global competition is intense. Unless the current focus on "ready-to-eat" talent is altered, we will experience an acute shortage of knowledge workers.

According to International Data Corp (IDC), Malaysia's IT sector is expected to generate more than 98,000 new jobs from 2007 to 2011 and help create more than 800 new companies within the same period. There are only about 20,000 science and ICT graduates in Malaysia per annum. Also, only 10% to 15% are employable compared to 25% in India. This employable issue may become further accentuated on account of competition for resources from other industries such as retail, insurance, manufacturing and banking. Growth can only be seen if the country gets its act together in education reform. And a public-private partnership is required to achieve this.

David Wong is group CEO of SnT Global Sdn Bhd, a BPO provider