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The Indian ITES-BPO Industry: Mobility and Immobility in Contemporary Capitalism Debra Howcroft CRESC and MBS University of Manchester

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Presentation on theme: "The Indian ITES-BPO Industry: Mobility and Immobility in Contemporary Capitalism Debra Howcroft CRESC and MBS University of Manchester"— Presentation transcript:

1 The Indian ITES-BPO Industry: Mobility and Immobility in Contemporary Capitalism Debra Howcroft CRESC and MBS University of Manchester ECIME Göteborg 2009

2 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’

3 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

4 “….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)

5 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 "The 'hot line,' which used to connect the Kremlin with the White House has been replaced by the 'help line,' which connects everyone in America to call centers in Bangalore."

6 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

7 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


9 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)

10 Indian BPO industry continues to grow rapidly Notes:(1) Leader locations are Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR (Delhi, Noida, Gurgaon, Faridabad), Pune Source:NASSCOM Exports Domestic Indian BPO Sector Revenue (USD billion, percentage) 3.4 7.2 12.5 CAGR 38% 37% 52% 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

11 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 previously- dispersed 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 de- regulation –GATS –Deregulation of Indian telecoms industry –Pressure from NASSCOM for benefits to ITES-BPO sector

12 Call routing 0800/0845 Virtual centre US Purchasers of (DELL) OptiPlex desktop and Latitude notebook European and Asian purchasers of OptiPlex desktop and Latitude notebook US sites Bangalore (Frauenheim 2003)

13 Tiered cities No. of providers per city Average centre Size (employees) Tier 1 Delhi-NCR, Mumbai, Bangalore 120-150350-45 Tier 1.5 Chennai, Hyderabad, Pune, Kolkata 75-100250-300 Tier 2/310-15180-220 Tier 3/4?? (Nasscom-Everest 2008)

14 However, most of this growth is currently concentrated in ~7 leading locations 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 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 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 Hyderabad Delhi Faridabad Gurgaon Bangalore Mumbai Pune Chennai Noida Kolkata

15 Choice of an offshoring destination country Accelerator SteeringSmooth Brake Primary motivating factors Inhibiting factors Facilitating factors A framework for evaluating the attractiveness of a country for offshoring (Joshi and Mudigonda 2008)

16 Bangalore

17 Hyderabad

18 ‘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)

19 Electronic City Bangalore

20 ‘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)

21 Population of urban agglomerations with 10m+ inhabitants 1975 1 Tokyo26.6m 2 New York-Newark15.9m 3 Mexico City10.7m 1950 1 New York-Newark12.3m 2 Tokyo11.3m 2007 1 Tokyo, Japan35.7m 2 New York-Newark19m 3 Mexico City, Mexico19m 4 Mumbai, India19m 5 Sao Paulo, Brazil18.8m 6 Delhi, India15.9m 7 Shanghai, China15m 8 Kolkata, India14.8m 8 Dhaka, Bangladesh13.5m 10 Buenos Aires, Argentina12.8m (United Nations 2007)

22 LeadersChallengersFollowersAspirants Ahmedabad (2) Bhubaneshwar Chandigarh (3) Coimbatore Indore Jaipur Kochi Lucknow Madurai Mangalore Nagpur Thiruvananthapuram Tiruchirappalli Vadodara Visakhapatnam Aurangabad Bhopal Goa Gwalior Hubli-Dharwad Kanpur Mysore Nashik Pondicherry Salem Surat Vijayawada Allahabad Dehradun Durgapur Gangtok Guwahati Ludhiana Patna Raipur Ranchi Shimla Siliguri Srinagar Varanasi Findings indicate that the 50 locations in India are categorized along a typical four stage development path Location Classification Notes:(1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and Faridabad (2) Ahmedabad includes Gandhinagar (3) Chandigarh includes Mohali and Panchkula Increasing Location Attractiveness Bangalore Chennai Hyderabad Kolkata Mumbai NCR Pune

23 REGION19601980200020102020 Bangalore1 1662 8125 5677 2298 795 Kolkata5 6529 03013 05815 57718 707 Mumbai4 0608 65816 08620 07224 051 Challengers Coimbatore4359071 4201 8102 243 Jaipur3588121 1001 3691 703 Vadodara3028911 4651 8752 324 Followers Mysore2534707769431 179 Surat3118772 6994 1745 142 Aspirants Allahabad4236401 0351 2791 592 Patna3598811 6582 3252 879

24 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

25 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

26 ‘…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)

27 Wipro Wipro Mumbai Wipro Bucharest Wipro Cebu Wipro Chennai Wipro Pune

28 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)

29 “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)

30 DELL CONFIDENTIAL Growth = HeadcountGrowth = Value Headcount Revenue Growth Headcount Non-linear is the mantra for future growth Last 7 Years :Way Forward : Revenue Growth Dell Presentation, NASSCOM 2008

31 Improving the platform... Sample ideas under implementationLevers Change recruiting mix to reduce entry – level salary Define skill – sets based on complexity of processes Recruit contractors for simpler tasks Reduce IT maintenance costs Increase seat utilisation Increase productive days Investigate options for leave encashment and carry forward of leaves Increase contractors Increase shift timing (hours/shift) Create multiple shifts for processes with TAT >1 day Share same set of seats across voice and data processes Rationalize demand for IT applications Redefine services levels appropriate to processes Benchmark AXA – Tech performance Standardize shift and break hours across teams as top processes within the centre Gradually increase productive hours over next 2-3 years (AXA Presentation, NASSCOM 2008)

32 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)

33 At the high end of low cost

34 At the low end of low cost

35 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

36 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.

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