India’s back office business faces a Covid-19 calculation

India’s catastrophic second wave of Covid-19 has become the real stress test of the global service industry as companies work to maintain back-office operations amid widespread infections and a healthcare system overflowing.

India is the largest back office center in the world, with close to 4.5 million people doing everything from answering customer service calls to software development to mortgage processing, locating -it far ahead of colleagues like the Philippines, which has more than 1.2 million workers.

Global banking and technology companies, from Goldman Sachs to Google, also manage their own internal operations, with many more contracting jobs with third parties such as Infosys and Tata Consultancy Services.

But the second wave of the pandemic has hit the country, reporting a seven-day average of 260,000 infections and a daily average of 4,100 deaths, both considered significant lows. The humanitarian crisis has been exacerbated by a severe shortage of hospital beds, oxygen and vaccines.

India has become indispensable for global companies, but executives say this crisis carries risks for this model. Companies have been forced to relocate work abroad, delay projects and even build their own treatment facilities for employees.

“I think with the second wave in India there will be a big impact on the industry,” said Vishal Sikka, a former CEO of Infosys and a board member of Oracle, the US technology company , which has 45,000 people in India.

The pandemic had already shaken the industry when India’s abrupt national closure last year forced the sector to do so. move on to remote work practically overnight. “But now, with the interruption, this seems more serious. That looks like it’s going to be worse, “Sikka said.” It’s just the large number of people who get sick. “

Executives and analysts say many companies have reported that up to 10% of their employees have gone down with Covid-19. But that number does not include workers engaged in caring for sick family members.

Vinod AJ, general secretary of the Forum for IT Employees, an industry group, said the burden has become manageable for many workers. “The problem is that not only them, but their families, are affected,” he said. “Many companies seek 24-hour assistance [clients in] United States and other parts of the world. They are not able to give so much support ”.

Sid Pai, a consultant, says no company has been immune. “All companies, regardless of size and national origin, are affected, whether you are Goldman Sachs, Accenture, TCS or Infosys,” he said.

Bangalore, battered by pandemic

Bangalore, the main technology and computer center, has been one of the most affected cities, although the situation has shown some signs of improvement. The number of domestic cases has fallen in recent days, although experts fear the virus is which extends to parts of the country with less testing capabilities.

Arvind Krishna, CEO of IBM, the US technology company with more than 100,000 employees in India, said the load was manageable assuming the second wave approached its peak.

“It’s a concern, but not something that is a five-alarm fire,” he said. “I am more concerned about the long-term impact of some families. We retrieve so many anecdotes from people in their twenties and thirties that they don’t recover. That’s a shock compared to last year. “

4.5 m

Back-office workers in India, ranging from customer service call centers to software development

4,100

Average daily deaths in the second wave of Covid-19

3%

Percentage of vaccinated Indian population

Pravin Rao, chief operating officer of Infosys, which employs more than 250,000, said India’s IT sector had suffered many storms and was well equipped to survive it.

“This industry has repeatedly demonstrated its resilience, from the days of the dot-com burst to the global financial crisis,” he said. “There’s always been talk about whether this industry will survive, even more so last year during Covid’s initial wave.”

A highly qualified and low cost business model

India emerged as a center for outsourcing to Western companies call centers and computer work from the 1990s.

The country’s large base of highly skilled and low-cost workers encouraged banks and software companies to delegate a growing list of critical functions to India. The sector generates about $ 180 billion in revenue a year, according to Nasscom, the Indian IT industry group.

Travel bans and blockades last year he shook a business model that was based on sending workers abroad and on extensive campuses. Spending on IT services fell 4% in 2020, according to Nasscom.

But the money-rich industry recovered again, as business activity intensified in Europe and North America. According to CARE Rating, a rating agency, net sales growth accelerated from 2.7% year-on-year in the quarter ending June 2020 to 6.4% in the first quarter of 2021.

The second wave of India poses a more fundamental threat if that of the government erroneous manipulation of the crisis, by not preparing health systems and acquiring sufficient vaccines, harms the country’s reputation as a reliable outsourcing destination.

In the UK, for example, regulators have been consulting with lenders on the possible effects on operations.

“It simply came to our notice then [companies] we thought India offers, ”said DD Mishra, a senior analyst at Gartner, the research and consulting firm. “The response hasn’t given everyone a good level of comfort.”

The health crisis put pressure on employers

A particular challenge is the huge burden that the second wave has placed on India’s healthcare system, which has been matched. affluent Indians unable to ensure treatment. This has forced companies to take matters into their own hands. NatWest, the UK bank, is one of many companies that has bought oxygen concentrators for its employees in response to a severe shortage of medical use.

With hospitals full, companies such as Infosys and TCS have also created their own Covid treatment facilities.

To keep operations running, some have also changed jobs outside of India. Shanmugam Nagarajan, co-founder of [24]7.ai, a customer service subcontractor, is redirecting calls from India to centers elsewhere.

“The wave hits different parts of the world at different times,” Nagarajan said. “When India can’t answer the calls, Colombia and the Philippines take them.”

Rao said the impact was limited, but Infosys also hired subcontractors and negotiated with clients to postpone projects “that are not very critical.”

TCS said the ability to maintain its productive workforce and deliver to customers demonstrated “the robustness and effectiveness of this model.”

Pai added that the latest outage would increase costs and affect productivity. “Customers have understood it so far, but at some point the economy will start and customers will ask questions,” he said.

One challenge companies have struggled to solve is vaccines. India has changed its rules this month to allow the private sector to acquire castings directly, but one acute shortage “He expects them to last for months,” he said.

Apparao VV, head of human resources at HCL, a Delhi-based subcontractor, said the company was able to secure a limited number of vaccines through a partnership with a private hospital, but was struggling to get more.

“No one is able to provide you with the necessary deadlines and volumes,” he said. “We approached all the manufacturers. They were very little committed. . . Without a source, we can’t make commitments. “

About 3% of India’s population is fully vaccinated, compared to over 30% in the US.

One advantage could surpass all others: people

Despite all the upheaval, executives say they believe India’s biggest long-term advantage can survive any pandemic: its workforce.

With strong competition around the world for programmers and software engineers, they argue that nowhere else can companies find so many workers at the right price.

Both JPMorgan and Credit Suisse, which already have major operations in the country, announced this month the forecast to hire 4,000 and 1,000 more employees from India respectively in 2021 to boost their technology.

“Companies will go where the talent is,” said Sangeeta Gupta, senior vice president of Nasscom.

Additional reports from Nicholas Megaw in London

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