India’s ITES/BPO Industry Turns to Domestic Market, New Geographies in Difficult Times

February 23, 2010

Although the U.S. market is still huge as far as outsourcing is concerned and Europe is an income generator for software outsourcing to India, the downturn in the global economy has made some waves in the domestic market and other new locations.

Examining the state of outsourcing, this is a crucial time for ITES/BPO sector because the U.S. is still the primary market for this industry, but this region is mired in an economic decline. Meanwhile, the Indian market is a relatively small part of the outsourcing market, and it is growing steadfastly.

One need only recollect that the Indian outsourcing sector has witnessed the fallout of overdependece on any single geography. When the subprime debacle took form in the U.S., stemming from the housing industry, the ITES/BPO sector began losing clients in the U.S. When the situation worsened into a recession, what followed worsened the revenue scene. Dealing with unstable exchange rates and contracts with price pressures and lower volumes, the industry learned to spread its risks.

It is no surprise that in this economic climate, outsourcing firms began to reach out to new geographies and to the domestic market. Incidentally, the domestic market is witnessing high demand in industries like banking, telecommunications, government, insurance and utilities.

IDC speculates that the Indian IT/ITES sector will go beyond $110 billion by 2013 – interestingly enough this figure is higher than the one for exports. Adding to that, the domestic BPO business has is growing at double digit rates, vendors in India have observed the tremendous opportunity and adjusted their business models to fit the current market scenario.

Sachdev Ramakrishna, Director – Marketing, Steria India told expresscomputeronline.com, “Amid extremely challenging global economic uncertainties that hit industries hard in the last two years, the Indian BPO sector showed resilience to maintain its commanding position as the world’s favorite outsourcing and offshoring destination. While the first quarters of 2009 saw the market bottom out, activities gained pace in the second half of the year as companies increasingly rationalized cost and global economies started to show signs of revival.”

According to Nasscom study, the Indian BPO sector’s growth and heightened maturity is revealed across several dimensions. In just ten years, the sectory has capped almost $11 billion in export revenue, accounting for more than 35% of total business, and provides jobs for more than 700,000 workers.

However, there is a slight decrease in the cost advantage of conducting business in India. This is defrayed by a reliable business environment, and a better talent pool. Apart from that, India maintains a high level of vendor maturity and infrastructure. This might not be easily available in emerging markets. In addition, technical support, strong process engineering, and back-office outsourcing capacity are strengths for India that may be missing in other geographies.

VP Convergys, Sukant Srivastava, said in a comment, “Diversification, flexibility and a keen focus on operational efficiencies, continued innovation and quality have been the key to India’s continued success, even during difficult times. There should be no doubt that the BPO industry in India employs men and women with the skills, talent and business acumen to continue to grow this vibrant business segment,” reports expresscomputeronline.com

Jacob Cherian writes for SourcingLine, a leading provider of directories on top software companies and ecommerce development firms.


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