Rising peso may bring good news for Indian BPOs

BANGALORE: The Indian business process outsourcing industry’s rapid growth was somewhat subdued in the last decade because of some stiff competition from the new kid on the block, the Philippines, which became an attractive destination for voice-based outsourcing. But a steadily strengthening currency could put paid to the BPO industry’s growth prospects in the South-East Asian nation, benefiting India, whose currency has weakened.

Between 2010 and 2012, the Philippine peso rose over 6% against the US dollar, while the Indian rupee depreciated 22%, making outsourcing services to Philippines more expensive. While this may not result in any immediate gains for India, industry watchers said it could halt the phenomenal growth the sector witnessed in Philippines.

“Strengthening peso will make Philippines more challenging,” said Raman Roy, chairman and managing director of Delhi-based BPO firm Quatrro BPO Solutions. “From hiring to training, everything now becomes more expensive for client firms,” he added. At about $16 billion (aboutRs 87,500 crore now), the Indian BPO sector is larger than the outsourcing sector in Philippines.

India became the world’s largest offshore market when companies in the US and Europe realised that they could save costs by shipping back office work to offshore centres.

But over the past few years, the Philippines and Latin America have managed to make strong inroads into the voice-based outsourcing market at the cost of India, aided by an English-speaking workforce that has a more neutral accent and better understanding of western cultural aspects.


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From about $7 billion in 2009, the BPO market in Philippines is today valued at $11 billion, according to the Business Processing Association of the Philippines. It provides employment to over 600,000 Filipinos, and the country is the world’s second-largest offshore market.

The Philippines too has recognised that a strengthening peso could provide Indian BPO firms the opportunity to offer more competitive rates. In a statement last week, BPAP president and CEO, Benedict Hernandez, conceded that outsourcing to the Philippines is now 30% more expensive.

“Our industry must also be able to operate within acceptable market prices. That’s becoming increasingly difficult as the peso continues to appreciate,” he said. With the difference in peso and Indian rupee exchange rates with the US dollar, Hernandez said the cost difference has substantially widened.

Some industry experts said while it may be too early to predict any gains, India could benefit if the trend continues. “These are just temporary currency movements. But client companies may take a note of it, if this trend continues for the next six months or one year,” said Pramod Bhasin, founder and former CEO of Genpact, India’s largest BPO firm. “The bigger issue is that the Philippines government puts in a lot of effort into training its people and it has a better infrastructure than us.

India has a vast talent pool, but we need to train them better.” India’s software industry body Nasscom had recently renewed a memorandum of understanding it signed with BPAP in 2009, which calls for commitment from both to work together on common concerns in the IT-BPO industry. Amneet Nivsarkar, vice president of Nasscom, said over the past three-four years, Philippines has expanded faster than India, but it does not call for any kind of competition between the two countries.