The Telegraph
Since 1st March, 1999
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Gartner warning on BPO cakewalk

Mumbai, July 15: Technology titans at home could find the outsourcing trail abroad cooling as companies from other low-cost countries elbow in for a slice of the pie.

What had been a bastion for Indian software stars is now turning into a twilight zone where players from Canada, Ireland, the Philippines, Eastern Europe and China fight for every order that comes from US corporations. The warning is part of a Gartner survey that says India’s technology sector will continue to grow at a fast clip, though the race for BPO assignments will be tighter.

The report says the annual growth rate will be 68 per cent for business process outsourcing (BPO) firms, from 2002 to 2007. That includes accounting services such as processing insurance claims and payroll management.

The more skill-oriented services — maintaining computer networks and automating processes — will clock 29 per cent. The size of the global BPO market by 2007 will be $ 173 billion, of which $ 24.23 billion will be farmed out to offshore contractors. Of this, Gartner says India has the potential to romp home with $ 13.8 billion.

In a tough market, many American companies have seen the benefits of pruning overheads by outsourcing activities to firms in developing nations like India. “The significant cost savings typically associated with global sourcing and continuing economic malaise in the US, has created extraordinary interest among enterprises for cross-border services,” Bob Hayward, senior vice-president of Gartner APAC, said.

For Indian firms, the cost per hour for an employee is around $ 18-20 an hour compared with $ 100-120 per hour that US firms charge for the same services.

That edge is under threat of being blunted in the months ahead, when Indian companies sitting pretty face stiff competition from Canada, Ireland, Philippines, Eastern Europe China, Russia, South Africa, West Asia, South America and Western Europe.

Rita Terdiman, research director at Gartner, said in the past six months new service vendors from these countries had snapped up BPO orders, which until recently were almost exclusively going to Indian firms.

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