Demand-Supply Syndrome in Action

The conventional wisdom used to be that demand is not a gating function in the outsourcing industry. Growth was a function of ability to build supply capacity for service and support. Talk to a CEO today, and you'll hear the opposite. I was recently in conversation with the CEO of a large BPO provider and heard the musing, "Our current problem is business growth - not employees"! With captives folding up or slowing down their growth in India and customers pulling out from existing service providers, there is suddenly over-supply of talent in the market, at least in the short-term. That's perhaps the only positive consequence of the current macroeconomic climate. With BPO service providers facing a growth challenge in the wake of the U.S. (increasingly global) financial crisis, we hear about moderation of attrition rates in BPO companies. Pressure on future growth is one side of the coin; loss of extant business with the ill-fated customers is the other. Given this fall-out, we're reminded of the basic economic law of demand and supply. While the industry was experiencing exponential growth and sucking more talent than academia could offer, negotiations were uni-directional, with prospective employees in the driver's seat. Now, negotiating power is in the hands of the employers. They're not only finding talent more easily, provided they need to hire, but are also getting away with very nominal salary hikes without facing the irk of the employees. Isn't this again uni-directional? I hope and believe it's NOT. How long will it take for the tables to turn again? Depends on when the global economy will recover. At this point, it's not looking like anytime soon.