Transcript The Indian ITES-BPO Industry: Mobility, immobility and

The Indian ITES-BPO Industry:
Mobility and Immobility in
Contemporary Capitalism
Debra Howcroft
CRESC and MBS
University of Manchester
[email protected]
ECIME Göteborg 2009
The Re-emergence of Capitalism
Klein N (2007) The Shock Doctrine: The
Rise of Disaster Capitalism
Porritt J (2007) Capitalism as if the World
Matters
Glyn A (2007) Capitalism Unleashed:
Finance, Globalization and Welfare
Sennett R (2007) The Culture of Capitalism
Castells M (2004) ‘informational capitalism’
New Spirits of Capitalism
• The spirit is: ‘the set of beliefs associated
with the capitalist order that helps to justify
this order and, by legitimating them, to
sustain the forms of action and
predispositions compatible with it’ (Boltanski
and Chiapello 2007: 10)
• Three spirits
– Third spirit is of globalised capitalism, a
connexionist world of multiple projects
performed by autonomous people
“….the specific contribution of little people to
enrichment in a connexionist world, and
the source of their exploitation by great
men, consists precisely in that which
constitutes their weakness in this
framework – that is to say, their immobility”
(Boltanski and Chiapello 2007: 361)
Globalization 3.0
“The most important force shaping
global economics and politics in
the early twenty-first century is a
triple convergence - of new
players, on a new playing field,
developing new processes and
habits for horizontal collaboration."
"The 'hot line,' which used to
connect the Kremlin with the White
House has been replaced by the
'help line,' which connects
everyone in America to call centers
in Bangalore."
ITES-BPO Industry
• BPO predicted to overtake ITO in next 5
years (Oshri et al 2009)
The term captures:
 customer facing, voice activities
 non-customer facing, back office activities
‘end-to-end’ integrated services
Why India?
• Still seen as paving the way among
developing countries (Taylor and Bain
2005; Nasscom-Everest 2008)
• Most of the export of IT and ITES go to the
UK and US (UNCTAD 2004)
• Offshoring largely follows the contours of
linguistic and cultural compatibility, arising
from the legacy of empire and colonialism
Activities
• Horizontals
– Processes that are seen as being similar across
industries (Customer interaction and support, finance
and accounting, HRM, procurement services, and
knowledge services)
• Verticals
– Processes which require vertical-specific knowledge
and are not easily replicable across industries, such
as claims processing for the insurance industry or
credit card collections for the credit services industry
(Nasscom-Everest 2008)
Indian BPO industry continues to grow rapidly
Indian BPO Sector Revenue
(USD billion, percentage)
CAGR
12.5
38%
1.6
52%
10.9
37%
7.2
0.9
Domestic
Exports
3.4
0.3
3.1
2004
Notes:
Source:
6.3
2006
•Higher process maturity and quality of output
•Increasing proportion of non-voice work (e.g.,
transaction processing, research etc.) likely to
be outsourced over the next two – three years
•Higher competition for lower end BPO
services
•Emergence of competing destinations trying
to emulate the Indian success
•Perceived ‘commoditization’ - Increasing
sensitivity to prices
•Growth in domestic BPO industry – Still
nascent, expected to increase with growing
business demands
•Primarily driven by Financial Services,
Telecom and Retail sectors
2008E
(1) Leader locations are Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR (Delhi, Noida, Gurgaon, Faridabad), Pune
NASSCOM
Underlying dynamics
• ICTs, which have enabled market expansion, removed geographical
constrictions and reduced the need for infrastructure (Miozzo and
Ramirez, 2003)
• Time is compressed while space and distance are expanded
(Massey 2007)
• ‘Distance shrinking’ ICTs enabled remote delivery and generated
economies of scale through the centralisation of previouslydispersed facilities
– ‘Work can take place anywhere there is a phone line thus making it
easy to establish operations nearly anywhere on the globe’ (Ritzer and
Lair 2008: 40).
• Yet paradoxically, place and space takes on increasing importance
• New regulatory frameworks, competitive sectoral markets, and
broader changes associated with liberalisation, privatisation and deregulation
– GATS
– Deregulation of Indian telecoms industry
– Pressure from NASSCOM for benefits to ITES-BPO sector
Call routing
0800/0845
Virtual centre
US Purchasers of
(DELL) OptiPlex
desktop and Latitude
notebook
US sites
European and
Asian purchasers of
OptiPlex desktop and
Latitude notebook
Bangalore
(Frauenheim 2003)
Tiered cities
No. of providers
per city
Average centre
Size (employees)
Tier 1
120-150
Delhi-NCR,
Mumbai, Bangalore
350-45
Tier 1.5
Chennai,
Hyderabad, Pune,
Kolkata
75-100
250-300
Tier 2/3
Tier 3/4
10-15
??
180-220
??
(Nasscom-Everest 2008)
However, most of this growth is currently concentrated
in ~7 leading locations
The top 7 locations account for around 90% of the
industry’s employment today
These locations have helped in transforming their
states into a knowledge driven economy with
high per capita income
Delhi
Gurgaon
Noida
Faridabad
Kolkata
Mumbai
Pune
Hyderabad
Bangalore
Chennai
However, the hyper and concentrated growth
across most of these leading locations have
resulted in:
– Saturation and deteriorating infrastructure
– Presence of large number of IT-BPO
players resulting in high attrition and
increased wages
– Rapid growth of other sectors, resulting in
greater competition for talent
– Rising real estate costs
– Deteriorating social and living
environment
Success and economic growth of these locations has led to significant interest from
other states / locations to leverage this sector as a growth driver for their economies
A framework for evaluating the attractiveness of a
country for offshoring
Inhibiting
factors
Primary
motivating
factors
Accelerator
Brake
Choice of an
offshoring
destination
country
Smooth
Facilitating
factors
Steering
Brake
(Joshi and Mudigonda 2008)
Bangalore
Hyderabad
‘Cities are at breaking point, and further
growth will have to come from entirely new
business districts outside of T1 and T2
cities’
(Nasscom-McKinsey 2005: 16)
Electronic City Bangalore
‘The processes of social reproduction then
crystallize into a relatively permanent
patchwork quilt of local, interregional and
even international specialisation. This
patchwork quilt may then also be
associated with marked differentials in the
value and value-productivity of labour
power’
(Harvey 2006: 383)
Population of urban agglomerations with 10m+ inhabitants
(United Nations 2007)
1950
1 New York-Newark
2 Tokyo
1975
12.3m
11.3m
1 Tokyo
2 New York-Newark
3 Mexico City
2007
1 Tokyo, Japan
2 New York-Newark
3 Mexico City, Mexico
4 Mumbai, India
5 Sao Paulo, Brazil
6 Delhi, India
7 Shanghai, China
8 Kolkata, India
8 Dhaka, Bangladesh
10 Buenos Aires, Argentina
35.7m
19m
19m
19m
18.8m
15.9m
15m
14.8m
13.5m
12.8m
26.6m
15.9m
10.7m
Findings indicate that the 50 locations in India are categorized along a typical four
stage development path
Location Classification
Increasing Location Attractiveness
Leaders
•Bangalore
•Chennai
•Hyderabad
•Kolkata
•Mumbai
•NCR
•Pune
Notes:
Challengers
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Ahmedabad(2)
Bhubaneshwar
Chandigarh(3)
Coimbatore
Indore
Jaipur
Kochi
Lucknow
Madurai
Mangalore
Nagpur
Thiruvananthapuram
Tiruchirappalli
Vadodara
Visakhapatnam
Followers
•
•
•
•
•
•
•
•
•
•
•
•
Aurangabad
Bhopal
Goa
Gwalior
Hubli-Dharwad
Kanpur
Mysore
Nashik
Pondicherry
Salem
Surat
Vijayawada
(1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and Faridabad
(2) Ahmedabad includes Gandhinagar
(3) Chandigarh includes Mohali and Panchkula
Aspirants
•
•
•
•
•
•
•
•
•
•
•
•
•
Allahabad
Dehradun
Durgapur
Gangtok
Guwahati
Ludhiana
Patna
Raipur
Ranchi
Shimla
Siliguri
Srinagar
Varanasi
REGION
1960
1980
2000
2010
2020
Bangalore
1 166
2 812
5 567
7 229
8 795
Kolkata
5 652
9 030
13 058
15 577
18 707
Mumbai
4 060
8 658
16 086
20 072
24 051
Challengers
Coimbatore
435
907
1 420
1 810
2 243
Jaipur
358
812
1 100
1 369
1 703
Vadodara
302
891
1 465
1 875
2 324
Followers
Mysore
253
470
776
943
1 179
Surat
311
877
2 699
4 174
5 142
Aspirants
Allahabad
423
640
1 035
1 279
1 592
Patna
359
881
1 658
2 325
2 879
Im/mobility of employees
• Follow capital wherever it flows
– Rapid migration to cities in search of better jobs
• Wage depends on education, experience, talent
and where s/he lives and works
• Attrition of 50% reported, with highest turnover in
third-party firms and most volume-driven
services (Taylor and Bain 2006)
• ‘Mobility power’ and ability to quit signifies
conflict
Im/mobility of capital
• Progressively creates new capitals and expands
labour markets
– Search for new spatial fix
• Need to manage a precarious balance between
labour mobility and fixity
• Moves to greater standardisation reduces
reliance on specialist labour
– In Indian BPO industry the aim is to have access to
cheap labour without labour institutions that would
pressurise terms and conditions
‘…the individual search for excess profits
would keep the space economy of
capitalist production in a state that
resembles an incoherent and frenetic
game of musical chairs’
(Harvey 2006: 393)
Wipro
Wipro Mumbai
Wipro Cebu
Wipro Chennai
Wipro Pune
Wipro Bucharest
Locational advantage
Two contradictory tendencies (Harvey 1974):
(1) the need for sufficient geographical mobility to seek out
investment opportunities in new locations
(2) the need for sufficient geographical fixity so that
accumulation can occur
•
•
Relative locational advantage is ephemeral
The annihilation of space through time creates more
fine-grained divisions and specialisations of labour
‘Reducing the friction of distance, in short, makes
capital more rather than less sensitive to local
geographical variations’ (Harvey 2006: 100)
“The economic model behind India’s BPO sector is
constantly changing. Historically, providers have
been able to tap into relative wage differentials
across geographies to build a strong value
proposition for offshoring. While cost arbitrage
continues to be a significant driver of global
outsourcing for most buyers, the associated
benefits will diminish over time…..wage inflation
in India is putting pressure on operating margins
of providers….Scenarios on potential
momentum indicate that cost-arbitrage can
diminish in the medium term.’
(Nasscom-Everest 2008: 9)
Non-linear is the mantra for future
growth
Last 7 Years :
Way Forward :
Revenue Growth
Revenue Growth
Headcount
Growth = Headcount
DELL CONFIDENTIAL
Headcount
Growth = Value
Dell Presentation, NASSCOM 2008
Improving the platform . . .
Levers
Sample ideas under implementation
Increase shift
timing
(hours/shift)
Standardize shift and break hours across teams as top
processes within the centre
Increase seat
utilisation
Create multiple shifts for processes with TAT >1 day
Share same set of seats across voice and data processes
Reduce IT
maintenance
costs
Rationalize demand for IT applications
Redefine services levels appropriate to processes
Change recruiting
mix to reduce entry
– level salary
Define skill – sets based on complexity of processes
Recruit contractors for simpler tasks
Increase
productive days
Investigate options for leave encashment and carry
forward of leaves
Increase contractors
Gradually increase productive hours over next 2-3 years
Benchmark AXA – Tech performance
(AXA Presentation, NASSCOM 2008)
ITES-BPO Labour process
• Psychological tensions are experienced as workers in Indian call
centres are rendered invisible by the adoption of Western identities
while being expected to conceal the location of the centre
(Mirchandani 2004)
• ‘Taylorism through export’ (Taylor et al 2008) with shifts of between
8-10 hours duration, six days a week (Taylor and Bain 2005
• One of the consequences of the 24-hour day is that Indian workers
completely reverse their working lives to night time, leading a
‘double life’ which generates a number of tensions including health
ailments and a separation from their family and the household
(Ramesh 2004)
• Fragmentation of service provision has resulted in deskilling as
tasks are standardised, thus allowing for a reduction of training in
order to cope with the high levels of attrition (Holman et al 2007).
• Management use ‘national identity management’ whereby
employees are asked to subsume different national identities as part
of their job: ‘Acting American’ (Poster 2007)
At the high end of low cost
At the low end of low cost
• Mobility and immobility of labour and
capital add to our understanding of the
dynamics of capitalism, but it’s unclear
how this accounts for exploitation
• Harvey’s work on uneven geographical
development offers stronger explanation of
the inherent contradictions within capital
accumulation
References
Howcroft D and Richardson H (2009) (eds.) Work
and Life in the Global Economy, Palgrave
Howcroft et al (2010) The Back office goes global:
Exploring Connections and Contradictions in
Shared Service Centres, Work Employment
and Society.
Howcroft D and Richardson H (2008) Gender
matters in the global outsourcing of service
work, New Technology, Work and
Employment, 23:1-2, 44-60.