The joke in Bangalore is that if you are 18 and hanging out in a discotheque, you will be grabbed and given a job; if you still linger, another recruiter will notice the offer letter in your hand and double your pay.
This apocryphal story isn’t too far removed from reality.
From handling credit-card queries and manning technical helpdesks to reconciling financial statements and chasing accounts receivable, outsourcing of work by global companies such as American Express Co. and Hewlett-Packard Co. has turned young university students in India into sought-after commodities.
In the mid-1980s, a college graduate who had been taught the rudiments of book-keeping and commercial law could hope to get a monthly stipend of Rs500—about $40 in those days—as an apprentice at an accounting firm, says Sid Pai, who heads Indian operations at Houston-based advisory firm TPI Inc.
Today, liberal-arts graduates can easily command a starting salary of Rs12,500 ($280). Within a year to 18 months, they will become supervisors. In three years, they would be earning about Rs25,000, the same as a university professor in India with a doctorate and 10 years’ experience.
Yet, no one sticks around in transaction-processing jobs.
Each person who leaves, either to join another firm or to pursue higher studies, costs the employer Rs45,000 to Rs75,000 in recruitment and training expenses, says Amitabh Chaudhry, chief executive of the business process outsourcing unit at Infosys Technologies Ltd in Bangalore.
Infosys BPO, as the division is called, had about 10,000 employees at the end of December. In the last quarter of 2006, it had an annualized attrition rate—employees leaving the company as a ratio of staff strength—of 36%.
Company executives in India lament that young workers in Bangalore, Mumbai and New Delhi have become greedy. Employees say they have to maximize their short-term earnings because these jobs aren’t a real career.
This isn’t how Chaudhry sees it. Getting to know how a global bank manages its complex processes is real learning, which can be monetized, he says. It’s a valid point.
One former back-office worker who told me the job was that of a “techno coolie” is now employed in a risk-management solutions company. The repetitive nature of the work is a genuine problem, though there’s no obvious way to avoid this.
Similarly, white-collar employees resent being made to account for their time the same way as factory workers stitching garments. Yet, if outsourcing companies didn’t “program” their tasks for maximum efficiency, they wouldn’t be able to offer clients a cost saving.
The same goes for working in shifts. It’s unavoidable.
It doesn’t look like the cost of attrition is a concern yet for the more reputed service providers: Infosys BPO had a 24% profit margin in the last quarter. A bigger issue is lost knowledge.
It’s quite easy to replace someone who makes cold calls to sell credit cards. Losing a team trained in the intricacies of the software that allows mobile-phone companies to reflect promotional offers in their customers’ bills might cause disruptions and financial losses.
Companies sending work to service providers in India nowadays make them sign agreements guaranteeing that the project won’t be manned entirely by greenhorns, Pai says. Even then, there’s a tendency among outsourcing companies to downplay attrition as uncontrollable. That’s a wrong view.
Many workers quit because their managers, who have risen too rapidly to their supervisory positions in this fast-growing industry, are lousy bosses. “You need to make managers accept that they have a problem,” Chaudhry says. “You have to bring attrition down to below 25%.” There’s no dearth of willing workers.
A young college graduate from a village in the southern Indian state of Andhra Pradesh once told me he was thrilled to do data-entry work—for the equivalent of $3 a day—because the alternative was to either eke out a meager and uncertain living from a small parcel of family land or to brave toxic fumes in a chemical factory.
Millions of such people are being denied global outsourcing jobs because many Indian states still insist on the local language being the medium of instruction in schools.
Infosys BPO has a programme called Project Genesis, in which the company is working with 8,000 students in 212 colleges in two Indian states to help graduates learn to speak, read and write better English. Chaudhry hired 600 of these students last year.
Those who believe the transaction-processing industry in India will wither away because of a crunch of reasonably priced agents may be exaggerating the situation. There are 1.2 billion people aged 10 to 19 in the world; 19% of these workers of tomorrow are in India.
The offshoring boom has nothing to do with capability or cost,” says Pai of TPI. “It’s all about demographics. Young people in such large numbers are just not there in the West.” As more youngsters from villages and small towns become ready for these jobs, economics will take care of attrition.
Until then, young people in the big cities of India can party on.