In a recent sourcingfocus.com news analysis, we covered the London School of Economics’ Beyond BRIC study. From that study we drew the conclusion that India may be having its iron-grip on the BPO industry loosened somewhat by emerging destinations. In swift succession Gartner has released a report saying that the Indian BPO industry is as strong as ever and it sees no reason why the Indian market share should fall. In fact Gartner thinks that its share will double by 2010.
This seems to totally contradict the speculation that India’s market share may be threatened by emerging destinations, nearshore vendors and a change in end user procurement needs. sourcingfocus.com spoke with Rick Simmonds, Partner and Head if Financial Services at Alsbridge, a global advisory firm, to ask his opinion these predictions
“I disagree, I think India’s market share is set to drop,” he commented. A reasonable opinion considering a recent FT article reported on Indian contact centres suffering from higher wage and location costs, with some having to get rid of staff and move to cheaper areas. Mr Simmonds goes on to state that more non-English speaking countries will take advantage of offshoring and as a result will be looking at other destinations to suit their BPO needs. “Spanish speaking nations will be looking to Morocco and Argentina. Egypt is also forging ahead in the BPO world.”
But It is not just the language similarities that businesses will be looking for when considering BPO. Mr Simmonds also believes that the current political and economic climate may deter some businesses from offshoring chunks of their processes, “Cheaper regional areas in Europe and the UK may appeal more to organisations now. Banks taking Government money won’t want to be seen offshoring either.”
Patriotic and protectionist sentiments are also adding to the increased interest in new destinations. Nearshore locations such as Northern Ireland are reaping the new wave of UK companies looking to offshore, but not too far. President Obama’s administration firmly stressed the importance of keeping jobs on American soil. While this contributed to the election winning strategy, it would have sounded nails on a chalkboard to U.S. companies. As a ‘halfway house’ US businesses will be looking to countries such as Costa Rica, Philippines and Brazil to provide them with nearshore outsourcing services. These destinations give the appearance of being ‘homegrown’ whilst still offering the cost effective benefits.
BPO is certainly flourishing. The growth in this sector is increasing at a far rapid rate than that of ITO, however, it is not monopolised by the big players. It seems that all nations can conceivably compete for a piece of that BPO pie. That will surely mean that India’s market share will reduce, despite an increase in internal growth. However, we are not prophesising India’s demise. As Mr Simmonds says, “India is always on the offshoring agenda.” The prices Indian vendors offer and the size of their work force are still very competitive and cannot be ignored. We just feel that the Gartner predictions are simply over-zealous.”
This year’s Nasscom leadership conference had a whole host of major Indian players taking the stage and delivering exceptionally up-beat forecasts for the future. This is all well and good and I am sure there is not a person out there who does not understand the importance of keeping your chin up in front of shareholders and the public. However simply burying heads in sand and dancing around issues such as, protectionist policies and a drop in IT spending will not do anyone any good. But then neither will over optimistic forecasts.
