United we stand: (L-R) ExlService's Vikram Talwar, WNS' Neeraj Bhargava, McKinsey's Noshir Kaka, Digital India's Som Mittal, Exult Inc's Kevin Campbell, Everest's Michel Janssen, Progeon's Akshay Bhargava, and BT's Priya Srinivasan

Is the anti-offshore-outsourcing wave that has surfaced in spurts across the US, the UK and Australia likely to have an impact on the Indian BPO business? Business Today's Priya Srinivasan put that question to an expert panel at the Nasscom-ites seminar held in Bangalore on June 12th and 13th. The paraphrased answer in short: No, the fear is overblown. The panel comprised Akshay Bhargava, CEO and MD, Progeon; Neeraj Bhargava, President and CFO, WNS; Kevin Campbell, President & coo, Exult Inc.; Michel Janssen, President, Supplier Solutions, Everest Group; Noshir Kaka, Principal, McKinsey & Co.; Som Mittal, President & CEO, Digital India; and Vikram Talwar, Vice Chairman & CEO, ExlService. Excerpts from the exclusive discussion:

Priya Srinivasan: Does the Indian BPO industry need to fear the growing offshoring backlash in the US?

Kevin Campbell: As someone who lives in the US and then visits here quite frequently what's interesting to me is that the only place I ever hear about this issue (anti-outsourcing wave) is here. Using an offshore location is an economic reality and if you are going to be a global company serving global customers today, you need to have a global service delivery model.

Noshir Kaka: Back of the envelop calculations suggest that the top 20 deals in India could be anywhere near $1.5 billion right now and that is not a slowdown by any means, it's a dramatic increase if anything. If at all the wave has any impact it will be very minor and restricted to sensitive sectors like defence or aerospace.

''I worry about infrastructure. We need mass transit systems'' Akshay Bhargava, CEO & MD, Progeon	''Communication works-tell people what's happening and why'' Kevin Campbell, President & COO, Exult Inc.

Neeraj Bhargava: The day I would get worried is when the CEO of JP Morgan Chase says even if Citibank moves jobs to India, I won't since I want to please the electorate. But I don't see that happening.

Som Mittal: I disagree that there is a wave. It's only a few proposed legislations. We recently met some Congressmen and they pointed out that the people raising these legislations are not really part of a larger movement.

Srinivasan: To say that the backlash is not in the American mainstream media yet is not right. It's been picked up by CNN in talk shows as well as the Wall Street Journal. Moreover Internet message boards are full of acrimonious references to "curry heads snatching jobs" and the like. So would I be wrong in saying that what I just heard across the table sounds like a lot of denial?

Campbell: You are wrong. I am a US-based outsourced services provider, and if I thought I could clobber all my colleagues here by just staying put in the US and outsourcing work there, why wouldn't I do that? I am not doing that because what you say doesn't exist. A lot of stuff on internet chat boards do not match reality. The same few people post everything.

Srinivasan: My next question to the panel hinges on the wage structure in the US since finally this business is about labour arbitrage...

Vikram Talwar: No, its not just about labour arbitrage.

Srinivasan: At this point it certainly seems to be.

Talwar: No, again, not at this point, or at any point, it's not about labour arbitrage.

Srinivasan: We'll come back to that argument. For now, let me just sound off an interesting viewpoint from a research paper on the subject, specifically on the issue of wages. There is a growing view that the high wage structure in the US is attributable to various cost components that are built into the salary-taxes, social security, among several others. Again this is entirely something that the US government could effectively address if it is brought under enough pressure.

Campbell: I think what you are missing is that we have been through this before. We went through this with manufacturing jobs, we went through it with engineering jobs and where are we today? It's a global economy whose jobs are done all over the place and in the best locations and that's the purpose of a global economy-to move the jobs and deliver from the best locations. It's about a global supply chain. It just happens to be the current one, but we've been through this for the last 20 years and the outcome is always known.

''Indian companies have to invest in people and process expertise to compete'' Michel Janssen, President, (Supplier Solns.), Everest	''We have been able to charge higher for the data-based work we do'' Neeraj Bhargava, President & CFO, WNS

Kaka: If you look at manufacturing, then contract manufacturing forced the displacement of jobs in the US to the tune of 20 million. We have projected just 2.2 million jobs, how is that for an order of magnitude? Secondly, this is not just about cost. Customers may come for cost but they stay for quality. If you look at every dollar that goes to offshoring, two-thirds of that value is left onshore and one unit of labour is freed up. Even if all that labour is not going to get redeployed, some proportion will be redeployed for economic value to be realised.

Michel Janssen: At a political level this issue is different, but at a deal level there is some impact, though it has nothing to do with India but more to do with the outsourcing proposition. And any good outsourcer will have a good change management process and a controlled way of handling the situation. Those things are universal to every outsourcing deal I've ever done.

Campbell: A couple of things that generally work is communication; tell people what's happening and why it's happening. You have to understand that people are getting displaced and there are human emotions involved but you need to work through it. I always ask my compatriots in the US, do you believe in capitalism? You can't have it when you want it and wish it away when you don't.

Srinivasan: Mr Talwar, now for your argument that what we see in India today is not just labour arbitrage, how many companies in India today are actually doing value added work?

Talwar: Unfortunately, at the moment-and this is just the growth process-most of the jobs that have come out to India are the call centre type of work since that's the easiest thing to outsource. These jobs tend to be price sensitive and people tend to move from one company to another, one country to another on cost. But even there, quality is key and the moment the contract is signed, the price is forgotten and it's all about quality. It's quality even at the low end of the market and as you move up into backoffice work, that requires immense amount of quality.

''Quality matters at both the low end of the market and backoffice work'' Vikram Talwar, Vice Chairman & CEO, ExlService	''I disagree that there is a wave. It's only a few proposed legislations'' Som Mittal, President & CEO, Digital India	''Customers may come for cost but they stay for quality'' Noshir Kaka, Principal, McKinsey & Co.

Janssen: In my view the biggest threat to the industry in India is not the anti-offshore sentiment but potential failures. We cannot afford any failures, any contracts that don't go well.

Campbell: For instance, you cannot have a supplier that goes bankrupt at this stage.

Akshay Bhargava: The other real issue I worry about in this business is infrastructure. Take transportation, for instance. Today this industry picks up people for night shift and drops them back. We cannot sustain this forever, not when we employ two or three million people. We need mass transit systems. I also worry about the fact that it does not attract enough women at the managerial level.

Srinivasan: Moving to the issue of competition, who do you think are India's competitors in the outsourcing business? Philippines? East Europe? Any other?

Janssen: Your real competition is Accenture and IBM and companies like that. They are going to own the customers and India is where they are going to get their resources. Indian companies are going to have to invest in the people and process expertise to compete and that is the real challenge.

Srinivasan: While shiploads of business may be coming India's way, there is also the reality of plummeting prices. What are your comments on this?

N. Bhargava: This is a call centre way of looking at things, we have in fact been able to charge higher for the data-based work we do.

Janssen: Kevin, you don't charge anything on any hourly basis do you? You are going after a value proposition which is around the end result. If call centre folks are charging on an hourly basis, competitors will pull the rate down when there is no differentiator.