Business Process Outsourcing sector is expected to see a consolidation wave in the coming months

With fast changing industry dynamics, the country's Business Process Outsourcing sector is expected to see a consolidation wave in the coming months."A consolidation wave in Business Process Outsourcing sector is likely (in the coming months). Since it is challenging to cope with changing dynamics, some existing entities may move to different lines of business.

The $12 billion Indian BPO industry is facing stiff competition from countries like the Philippines and the top 10 players account for about 75 per cent of the total market.Besides, in recent years, as part of their competitive strategies, many domestic BPO players have been looking at broadening their service portfolios.

"BPO providers are aiming to differentiate services via broadening their service portfolios to provide end-to-end services, such as, source-to-pay, and through investments in technology for point solutions automation and business process utility services.Roy noted that process management segment, which is expected to be worth over a billion-dollar in coming years, offers good business opportunities for domestic BPO entities.

"Process management is expected to see high growth. This segment will provide new revenue streams as well as cross-selling opportunities for many players.
According to him, process management segment is expected to be worth about $1.7 billion by 2014 whereas this market was pegged at around $600 million in 2009.

China catching up india in outsourcing

India is still the world's favourite destination for offshore outsourcing, but attractive cost structures in the Philippines, Vietnam and Indonesia and the rapid growth of the business in China are posing tough competition.

In the study, the IT research and advisory firm identified the Top 30 countries around the world for globally outsourced activities in 2010-11, rating them on the basis of 10 criteria.Many organisations that choose to move IT services to lower-cost countries are daunted by the task of determining which country, or countries, would best suit their requirement. Gartner conducted an analysis of these countries to assess their capabilities and potential as offshore services locations.

India retained its position as the most successful country among global offshore locations. It scored well across all 10 criteria. While its cost-competitiveness is being challenged due to the rising rupee, this is compensated by its strength in other areas."Clients continue to seek a portfolio of offshore countries and with India again experiencing increasing labour costs and attrition, this is creating opportunities for other offshore locations to target the services needs of more-mature Asian clients.China improved its scores for "political and economic environment" from "good" to "very good", and "culture compatibility" from "fair" to "good".Contributing to the increased rating for China is its rising global political and economic leverage, especially in the wake of the recent global economic crisis.China experienced a steady positive growth rate, spurred by a USD 583.9 billion stimulus package, in 2009. The Shanghai 2010 World Expo has helped increase cultural awareness within China, which has helped the growth of the business in the country.foreign companies being attracted to the Philippine's young, experienced labour pool specialising in contact centres and finance and accounting (F&A) business process outsourcing (BPO), complemented by its good language and cultural compatibility with western economies.

Hewlett-Packard To Set Up 3 Outsourcing Centers In India

Hewlett-Packard Co. Tuesday said it will set up three outsourcing centers in India to support rising demand for low-cost services from clients around the world.The expansion is part of a $1 billion that the company announced earlier this year to transform and grow its enterprise services business, it added.
It didn't immediately give details of its other centers.
The company is seeking to grow its presence in low-cost centers such as India in an effort to fight competitors such as International Business Machines Corp., Accenture PLC and Dell Inc.H-P's new centers, to be located in the southern Indian cities of Bangalore and Chennai, are likely to add close to 500,000 square feet of real estate, the company said.The company said also that it will hire additional employees.
"India offers a complete range of capabilities in applications, infrastructure technology and business process outsourcing for global and domestic clients," the company said.
Companies such as H-P, IBM and Dell have been increasing their staff count in India to benefit from a large pool of English-speaking computer engineers and support staff. Also, Indian companies are seeking outsourcing vendors as they seek to expand in the domestic and global market.
Demand for outsourcing services in India has seen a better-than-expected revival after 2008's recession-driven cutback in technology and outsourcing spending.
In November, India's software services trade body said it estimates export revenue to grow at the higher end of 13%-15% in the current fiscal year through March 2011, backed by a robust rise in software exports in the first six months of the year.Most Indian companies follow a fiscal year ending March 31."Clients leveraging skilled resources in India for their enterprise expect high-value services in addition to lower costs," said Robb Rasmussen, vice president and general manager at H-P.H-P will service clients together with Indian outsourcing company MphasiS Ltd., of which H-P owns a majority stake.MphasiS gets about 70% of its total revenue from H-P and its customers.IBM is the second-largest private-sector employer in India after Indian outsourcing major Tata Consultancy, a newspaper reported in August, citing sources it didn't identify.

Philippines overtakes India as call centre outsourcing

The Philippines has become the call centre capital of the world, overtaking India as the number one player in the global business outsourcing market, according to industry data and the government. President Benigno Aquino has led celebrations in recent weeks as it has become increasingly clear that the Southeast Asian nation has become the world's dominant player in the outsourced back-office operations industry.

"In the past decade, the (growth in the) industry in the country has been nothing short of exceptional. From a virtual non-entity in 2001, your sector has earned sunshine industry status," Aquino said.At an opening of an IBM outsourcing centre in Manila last week, Aquino forecast that the industry's revenues would hit 12-13 billion dollars next year, rising to 100 billion dollars by 2020 for a fifth of global market share.A report from IBM released in October said the Philippines had this year passed India as the global leader in business process outsourcing in terms of the number of people each country employed in the sector.The IBM report did not present exact figures on how many people each country employed in the outsourcing industry.

But the head of the government's information technology commission, Ivan Uy, said the Philippines had definitely bypassed India in call centre revenues with 5.5 billion dollars last year compared with India's 5.3 billion dollars.The president of the Contact Center Association of the Philippines, Benedict Hernandez, also said the Philippines had more than half a million people working in call centres and related services compared with 330,000 in India.
Hernandez said the Philippines, a former US colony, had an advantage due to its workforce being made up of English speakers who had accents and a culture that is closer to those of many Western callers."The market over the years has generated a preference for the Philippines, especially the US market. There is more cultural affinity and the language is more attuned to the US," Hernandez told AFP.Uy said even Indian companies were setting up call centres in the Philippines to take advantage of the Filipinos' cultural links to the West."Many of these Indian companies do outsourcing work for US companies and their US clients say they prefer doing business with Filipinos so rather than lose those clients, they to move to the Philippines,"Tata Consultancy Services, one of the Indian giants in the industry, announced Monday it had launched a business process outsourcing operation in Manila, its first in Southeast Asia.
While business process outsourcing has been dominated by call centres -- where hundreds of workers handle phone calls from customers abroad -- the sector now covers a wide area of services.These include logistics, finance, accounting and software research and programming, computer-aided design, animation and graphic design.

outsourcing for cutting costs and optimizing resources

Outsourcing has become one of the most preferred means of achieving operational excellence across industries and the preferred destinations for outsourcing have been China and India. While China has been conventionally considered the hub for manufacturing, India has traditionally attracted most of the services outsourcing projects. The information technology (IT) industry has been one of the foremost industries to adopt outsourcing as a means of cutting costs and optimizing resources.

China, India, and the united states also been the main destinations of global foreign direct investment (FDI) in Information and Communication Technologies (ICT), accounting for more than 50 percent of the overall investment. However, the profile of these investments varies across these countries. While India is preferred for research and development (R&D) and IT-enabled services, IT services projects are concentrated in the United States and China is considered the hub for ICT manufacturing.

Whereas India and the United States are yet to succeed in attracting ICT manufacturing investments, China has been successfully garnering investments in the IT services projects as well as for R&D. This is mainly due to the well-educated and cheap labor force in China. The high influx of foreign investors into China has ensured the high demand for ICT products and services in the country.

Global IT outsourcing was estimated to be around $39.6 billion in 2004 India’s share amounting to nearly $17.2 billion while China garnered nearly $1.9 billion of the outsourcing revenues.

Chart 1 indicates the share of IT outsourcing revenues by region in the year 2004.

The Chinese Government and the IT service providers are working at various levels to compete with the dominant Indian participants in the global IT outsourcing market. India with its 44.0 percent share of IT outsourcing projects is considerably ahead of China in the global outsourcing market but this gap in revenues is estimated to reduce soon as China leverages on its advantages.