India’s BPOs turn AI from ‘Job Killer’ to ‘Job Generator’

In January this year, KR Vishwanathan, then Vice President of NASSCOM, dropped a bombshell. His words carried both optimism and caution. “Machines are poised to take over 20% of BPO roles, but the same technology could create 40% more jobs in other domains.”

For example, he continued, the role of chief customer officers, traditionally held in-house, would soon be handed over to BPO partners.

Nine months on, his prophecy is coming true. Fresh NASSCOM data shows Indian BPOs riding the AI wave, turning potential disruption into lucrative opportunities.

The technology once feared as a job killer has emerged as a revenue generator. BPOs that previously processed transactional data have now gone a step ahead to analyze it, offering clients deeper insights into their own operations.

“AI, while powerful, still needs a human touch”

Some BPOs are excelling in data management, while others are breaking ground in the advanced field of building language models—a necessary function for companies to unlock the full potential of AI.

“AI, while powerful, still needs a human touch,” explains Anupam Govil, Managing Partner at Avasant. “This is where BPOs step in, creating a new wave of services.”

Large business houses, eager to integrate AI into their products, are turning to BPOs to train their language models. Data analytics, content creation, and natural language processing are now the industry’s golden geese, driving significant revenue growth.

“Many global companies, lacking the in-house expertise or budget, are outsourcing these tasks to BPOs,” Govil clarified in an interview with Nearshore Americas.

Govil’s firm, Avasant, a Los Angeles-based business consulting company, maintains strong ties with India’s BPO sector and frequently features in NASSCOM events.

The medium-sized BPOs that ceded contact center services to the Philippines are diversifying into high-growth areas such as loan processing, fraud detection, revenue cycle management, and e-commerce optimization.

Govil recalled that when RPA services first emerged, there was also widespread fear that they would eliminate many jobs in the sector.

That fear only intensified with the rise of SaaS and cloud services. However, India’s BPOs climbed up the value chain and went on growing.

“Now, they are better positioned to reap greater rewards,” he said, expecting the industry to achieve up to 10% annual growth rate in the years to come.

 Job Growth

India’s BPO market reached $49 billion in the fiscal year ending March 2024, but despite this impressive figure, it only created 25,000 net new jobs.

Looking ahead, the sector is poised for substantial growth, with NASSCOM predicting it will hit $70 billion by 2027.

However, the impact of BPOs on employment remains concerning. They collectively employ fewer than 2 million people, a small number in a country of over 1.3 billion.

In comparison, the country’s IT services sector employs nearly 4 million people and generates over $200 billion in export revenue alone. Moreover, IT jobs come with much higher pay.

Traditionally, BPOs were centered in metro cities like Delhi, Pune, and Bangalore. But to cut costs, they’ve been branching out to smaller cities such as Lucknow, Kanpur, Coimbatore, Trichy, Indore, Bhopal, Vizag, and Vijayawada.

The move slashes costs and navigates lenient regulations, but it’s not without hurdles—finding skilled workers in these cities remains an uphill climb.

Gone are the days of labor arbitrage. As AI tools evolve, BPOs should look for professionals with advanced skills in areas like data analysis and programming. While India churns out over a million engineering graduates annually, many dislike the idea of joining BPOs. To them, the industry is still synonymous with call centers—offering limited career growth and no prospects for global exposure.

To combat this perception, NASSCOM rebranded the industry as “Business Process Management” (BPM), emphasizing partnerships over transactions. But for many Indian graduates, the term “BPM” still rings hollow, conjuring images of dead-end jobs.

Ganesh Hegde, a former contact center employee from Bangalore, sums it up: “Young graduates dream of reaching the heights of Sundar Pichai or Satya Nadella, not sweating for few thousand rupees in BPOs.”

Both Pichai and Nadella, CEOs of Google and Microsoft, respectively, graduated from India’s prestigious technology schools and have a large fan-following back home.

“Many skilled graduates instead flock to IT companies, thinking those roles will take them around the world.”

Despite the hurdles in acquiring talents, BPOs in India are taking on higher risks by signing outcome-based pricing contracts with clients. This shift could offer bigger rewards, but also carries the danger of losing revenue altogether.

In its report, NASSCOM predicted that by 2027, revenue from outcome-based models will triple.