Modis radical tech reforms are a gamechanger for India's BPM industry

Sweeping regulatory changes will pave the way for doubling the size of the $37 billion sector.

The Indian government's dramatic reforms to its regulations for the tech industry, including relaxing provisions for other service providers (OSPs) and allowing companies to run their own VPN service, is not only a game-changer for the industry but will also pave the way for doubling the size of the $37 billion business process management (BPM) sector, create thousands of new jobs and make India a global hub for digital services.

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That's the view from tech experts, industry analysts and top government officials on the sweeping changes announced by the Narendra Modi government last week - a decision that industry body Nasscom hailed as significantly expanding access to talent, increasing job creation and catapulting the sector to the next level of growth and innovation. It said that access to remote working will give the $191-billion IT and BPO industry a massive boost amid the coronavirus pandemic.

New rules, new culture

The new rules by the Indian Department of Telecom come nearly 18 months after the Telecom Regulatory Authority of India had suggested relaxations of registration, submission of bank guarantee and other norms for other service providers (OSPs) in the business process outsourcing (BPO) and information technology-enabled services (ITes). The new rules do away with the registration requirement for OSPs, while BPOs that are engaged only in data work have been taken out of the category of OSPs altogether.

India's IT minister Ravi Shankar Prasad immediately applauded the reforms, tweeting that the regulatory changes would boost the IT/BPO industry and create a friendly regime for teleworking in the country.

India's Telecom secretary Anshu Prakash told the Economic Times that the move by the Department of Telecommunications to relax the provisions for OSPs will be a major help for IT and BPM companies to adopt permanent work-from-home (WFH) and work-from-anywhere policies as the coronavirus pandemic alters the entire concept of work for the sector. It is also aimed at attracting huge investments and generating jobs.

WFA replaces WFH

Against such a backdrop, the eased regulations are aimed at providing flexibility to adopt a 'Work from Anywhere' model for the BPM sector - which unlike its IT counterparts, cannot just move to a WFH regime and dismantle its existing tech infrastructure. “It opens doors for geographic diversity of talent and provides increased employment options, which will further boost India′s position as a global technology and digital hub,” Tiger Tyagarajan, CEO of Genpact, told BusinessLine. India's IT and BPO sectors employ around 4.3 million people, but Covid-19 has challenged the traditional hiring of BPO staff from India's larger metro cities.

Announcing the revamped guidelines, Indian Prime Minister Narendra Modi said that the government was committed to doing everything to ensure a conducive environment for growth and innovation in India. “India's IT sector is our pride. The prowess of this sector is recognised globally. We are committed to doing everything possible to ensure an environment conducive for growth and innovation in India. Today's decisions will especially encourage young talent in the sector!” he tweeted.

Requirements such as deposit of bank guarantees, static IPs, frequent reporting obligations, publication of network diagrams and penal provisions have also been removed. Several other requirements that prevented companies from adopting flexible work arrangements were scrapped. The guidelines, released on November 5, will make it easier for BPOs and ITes companies in several crucial ways - such as cutting down on the cost of location, rent for premises and other ancillary costs such as electricity and internet bills.

Ease of doing business

“Committed to furthering 'Ease of Doing Business' and making India a tech hub! GoI has significantly simplified OSP guidelines of the Telecom Department. Compliance burdens of the BPO industry will be greatly reduced due to this. Registration requirement for Other Service Providers (OSPs) has been done away with altogether. The BPO industry engaged in data-related work is out of the ambit of OSP regulations. Many other requirements have been done away with. These steps will further flexibility and productivity,” Modi said.

According to officials, the simplified guidelines and the sharp reduction of red tape are a signal for countries and private investors to focus once again on the lucrative opportunities awaiting them in the Indian IT industry.

“One should not be merely extrapolating current BPO services into the future. The explosion of digital platforms means the post-Covid-19 world will create new opportunities for IT-enabled services and this will be worth millions of jobs in the next 5-7 years,” said Sanjeev Sanyal, Principal Economic Advisor to the Indian government, noting that the new guidelines will create an architecture for India's IT sector for the next two decades. Other senior government officials said the reforms should not only help double India's current BPM industry in the next few years, but also that this was the first of the high-impact reforms planned in the digital space, with the government working towards making robust digital platform services the cornerstone of India's growth story.

The dynamic nature of the relaxations prompted outpourings of support from titans of the industry. “The reforms of Other Service Provider regulations for BPO/BPM industry is breath-taking in its simplicity. Truly a case of dramatic Ease of Business in the digital world!” tweeted Infosys co-founder Nandan Nilekani. “Today's landmark decision is a dream come true. With work from anywhere as our new reality, India will significantly up its game as a global tech leader,” said Debjani Ghosh, Nasscom's president.

Benefit for gig workers

According to Nasscom, the BPM market's 8.4% growth is driven by incremental gains in export revenue due to increased adoption of digital technologies and automation tools and the acquisition of new customers.

Apart from easing the bureaucratic burden on companies, the revamped laws also have the potential of bringing more 'gig economy' workers. “The biggest advantage of this policy change is that it will open the doors for us to tap into new talent pool such as the young workforce and retired people with domain knowledge who want to work for few hours remotely,” said Keshav Murugesh, Group CEO of WNS and Immediate Past Chairman of Nasscom. “In the earlier model, a person was forced to come to a city, and had to incur higher cost of living. Now, that is no longer the case,” he told BusinessLine.

By reducing compliance requirements, company margins are expected to improve at a time when every sector is desperate to boost their bottom lines - an exercise which could lead to a dramatic spike in job creation. Companies can now focus on spending on office expenses with a direct 20-25% improvement in margins, while the pressure to scout talents from Tier-2 and Tier-3 cities will also force states to dramatically upgrade their tech infrastructure, last-mile fiber deployment and cyber safety and security in the long run.