Life Beyond BPO
To be honest, I ended up encouraging him in the end, connecting him on Ryze and leading him to the Outsourcing forum, in case he manages to get a lead. But, yes, deep down my heart, I was not convinced that BPO is a good start-up opportunity anymore, if it ever was.
I am not exactly sounding sane, and I am conscious of that. But, I have my reasons, and I must try to make my point in the assumed privacy of my blog. So, here goes – my laundry list of reasons why someone planning to launch a business now should start thinking beyond BPO.
Reason 1: It isn’t easy
Providing Call Centre Support or Accounting etc isn’t easy. Remember, when you take on your US or UK clients’ order, it comes with a Service Level commitment which isn’t easy to meet. You need a workforce that is cheap [so that you can maintain the cost advantage] and able [so that you can deliver service]. Now this puts you up for a competition with IBM, Accenture and EDS as you start up, not the best competitive landscape one hopes for, I suppose. Too many business plans get drawn up without factoring this in – a fatal mistake! The inevitable equilibrium is reached by settling for a second tier workforce, neither meeting the customer’s requirement nor earning a nice profit, as eventually the costs keep rising too.
Reason 2: It isn’t new
I guess it is essential for every successful business venture to start with a question: what value can I deliver? No, I am not a believer that all business ideas have to be new, fresh out of the oven. But, there has to be a clearly identifiable value-add, an answer to this question: why should this business exist? I am sure it is okay even to have a pedestrian answer, something like ‘there is not a single decent curry house in this locality’, or ‘I know how to sell an event like this’, or even ‘I do great designs and I must let people have that’. But, saying ‘I think there are lots of potential in the BPO market and I shall put up a shop and see whether I can get a trickle’ – nah!
Reason 3: It isn’t sustainable
Well, you can point out that you can build competencies / specialisms by being around in a business. True, if you count contacts, market knowledge etc – just being around in a business, you can accumulate the value-additive inputs. But, then, BPO isn’t a very sustainable business that way, it is cash hungry – you must get good people paying good money, and keep service levels high. Otherwise, you will not get anywhere with contacts or knowledge. So, if you are trying to get your feet wet, this is not something you should be looking at.
What Offended My Friend?
I told my friend this is a good time to start a BPO unit only if he knows someone in one of the Industrial Promotion Boards or other various government agencies and can get some low cost loans out of them. I have seen such scams in Bangladesh, where the World Bank created a fund for such new businesses [dubbed EEF], dispersed a lot of money for BPO units – given out as equity funds which the entrepreneur must buy back after 2 years – and ended up funding over-costed units, where the promoters removed the low cost funds from the business and invested in shares or other items of luxury. Did anyone pay back? I doubt, because bankruptcy of the business was an easier alternative. But even if some people did, they did not earn their money out of BPO.
I did not mean to offend him though. The government is always very bad at spotting opportunities and promoting them, so it is actually a bit of an enterprise spotting the idiosyncrasies of public policy and earning an arbitrage from adjusting it to markets.
So, Isn’t India Going To Shine Anymore?
I didn’t say that at all. I am certain – India will become far more powerful an economy that it ever was. But, that will not be because of outsourcing in its current format. Nor it will be for big companies like IBM or Accenture setting up large sweatshops in Indian cities.
It will be because the entrepreneurs like my friend will eventually discover the life beyond BPO. They will create the new wave of software and services – I have already come across entrepreneurs in Calcutta, Bangalore and Mumbai talking about investments in Web 2.0, Software as Service concepts, e-Business enabling services for domestic markets, e-education and rural telecom projects, ideas and businesses which will spawn a new generation of service business-owners in India. These people are not only looking at the western market, and does not want to remain low-paid clerks; they are looking at markets in China, South East Asia, Africa, Middle East and domestic market in India, and trying to be the best in their own classes and categories.
We are all set for life beyond BPO, I suppose.