Since its inception in 1994, Cognizant Technology Solutions, a New Jersey technology services company has been growing at an exponential rate with year-on-year revenue rising 60 percent to $75.5 million in the quarter ended March 31. Leading information technology research firm Gartner said Cognizant’s growth came despite disappointing results from leading companies in the tech industry like Infosys Technologies, Wipro and Satyam Computers.

Wijeyaraj ‘Kumar’ Mahadeva, former chairman of Dun & Bradstreet India and founder, chief executive and president of Cognizant, spoke with News India-Times about the recent developments in the business process outsourcing (BPO) industry and the future trends with specific focus on India and the United States.

Q:Is the BPO industry concerned about the moves by some states in the United States to block outsourcing of jobs to India?

‘KUMAR’ MAHADEVA Yes. There has been a lot of concern about the possible backlash. A bill was introduced in New Jersey to stop government BPO jobs from going overseas. We had a $300-a-week call center operator in India answering telephone calls from a $500-a-week welfare recipient in the New Jersey. There is a lot of activity on this issue. But it has not gone through. We believe that at least four other states --- Missouri, Maryland, Wisconsin and Connecticut --- are considering similar moves. But in none of the states it has become law. My feeling is the backlash, if any, will be limited to government BPO jobs. Private sector, which is the dominant player, will continue to outsource.

Q:Commerce and Industry Minister Arun Jaitley, who was here earlier this month, said that the proposed moves by New Jersey and other states amount to market denial under the multilateral trade regimes.

MAHADEVA Outsourcing is not a new trend. It basically is the function of farming out work --- processes and activities --- to a third party. It is a “make” versus “buy” decision which a firm takes in order to remain competitive and gain access to better technologies and quality. In the 1980s, it was tactical outsourcing of individual processes like payroll accounting and in the 1990s, it was IT outsourcing like support processes, finance, human resources. The aim was to reduce costs and improve operative effectiveness. Now we are seeing strategic outsourcing of core intertwined processes like customer support. So one has to understand the move with these issues in mind.

Q: Can India look at market access for BOP in isolation?

MAHADEVA While addressing multilateral or bilateral trade issues, there is always a give and take. So if India wants market access, it will also have to extend market access. I don’t know in what areas the trade-off will take place. But this is an issue that the Indian government will have to consider. Under World Trade Organization, India, I think, has every right to export services. The United States has pushed harder than anybody for free trade in services. I think, the outsourcing issue is not legal, it is more political.

Q: Where does India stand in the current global BPO market?

MAHADEVA The Indian IT services industry, which includes business process outsourcing, has been growing at a cumulative annual growth rate of 46 percent. The IT services exports were close to $10 billion in the fiscal year just ended March 2003. It exceeded the projections made by McKinsey for the Indian government. But as we look at the projected global outsourcing market of $200 billion for this year, it is a tiny fraction.

Q: Which countries do you think are India’s main competitors?

MAHADEVA The global BPO pie itself is still being determined. The $200 billion market projected for 2003 is one such ballpark by Forrester Research. So there is room for every player to grow.

Having said that one can say that while India is a leader, the challengers are several --- Canada, China, Philippines, Russia and South Africa, to name a few. Bangladesh, Nepal, Sri Lanka, Malaysia are among the beginners who are seeing a lot of potential in the BPO market. Each of these countries is also starting to specialize in various areas. For example, Russia in very high-end software engineering and mathematical modeling, China in embedded software and hardware services, Philippines is strong in contact centers.