Globalisation - India's Service Sector

Geo File on India's Service Sector (call centres etc)

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Geo file
April 2010
Online 617
Simon Nash
Globalisation of services ­ Calling India
Developing countries, newly Figure 1: Global BPO market by
Globalisation of services industrialised countries (NICs) and industry
Globalisation is the process by which periphery countries in developed
regional economies, societies, and regions are endowed with the well-
cultures have become integrated qualified workforces that the service Consumer
through a worldwide network of industry requires, but pay levels are goods/
communication and exchange. In relatively low. This gives them a services
relation to industry it is also the `comparative advantage' in terms of 15%
move to a globalised economic labour costs.
system dominated by supranational Communication Information
corporate trade and banking (telecom) technology
institutions operating beyond national Clustering/cumulative 16% 43%
governments. causation
Clustering of similar industries due services
The current wave of economic to cumulative causation is also part of Manu-
globalisation started in the 1980s, the explanation. According to Dicken facturing
following on from the earlier relocation these specialised clusters reflect the 9%
overseas of manufacturing industries tendency for firms in the same or
to gain access to raw materials and closely related, industries to locate in Source: Price Waterhouse Cooper
cheaper labour costs. The globalisation the same place. They grow through a (,com/en_IN/in/assets/pdfs/evolution-of-
of services is also in part due to labour process of cumulative self-reinforcing
costs but also the global mobility of development (Dicken, 2007). GeoFile Series 28 Issue 3
factors of production, capital and shows the services
Fig 617_01 provided in
Mac/eps/illustrator 11 the
advances in infrastructure, transport This means as industries become global BPO market
and communications technologies. Artist: David Russell Illustration
successful, they will:
These developments have coincided · attract linked activities Innovation has allowed the BPO
with the opening up of the less · stimulate entrepreneurship and market to expand to include database
economically developed countries innovation marketing, transcription, billing
(LEDCs) to direct foreign investment · deepen and widen the local labour services, web design, sales/marketing,
and international trade. market accounting, tax processing, telesales/
· cause economic diversification telemarketing, human resources,
Why and how is it happening? · stimulate development of the market research, legal processes,
Service industry or tertiary physical infrastructure. biotech research and special effects
industry: an industry comprised for Hollywood. On a smaller scale,
of companies that primarily This ongoing process makes one company in India is offering
earn revenue through providing established overseas sites even more outsourced personal assistants.
intangible products and services. attractive.
Knowledge process outsourcing of
core innovation activities (product
Outsourcing and offshoring development, engineering, R&D) is
Factors of industrial location In making decisions on the provision also increasingly being offshored. e.g.
· Labour/human capital of IT or accountancy services, US aircraft manufacturers Boeing
· Capital companies can choose between (US) and Airbus (Europe) have
· Government policy having the work done in-house design centres in Russia.
· Transport/accessibility (internalisation) or subcontracting/
· Raw materials outsourcing (externalisation). Company structure
· Site Outsourcing used to be limited
geographically to companies in their The move to BPO in its many
`Footloose' service industries have no home nation, but with innovations forms is for many organisations
need of heavy raw materials nor large in communications these services just one aspect of their operation as
sites. What they require is an educated can now be provided anywhere in a multinational company (MNC),
workforce, with IT skills, access to the world. This is referred to as utilising their experience of working
communications systems, offices offshoring. in different countries. They also
or business parks and government outsource backroom operations to
policy in favour of foreign investment Initially, offshoring catered for large service MNCs. The success of
and development of their country's simple `back room' office functions, companies competing for business in
infrastructure. Since these location such as payroll, and IT services. offshore locations has allowed them
factors are all readily available around These remain a major element of the to develop into MNCs, including
the world there is no restriction on industry and are collectively referred establishing offices back in the
business in choosing a location, and to as business process offshoring originating more economically
so the key determining factor for (BPO) and information technology developed countries (MEDCs).
industry is the cost of production. enabled services (ITES). Figure 1
Geofile Online © Nelson Thornes 2010

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April 2010 no.617 Globalisation of services: Calling India
Figure 3: Worldwide offshoring locations
Government policy
The move to offshoring has also Argentina Web & software programming,game development, IT
required LEDCs to create appropriate support,network solutions
economic development policies, to Bangladesh Web & software programming,game development, IT support,
liberalise policy to allow foreign direct network solutions,offshore outsourcing service
investment (FDI), and to support Belarus Programming, R&D
investment in infrastructure and
specialised education.…read more

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April 2010 no.617 Globalisation of services: Calling India
Figure 5: Comparison of India's and the our domestic lives, be it the day-to-day and Uruguay, plus numerous centres
UK's economies management of phone and broadband in India.
Percentage of India UK provision, or in our entertainment,
GDP by sector with call centres featuring in the film Why the success?
(estimate 2008) Slumdog Millionaire and on the TV in The Indian perspective on India's
Agriculture 17 1 Mumbai Calling.…read more

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April 2010 no.617 Globalisation of services: Calling India
This period brought deregulation Other government investment in Conclusion
of the telecoms industry, with the infrastructure includes the `Golden
National Telecom Policy (NTP) Quadrilateral', a highway network The globalisation of services is well-
opening up national, long distance connecting Delhi, Mumbai, Kolkata established and will continue to
and international connectivity to and Chennai. spread across the world following
competition.…read more


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