The Meltdown and Career with BPOs
Everyone today is wondering how the global financial crisis will negatively impact Indian business process outsourcing (BPO) companies. But what exactly is the crisis and how was it caused? Why are the BPO Companies so susceptible to something happening on the shore of the Americas? Read on to figure out why the BPO honchos are so worried and how it will impact employees.
The Financial Meltdown: Sub-prime Story
For years, banks in the US have been lending out huge sums of money in the form of sub-prime mortgages commonly known in India as Home Loans. These mortgages are given to people who, by definition, are unlikely to repay them, i.e. where the risk of the debtor defaulting is relatively high and debt settlement may become an issue. Since housing prices were consistently rising, the banks did not perceive a lot of risk: since if the debtor defaulted on the loan, the bank could simply seize and sell the house and not incur a loss.
Then, house prices in the US started falling. And kept on falling. As a result the banks couldn't recover the loans from their debtors and started losing huge amounts of money. In a world where commerce is delicately interlinked, these losses had a domino effect. Lehman Brothers collapsed. Morgan Stanley faltered. The US government recently spent $700 billion bailing the banks out. Despite the government's intervention, the damage is likely to be unforgettably huge. The people on the other hand have to handle diluted valuations and a financial crunch due to which they are being unable to handle mortgage payments. As a result they are resorting to means like debt negotiation to keep liquid and not have to declare bankruptcy.
How Does it Impact India and Your Job?
USA today contributes to the tune of 60% of Indian BPO revenues. However, the same corporations will now be under tremendous amount of pressure to shed fat and trim the corners with customer care and back office processes like data entry services, medical billing and coding etc being first to go. Since the US is one of the largest contributor to Indian BPO/KPO companies the impact will be directly felt here. Though functions like legal process outsourcing or litigation coding may get spared due to the high end nature of each transaction.
A website called BPOVoice has an article published that states Country's fourth largest software exporter Satyam Computer has put about 2,500 employees under 'Performance Improvement' programme. Terming it as a regular exercise, a Satyam spokesperson said in an e-mailed statement that "as part of our appraisal process we identify around 5 per cent of our associates in the Performance Improvement category and put them through a structured Performance Improvement Program". Though termed as routine, according to industry sources the exercise is a result of Satyam trying to effectively utilising its bench strength.
Will This Have a Postive Impact in the Long Run?
Well yes and maybe. A report by the Everest Research Institute states "business process outsourcing (BPO) from the financial services sector will increase 40 to 45 times the current market size over the next five years, with key drivers of growth coming from cost pressures". In other words, under pressure to cut costs and stay afloat, these companies may shift out more and more functions. But this is yet to be seen.
The Financial Meltdown: Sub-prime Story
For years, banks in the US have been lending out huge sums of money in the form of sub-prime mortgages commonly known in India as Home Loans. These mortgages are given to people who, by definition, are unlikely to repay them, i.e. where the risk of the debtor defaulting is relatively high and debt settlement may become an issue. Since housing prices were consistently rising, the banks did not perceive a lot of risk: since if the debtor defaulted on the loan, the bank could simply seize and sell the house and not incur a loss.
Then, house prices in the US started falling. And kept on falling. As a result the banks couldn't recover the loans from their debtors and started losing huge amounts of money. In a world where commerce is delicately interlinked, these losses had a domino effect. Lehman Brothers collapsed. Morgan Stanley faltered. The US government recently spent $700 billion bailing the banks out. Despite the government's intervention, the damage is likely to be unforgettably huge. The people on the other hand have to handle diluted valuations and a financial crunch due to which they are being unable to handle mortgage payments. As a result they are resorting to means like debt negotiation to keep liquid and not have to declare bankruptcy.
How Does it Impact India and Your Job?
USA today contributes to the tune of 60% of Indian BPO revenues. However, the same corporations will now be under tremendous amount of pressure to shed fat and trim the corners with customer care and back office processes like data entry services, medical billing and coding etc being first to go. Since the US is one of the largest contributor to Indian BPO/KPO companies the impact will be directly felt here. Though functions like legal process outsourcing or litigation coding may get spared due to the high end nature of each transaction.
A website called BPOVoice has an article published that states Country's fourth largest software exporter Satyam Computer has put about 2,500 employees under 'Performance Improvement' programme. Terming it as a regular exercise, a Satyam spokesperson said in an e-mailed statement that "as part of our appraisal process we identify around 5 per cent of our associates in the Performance Improvement category and put them through a structured Performance Improvement Program". Though termed as routine, according to industry sources the exercise is a result of Satyam trying to effectively utilising its bench strength.
Will This Have a Postive Impact in the Long Run?
Well yes and maybe. A report by the Everest Research Institute states "business process outsourcing (BPO) from the financial services sector will increase 40 to 45 times the current market size over the next five years, with key drivers of growth coming from cost pressures". In other words, under pressure to cut costs and stay afloat, these companies may shift out more and more functions. But this is yet to be seen.
Comments
and lots of countries are merging to each other to help other countries form global financial crisis and it's so good to hear that... thanks a lot...