Mumbai: A recent Gartner study released at the second Outsourcing Conclave 2004 organised by the Confederation of Indian Industry (CII), says, "India will generate $13.8 billion from offshore BPO exports by 2007."

Pramod Bhasin, president, GE Capital India, who delivered the keynote address, said it was essential to deliver cost advantages keeping in mind the savings and time factor, which would lead to cost arbitrage, process improvement and process excellence.

Bhasin said the BPO target of $24 billion by 2008 could be achieved by investing in specialised training for people, infrastructure (power and transport), government relations (subsidies, reforms, lobbying) and a shift in attitudes. He also said that there was a strong at 50 per cent compounded annual growth rate (CAGR) in the global BPO market.

Speaking on the emerging challenges in the sector, he pointed out that despite a surplus labour pool, lack of adequate skills, attrition rates between 55 and 60 per cent, annual wage inflation of about 12 per cent, 85 per cent concentration of BPO operations in the five big cities, competition from other low cost countries, and hiring challenges were increasingly emerging as daunting bottlenecks.

Bhasin emphasised the need for better product expertise, training for the BPO sector, better infrastructure across small towns and funding, VC and equity funding for start-up enterprises. Moreover, Bhasin felt proactive support from the government through flexible telecom rules to help enterprises lower costs, public-private partnerships and support in international such as WTO against protectionism, would go a long way in strengthening India's long term prospects.

Ajay Bhushan Pandey, secretary information technology and secretary to the Maharashtra state chief minister, said, "India is the most favoured outsourcing nation because of its large human capital." He quoted a McKinsey estimate that by 2009, US firms could save $390 billion annually by outsourcing jobs to lower-wage countries. A study by A T Kearney showed that nine out of 10 chief executives wanted to outsource to India. In the US 25 per cent of the respondents wanted IT and auto component work to be given to India against 15 per cent favouring China and 13 per cent for Mexico.

"In the next wave of outsourcing we will see major outsourcing in the areas of financial services, automobiles, pharmaceuticals, among others with India moving up the value chain to high end quality services," Pandey said. While the market all over the world for outsourcing is expanding, competition from other countries, such as China, Russia and Brazil, is increasing. To maintain its leadership, the factors in favour of India - cost, business environment and quality of people - would have to be strengthened by creating institutions that could anticipate and impart the required skills to maintain our lead, he added.

Ganesh Natrajan, chairman, CII's western region task force on outsourcing, said BPOs and outsourcing are not just about bagging outsourced jobs but being able to invest in scale and capability, developing financial engineering skills through mergers and acquisitions, strategic partnerships and complex deal structuring.

Analysing the sectors long-term prospects, Ananda Mukerji, MD and CEO, ICICI One Source stressed the need for higher investment in domain knowledge, development of financial engineering skills, enhancement and diversification of manpower and large-scale operations as the key for global expansion and future growth.

Analysing the outsourcing prospects of the Indian pharmaceutical industry, Andrea Bierce, vice president, technology and transformation group of AT Kearney, stated that India could potentially capture between $700 million and $ 1.5 billion of the offshore spending of the overseas pharmaceutical firms in the next 5-10 years, thereby offering substantial savings to Pharma companies.

Summing up the conclave, Pandey stated that the prospects of outsourcing for India would best be served through government and industry working hand-in-hand in making India a global player.