The future of Indian business process outsourcing or BPO, which registered a loss of growth momentum from 29% in the second quarter of 2008, to 17% in 2009, is uncertain with most experts predicting a drop to single-digit growth by the fiscal year of 2010. India is widely regarded as the largest and fastest growing BPO service provider in Asia and has dominated global outsourcing markets for over a decade. The Indian BPO industry generates $12.4 billion in total revenue and employs more than 3 million people in various outsourcing services; however, rising wages, rates of attrition, and a shortage of English proficient skilled workers, has led to the gradual decline of many voice-related tasks in Indian BPO. This, in turn, has opened doors of opportunity for countries, particularly the Philippines, allowing them to tap into the global BPO market.
According to Gregory Kittelson of Manila-based Consulting Firm Kittelson & Carpo Consulting, “Clients are now looking to the Philippines for more cost-efficient BPO services, and as this demand continues to grow, the Philippine BPO sector will surely reap the benefits. We have already registered and assisted a number of India/American-based BPOs and call centers, such as Omiglobe, Compvue and more that have relocated operations to the Manila.”
The Philippines is regarded as an ideal outsourcing destination, for several reasons. The country boasts a large pool of English proficient workers, an advantage for call centers setting up operations in the area. Philippine-based BPOs and outsourcing companies also enjoy various government-issued tax incentives and exemptions, and start-up costs for businesses are much lower than in India. It’s close proximity to top outsourcing clients like the United States, also make the Philippines an ideal location for setting up BPO companies. To date, the Philippines employs 557,000 skilled workers in the BPO sector, registering a total growth revenue of nearly $7 billion.
Moreover, the Philippines is set to overtake India in the sale of telephone-based customer services late this year, notching up revenues of $5.7 billion, compared to India’s expected income of $5.58 billion. While India continues to dominate the global BPO industry, with annual revenues of up to $12.4 billion, the Philippines is growing on an unprecedented scale, and revenues are expected to increase to $9.5 billion this year, registering a 28 percent growth from the second quarter of 2009.
Although India still dominates over 50% of the global BPO market, prospects are diminishing for the future of the country’s BPO industry. A shortage of skilled, English-proficient graduates, rising wages and attrition, increasing infrastructure and overhead costs, are all glaring problems in the Indian BPO sector. Whether viable solutions will be found, to address these problems, remains to be seen. Tough times lie ahead for the Indian BPO industry which will need to address these issues to sustain itself.