India’s BPO industry could reach $50 billion by 2012

India's business process outsourcing industry will need greater investments in education and infrastructure by the government, according to a new Nasscom report

India's business process outsourcing companies could attain revenues of up to $50 billion by 2012, but the industry will need greater investments in education and infrastructure by the government, according to a new report released Tuesday.

At its current growth rate, India’s $11 billion BPO industry will reach about $30 billion by 2012, said the joint report, published by consultancy firm Everest Group and India’s National Association of Software and Services Companies (Nasscom).

If the industry reaches $50 billion in revenue, it will directly employ two million staff and provide indirect employment for two to three times more people, said Som Mittal, president of Nasscom. The industry would comprise 2.5 percent of India's GDP (gross domestic product).

Mittal said India's federal and local governments would have to play a larger role in order to push revenue to $50 billion. Over the last 10 years, the industry has done much on its own, such as building power generation facilities and providing training to staff, but could use more government support, Mittal said.

Indian companies spend a lot on in-house training because the education system in India does not have direct links with the BPO industry, said Raman Roy, chairman and managing director of Quattro, a BPO firm.

The BPO industry needs more employable graduates with skills in new areas such as analytics or the industry could face staff shortages of up to one million people for entry-level positions, Roy said.

Some companies have explored setting up operations in smaller cities due to competition for staff from the retail and telecommunication areas.

“We hire people from small cities, but we cannot set up operations there because the infrastructure does not exist,” Roy said. It is unfair to ask managers to move to small towns where there are no hospitals or entertainment, he added.

The BPO industry now plans to set up regional hubs and develop infrastructure, including communications capabilities and staff housing. Many BPO companies now spend time and money transporting staff between cities and suburbs.

The industry is also demanding that BPO companies be allowed to use the same facilities during daytime to address domestic business. India prohibits using the same facility for domestic and export business.

Since nighttime operations focus on servicing foreign customers in the U.S. and Europe, using the same facilities during the day for domestic business would benefit companies, Mittal said.