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In the last five years India has lost about 10% market share to the rest of the world in the business process outsourcing (also known as BPM) space, most of which is in the voice contract segment.
In the BPO sector, countries such as the Philippines, Malaysia and China in the Asian continent; Egypt and Morocco in North Africa; Brazil, Mexico, Chile and Columbia in Latin America; and Poland and Ireland in Europe are emerging as attractive destinations for voice contracts, posing a significant threat to Indian firms.
“Though the Philippines, the second largest destination for outsourcing, is currently facing the challenge of appreciating currency, it is a serious competitor having developed both the hardware and software segments of IT,” said the survey.
It also mentions that though China faces challenges, such as language proficiency, the country is spending large amounts in mission mode to increase English proficiency, and “thus may eventually emerge as a threat to India.”
The global slowdown has impacted the revenues of the IT-BPM sector, the growth of which decelerated from 15% in 2011-12 to an estimated 8.4% reaching $ 95.2 billion in 2012-13 as per Nasscom.
The deceleration in growth of the dominant export sector (80% share) was from 16.5% in 2011-12 to 10.2% in 2012-13. In Indian rupee terms domestic revenues have grown at 14.1% in 2012-13 compared to 16.6% in 2011-12. Nasscom estimate of growth for 2013-14 are 13-15% for total IT-BPM revenue, 12-14% for exports and 13-15% for domestic sector.
As a proportion of national GDP, IT and BPM sector revenues have grown from 1.2% in 1997-98 to an estimated nearly 8% in 2012-13.
While the global slowdown, increasing competition from new countries, and rising protectionist measures in the wake of job losses in developed countries have slightly dimmed the prospects for exports of IT and ITeS services, a great opportunity is waiting in India’s domestic market with increasing technology adoption within the government sector and the small and medium business (SMB) sector.
In such a situation, the Economic Survey, believes that Indian BPO industry needs to gear up to address the challenges. Information campaigns to dispel the myths and fears about outsourcing needs to be undertaken by the industry in the developed economies.
India should also move up the value chain in software services. Equally important is the need to focus on the large domestic sector where there is a huge opportunity which, if tapped could also lead to lower costs due to scale economies. To address the rising wages in the urban BPO space, there is a need to move more towards rural areas, for which skill development, and English language training with American and different European accents is necessary.
