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BPO not a cost-cutting ploy: Survey

Instead, company bosses are focusing on India to win new customers, reports Nabanita Sircar.

india Updated: Jan 25, 2006 19:27 IST

Outsourcing to markets like India is not a cost-cutting ploy any longer. Company bosses are focusing on winning new customers in emerging markets like Brazil, Russia, India and China, a survey by consulting firm PricewaterhouseCoopers suggests.

India comes second to China, which is seen as the most promising market, with nearly four fifths of all companies planning to sell their products there. And nearly two-thirds of chief executives believe that globalisation is not just unstoppable, but also good for their company. "Globalisation is widely viewed as an (attempt) to take advantage of low costs, but chief executives tells us that now it is more about accessing markets and getting new customers," said Samuel DiPiazza, the chief executive of PricewaterhouseCoopers International.

Just 12% of the executives interviewed believe that globalisation will have a 'somewhat negative' or 'very negative' impact on their organisation. Executives in developing countries are also upbeat about globalisation. "They are unanimous that it's not a threat but an opportunity; they worry less about multinationals coming into their market, but look forward to getting better access to new markets," DiPiazza said.

It is the burden on business where the bosses in the developed and developing nations differ. In industrialised nations, too much regulation and trade barriers top the list of complaints. Corruption and poor education and health systems are the biggest worries of chief executives in developing countries.

Much of global investment has been focused on the so-called BRIC countries - Brazil, Russia, India and China - a term first coined by investment bank Goldman Sachs. But the survey contradicts the reasons behind it. Almost half of all firms say that lower costs is one of the factors driving their decision to do business in these countries, about three quarters hope to get access to new customers. Among the BRIC countries, most corporate attention is on China. Nearly four fifths of companies have a strategy to enter the Chinese market, while 55% hope to sell there within the next three years.

India came second, with 64% of companies seeing "significant market opportunities", while less than half identify such opportunities in Brazil and Russia. "Until recently, when people thought about China it was about making things cheaply and sell them to the West," says Kieran Poynter, the chairman of PwC UK. "Today they see a billion people that are getting richer and who represent a consumer market."

India, meanwhile, is rated highly for its highly skilled workforce. PricewaterhouseCoopers interviewed for the survey 1,410 chief executives in 45 countries during the last three months of 2005. Of the chief executives surveyed, 25% worked for companies with a turnover of $1bn a year and more, while half were leading firms that had a turnover of less than $500m.

First Published: Jan 25, 2006 19:27 IST