Indian labour shortage may affect offshoring, says Gartner

According to Indian Government estimates, there will be a need for one million trained and qualified employees in call centres by 2009, but a likely shortfall of over 260,000 workers.

Gartner says this is due to the growing demand for offshore business process outsourcing (BPO) resources, which has already created a shortage for existing offshore call centre service providers.

Many large multinational organisations that located their shared service centres in India did so anticipating an unlimited supply of skilled labour. According to Gartner, this expectation, specifically for educated recruits with good English-language skills, has not been met – even though India graduates more than 2.5 million college students each year.

Gartner predicts that high staff attrition will occur as professionals switch companies to advance their careers or improve their salaries. Although high employee attrition by itself is a manageable issue, a shortfall in qualified personnel will affect costs, as service providers offer employees better salaries and benefits to stop the high attrition rates.

Over time, these measures will erode the competitive advantage that India currently enjoys in the area of labour costs, says Gartner.

The shortage will also impact upon the quality of staff employed by the industry.

According to Gartner, the top available talent has already been absorbed by the industry, leaving service providers with no option but to recruit from a level below their optimum requirements. This makes high-quality in-house training a critical factor.

Finally Gartner warns that any reduction in due diligence resulting from the need for rapid recruitment increases the possibility of less-trustworthy staff being employed. This increases the risk of fraud and theft of confidential data.

The firm advises organisations to investigate carefully before engaging with a call centre provider. Organisations should inquire about attrition rates and security measures, and ensure that adequate mechanisms — such as service level agreements and resulting penalties, call monitoring and customer satisfaction surveys — are built into contracts.

Gartner also urges organisations to review their offshore BPO strategies regularly, looking for signs of improvement or deterioration in the service provided to them, particularly over the next two years.

In addition, Gartner urges the Indian government to consider the long-term implications of the skills shortage, and suggests that the government must work closely with call centre service providers to implement a comprehensive, clearly defined policy and road map for skill development to support the industry.