Challenges to India’s supremacy

There are three major potential challenges to Indian outsourcing predominance:

Firstly, the leader will always be challenged for market share and there are regular reports of new emerging princes competing for India’s crown in the outsourcing market. There are countless countries that are vying to oust India from its throne. Chief among the contenders are the Philippines and China. Muscling in on the rightshoring argument for the UK are the Central European countries of Czech Republic, Poland, Romania and Hungary, which all have burgeoning outsourcing industries, offering a nearshoring alternative to offshoring.

Having established their precedence and expertise in the global outsourcing market, servicing the UK and US economies, Indian outsourcers will use their prime position to consolidate their position. Indian outsourcers have carved out their position delivering what newcomers to outsourcing have not yet been able to do. Indian BPO providers have moved beyond the simple cost saving argument to justify outsourcing and deliver far higher value to their clients.

Companies that have outsourced to India are benefiting from the next generation of outsourced solutions, with improvements in productivity, efficiency and end user customer satisfaction. Indian BPOs have adopted continuous process improvement tools such as Six Sigma, COPC and Kaizen methodologies to deliver process efficiencies. These methodologies are not exclusive to India, but Indian outsourcers have adopted them enthusiastically and it is this leading edge that will maintain Indian companies’ predominance in outsourcing, even if India’s geographical market share is gradually eroded.

Equipped with these high standards, Indian BPO companies are expanding their geographical domain and setting up global subsidiaries and delivery centres across the world, taking advantage of the benefits of other countries’ labour arbitrage, pool of educated English speakers and lower attrition rates, in the same way that UK and US companies originally came to India for outsourcing. All of the leading Indian outsourcing companies have established delivery centres worldwide, either by acquisition or by investing in the chosen countries, to offer the rightshoring model to their client base.

Reliance on established markets

Secondly, India must beware of too much reliance on the established western economies, which as has been pointed out earlier, are significantly declining in comparison to the emerging markets. The USA and UK are the two leaders in adoption of outsourcing but if India is continue its economic triumph, it needs to look beyond its traditional overseas markets. Weaknesses and uncertainties in these established economies could lead to a decline in consumer spending power with a consequent downturn in the demand for customer services, one of the cornerstones of the BPO sector.

For the medium term, the USA and UK will remain the principal outsourcing countries, but with increasing competition for these markets, India would do well to cast its net wider for new business. Continental Europe has been slow to seize the economic benefits of outsourcing. More rigid labour laws have been a major obstacle to European companies outsourcing and there also seems to be a cultural resistance to moving work overseas, even if it is non-core to the principal business. India, with its large English speaking population, has a more natural affinity with the US and UK and for similar reasons of language and heritage, Morocco seems the natural location for French outsourcing. However, India may not be overlooked by any French companies considering taking the BPO route. There is a significant French speaking population in the former French colony of Pondicherry, so India could take advantage of the predicted upsurge in outsourcing from France.

Despite the stagnating growth in developed economies, most analysts and economists agree that outsourcing offers benefits for western businesses, allowing them to save costs and improve productivity as well as focus on core activities.

Most analysts put outsourcing into the context of inevitable globalisation and focus on the wealth creating benefits for the UK and US economies. Estimates are that for every £100 invested in India by UK companies, they receive back £141 and figures are similar for the US, with McKinsey’s estimates indicating that for every $1 invested in India, the US receives back $1.12 - $1.14.

A major opportunity for Indian BPO expansion lies on its own doorstep, with the expansion of the Indian domestic market. With the expanding middle class demanding consumer goods and financial services products, the Indian service sector is starting to follow the example of the developed economies. In 2006 alone, the domestic Indian BPO market is predicted to have grown by 60% to US $93.5 million. Most of this is phonebased customer enquiries and outbound sales. By 2009, India is expected to have nearly 100,000 contact centre workers, serving the domestic market, according to Datamonitor.

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