Examination of Witnesses (Questions 360-373)
NATIONAL ASSOCIATION
OF SOFTWARE
AND SERVICES
COMPANIES
9 MARCH 2004
Q360 Richard Burden: Is that a view that
is generally shared in India or do you see any trend towards people
in India—a bit like in the UK—saying "Actually,
we are under challenge from China, Israel and Eastern Europe and
we need to try to protect our bases here in India"? Are there
people saying that?
Mr Mehta: As an industry we have
always promoted free trade. We were the only industry in India
who said that there should be zero import duty on imported software.
On all of our communication equipment on computers in India, there
will not be any import duty by the end of this year. As an industry
it is in our interest to promote free trade within India as well
as other parts of the world.
Q361 Richard Burden: Is there anything
that the Indian Government is doing to try to retain business
in India?
Mr Mehta: No, they are not.
Q362 Richard Burden: Nothing at all?
Mr Mehta: The Indian Government
has concentrated on how to create an enabling environment in which
industry can thrive. It has invested into higher education, it
has deregulated our telecommunications sector, it is actively
involved in bringing overseas investment within India. It is more
about creating an enabling environment for business rather than
actively protecting business, which is usually more effective
in the long run.
Q363 Richard Burden: I put to you before
the issue of data protection as being a concern in the UK and
if companies offshore from UK to India it is important that India
has equivalent data protection regulations, and I think you said
that exists. Does India insist on equivalent data protection regulation
in other countries when operations may be offshored from India?
Mr Mehta: Not to my knowledge
as yet.
Q364 Richard Burden: So if there was
a company in the UK that offshored part of its operations from
India which then sub-contracted some of those operations out to
China, that might be a problem both under Indian domestic legislation
and, indeed, under UK domestic legislation?
Mr Mehta: Usually the end customer
will insist that the operation will be physically performed at
a particular location only.
Mr Kumar: I think the customers
are very specific on the location or the city, including the premises,
that is compliant with their standards. It is not a decision by
the contractor to place it anywhere, there is equal participation
from the contracting party to determine the standards and location
and facilities, etc.
Q365 Judy Mallaber: Just for information,
do you know what proportion of call centres in India are established
by overseas companies, like the one I visited which is basically
a US company, and what proportion are run by indigenous Indian
companies that then win contracts from foreign companies?
Mr Mehta: Two-thirds of them are
overseas companies.
Q366 Judy Mallaber: Actually owned by
an overseas company?
Mr Mehta: GE, American Express,
HSBC, Standard Chartered.
Q367 Judy Mallaber: They have set up
their own call centres and they are run by Indian companies to
attract business from overseas?
Mr Mehta: That is right.
Mr Kumar: I would call it more
an operation centre than a call centre.
Q368 Sir Robert Smith: Just one other
issue I am interested in in the wider part of our inquiry into
the knowledge economy is how attractive companies find setting
up offices for consultancy and other functions in the UK and if
they are looking at Europe as a destination market, which part
of Europe they would see as an ideal location and why.
Mr Kumar: I think the UK is attractive.
Yesterday I was sharing the example of Singapore where, for example,
60% of professional services revenue in Asia is built out of Singapore.
There is a great opportunity for the UK to be that for this part
of the world. A lot of people, like Sunil gave an example of 200-plus
companies, are setting up their legal infrastructure out of the
UK. There is a comparatively lower number on the continent available
today.
Mr Mehta: If I could add to that.
As of today, the Indian industry is really impressed by the garment
industry to bring in investment within the UK. Agencies like the
WDA and British Midlands Initiative have actively engaged with
the industry and invited them. It is seen as a very favourable
policy.
Q369 Mr Clapham: Mr Mehta, could I ask
you about the number of employees. The reason for that is I am
looking at the final paragraph in your paper where you say that:
"Economic analysts, Business Strategies last year estimated
that UK call centres currently employ the equivalent of 423,000
full-time employees". That contrasts somewhat with the evidence
we were given a fortnight ago by the UK Call Centre Association.
They suggested that at the present time in the UK there are three-quarter
of a million employees in call centres. Could you tell us how
many people are employed in call centres in India at the present
time? How do you see that growing, say by 2008? Is there likely
to be a change in the proportion of foreign companies and Indian
companies? At the present time it is two-thirds foreign and one-third
Indian, do you see that changing by 2008?
Mr Mehta: Call centres in India
today employ about 40,000 people and we think that by 2008 they
will employ close to 200,000 people. By all estimates the proportion
of foreign-owned call centres is likely to increase from two-thirds
to three-quarters. Those are estimates.
Q370 Chairman: You referred to call centres
there. If you were to widen that to outsourcing in general, how
do you see the figures developing? I know you said that of all
call centre work—maybe you can confirm this—was it
11% of all potential UK call centre work or 11% of all UK contact
work?
Mr Mehta: Eleven per cent of all
services work: lawyers, accountants, transport services, environmental
services, they just process everything. Eleven per cent of all
service sector jobs.
Q371 Chairman: As far as call centres
are concerned, you would draw that distinction between the two?
Mr Mehta: Yes.
Q372 Chairman: Just to come back to this
point about the potential reaction of the Indian Government. At
the moment it is open season, you can pretty well pick up all
the jobs you like. You have already identified other areas to
which jobs might go. How would you envisage the reaction of the
Indian Government, regardless of the political party in power—I
understand elections are coming up—in the sense that come
2008 you seem to be suggesting that there might be a kind of plateauing
in India? Do you think there may be the possibility of Indian
protectionism, that they would try and keep jobs within India,
or do you accept the apparent inexorable logic of globalisation?
Mr Mehta: I think independent
of their political ideologies, all parties in India today are
committed to economic reform and free trade. I think if you see
the examples since 1996, there has been no move initiated by India
to protect any jobs. Let me give you an anecdotal example: as
of today there is no advertising agency in India that is owned
by an Indian. If you think of the insurance sector, almost all
of the new entrants are agencies. Telecommunication is only global
companies. I think there has not been any move by the Indian Government
to protect jobs per se. I do not want to predict future
politics but if asked I would say that is unlikely to happen.
Q373 Chairman: Thank you very much, gentlemen,
that has been very helpful. You have filled in one of the big
gaps in our jigsaw and we are very grateful. Thank you for the
trouble you have taken.
Mr Mehta: We are very grateful
to be given the opportunity. If there is any additional information
you need we would be happy to supply it.
Chairman: We will be likely to come back
to you. It is no reflection on the evidence you have given us
this morning which has been very helpful and very fulsome. Thank
you.
| 
