In previous articles we have seen how the BPO phenomenon benefits the Western countries (US, Europe etc) by slashing the costs of the firms who outsource their back office work. In this article, we look at how the BPO phenomenon is transforming the economies of the countries that are the recipients of the outsourcing phenomenon.

In other words, countries like India and other Asian countries where the majority of the firms that do the outsourced work are located have reaped the benefits of the BPO phenomenon to the maximum extent.

For starters, the influx of foreign exchange and primarily Dollars puts these countries at an advantage since the US Dollar is the reserve currency or the currency in which the economies of the world trade with each other.

The point here is that by performing outsourced work, these economies stand to gain in terms of Dollar reserves which put them at an advantage over the countries that lack humungous Dollar reserves.

Next, the employment generated by the BPO sector absorbs the majority of the employable workforce in these countries.

In other words, the large numbers of jobs created by the BPO companies act as a buffer against unemployment and at the same time provide the graduates in these countries with a chance to move up the economic ladder. In fact, many studies have pointed to this fact where hitherto economically underprivileged sections have benefited to a large extent because of the earnings that they have made by working in the BPO sector. Indeed, for third world countries, the BPO phenomenon is a godsend for lifting people out of their economic backwardness and propelling them towards middle class lifestyles.

The third aspect relates to the moving up of the value chain for these economies that happens once the base level work is done according to specifications.

In other words, countries like India and the Philippines that started with low level back office work are now into higher value adding activities like KPO and Research and Development which means that pretty soon these economies can compete with the economies of the West in R&D and Innovation. This is definitely a huge plus for the purveyors of the outsourced work since moving up the value chain brings a longer term competitive advantage that is denied to the countries still stuck in low end work.

Finally, the BPO phenomenon has altered the perceptions of the Western countries about the Asian countries in a positive manner. Gone are the days when the West used to look askance at the Asian countries and dismiss them as being backward and unfit for value adding work. Hence, the BPO phenomenon has proved that the Asian countries can indeed be talked about as being in the same league as the West as far as doing cutting edge work is concerned.

In conclusion, the BPO phenomenon is indeed a favorable development for the Asian countries in more ways than one. It remains to be seen whether these countries can sustain the benefits that have accrued to them because of this.