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June 17, 2008

India: Beyond BPO

John Shoaf '10
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This post is part of a series following the “Pre-MBA World Tour,” organized by Shoaf and members of the class of 2010.

When most people think about the growing economy in India, their first thought probably relates to BPO (business process outsourcing). The BPO phenomenon in India was due to, among other things, a combination of low wages, a highly skilled labor force and the economic-liberalization policy of 1991. This scenario created a large flow of foreign direct investment into India’s IT and communications infrastructure during the tech boom of the late 1990s.

Although BPO has been a driver of India’s recent economic development (by putting India on the radar of investors around the world), the future of India’s emerging economy will likely be elsewhere. If you’re looking for the next wave of growth and opportunity in India, consider the new rising middle class of nearly 300 million people.

Because of the prevalent family-business model in India, much of this middle-market growth will likely come from privately held enterprises (rather than public companies) — so if you’re simply pumping cash into an ETF, you might just end up in a few, highly speculative investments. The best way to really capitalize on this opportunity will be to actively participate in the emerging economic system. Of course, this is always easier said than done.

So how do you become a competitive player in a new market with a total population of 1.2 billion people? The first step is to realize that India is an extremely diverse country with hundreds of languages, religions and ethnicities. Each of the 28 states (and seven union territories) in India has its own unique culture (and subcultures) that must be considered when developing marketing and distribution strategies.

It will be critical to understand not only the Indian psyche but also what physical and political constraints exist to get your products to market.

For example, in certain regions the postal system is not effective, because many residences don’t have accurate mailing addresses. So to reach their customers, many companies deliver mail, advertisements and warranty information through SMS text messaging. Even in Mumbai, I had a rickshaw driver explain how he checks his Facebook account and asks for driving directions through his mobile phone.

The other important consideration is learning how to deal with the political bureaucracy. Last week our tour stopped in Dubai, where it typically takes about six months to get a project through the planning stage. In Mumbai, a certain infamous flyover project has been in the planning phase for more than five years.

Stay tuned for our second blog post from India, as we plan to learn more about economic development and how to facilitate ethical business practices in a market where political corruption is an everyday fact of life.

Next stop: New Delhi

Comments

by Anubhav Goyal | June 18, 2008 at 2:46 AM

Hi, I agree on the few things mentioned regarding the hurdles in the project planning but i think its a part of the democracy and the best contradictory example for this if we see the development taking place in Delhi, i have seen flyovers coming up functional in less than a year. Obvious reason for this is the upcoming Commonwealth games in New Delhi in 2010. I dont know whether this helped Delhi goverment to take fast actions or may be harsh for the public sometimes. But i would like to see this kind of determination in order to develop India not for the sake of hosting any game or event. I hope politicians can understand this one day or may be people of India can become more sensible in selection of the goverment or their leader.

by Ayash Basu | June 18, 2008 at 11:33 AM

I was in Johannesburg recently and noticed the fast pace of construction and infrastructure development from the moment I landed, i.e. starting from the airport to metro lines, highways, flyovers etc. A very senior American gentleman, who works in the sustainable development sector later commented that South Africa is no different from any beaurocratic, slow to act government and all this infrastructure frenzy would not have happened without the 2010 FIFA World Cup. His words, "Get to host a global event in India and see how things begin to happen." Coming to India, I personally believe, one of the key ingredients to India's sustained long-term success will be how well they can plan infrastructure development. A key metric for investment in India, to my mind is if these levers are (or will be) in place. Unless roads, transportation networks, power plants etc are up to speed, the basic foundation of a country's long-term growth is critically wanting and a supplementary IT-based economy can only go so far.

by Vineet Kumar | June 18, 2008 at 12:27 PM

If a closer look to the indian market is given, a lot of profitable investments can be looked at. To name a few: # India is a hub of small "Mom and Pop" stores. While these small businesses operate in a close conservative environments, the young proponents of these businesses are open to investments and expansion. # There's an oppurtunity of investment in evergreen entertainment market in india. Not-to-mention, bollywood is placed second in churning out movie flicks with quick succession. However, quality of such ventures is a concern which ofcourse can be improved. A reverse step in the line of one taken by Anil Dhirubhai Ambani Group could also be worked out. # Another possible, and profitable, investment option available in india is its insanely competitive Education business. Indian education system is competitive and is consistent irrespective of geography. While there're regular markets like technology, Real-Estate and/or telecom, there're many other unnamed small avenues which can be looked at in near future as they make India a highly lucrative market.

by SEO Professionals | June 22, 2008 at 11:40 PM

Nice post, India is really dominating when it comes to business outsourcing. BPO would really boost up if the government have a full support as well. http://www.outsourceit2philippines.com/outsource-latest-services.htm#business%20process%20outsourcing

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