Recession proves good for Indian outsourcing firms

In a year when outsourcing of application development and maintenance projects has slowed down, top customers such as Bank of America, JPMorgan and Citibank continue to send more back office projects to India, as they seek to lower their cost of operations by up to 40%.

According to Nasscom, India’s back office outsourcing industry will grow at 18.4% this year to reach $14.8 billion. Outsourcing of IT services will clock a lower growth at around 13.5% this year, and could even decline to single digit growth if the situation does not improve.

“The Indian BPO industry is likely to maintain double digit growth rate as most of the work done by them is ‘keeping the lights on’ or non-discretionary ,” said Everest Group principal & country head Gaurav Gupta.

The current recession is forcing companies from other verticals such as media, entertainment, healthcare, energy and utilities to consider outsourcing of back office work.

“BPO business is largely annuity in nature where the contracts are for a longer term making it slightly more immune from economic recession,” said Intelenet EVP Sandeep Aggarwal says. “A CFO is constantly looking at gaining control on the cost structure,” said Gartner senior research analyst Arup Roy.

According to a Gartner study released in April, 2009, Indian BPO providers have proved to be stiff competition to western BPO providers, accounting for 5% of market revenue generated among the top 150 providers in 2008.

Gartner expects this increase in revenue to be maintained, with the BPO market share of Indian vendors expected to nearly double by 2010.Meanwhile, Infosys BPO CEO Amitabh Chaudhry said that the BPO growth story is primarily driven by captive outsourcing.

Captives have not stopped outsourcing, they have in fact increased their pie,” he said.
Source: EconomicTimes