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Raja Simhan T.E.

Players who have ventured into the ITES-BPO sector have a long-term vision and strategy in place, says Mr Karnik, President, Nasscom.

Chennai , Oct. 6

THE growth in both outsourcing contact centres and agent positions in India would begin to slowdown in 2005 following an "inevitable industry vendor shakeout".

It is due to oversupply and shrinking margins consequent from downward competitive pressures on pricing, says a recent report by the UK-based independent market analyst, Datamonitor. The report is titled `Indian contact centre outsourcing: Surviving the shakeout'.

The shakeout would be driven largely by consulting companies exiting the contact centre outsourcing market and spinning off their contact centre operations or turning over the management of their customer care offering to other third-party outsourcers.

In five years, the fragmented Indian outsourcing sector would be dominated by large Indian IT conglomerates, smaller Indian specialists and large multi-national companies (MNCs) using India as a base for business process outsourcing (BPO) practices, the report says.

Financial services (53 per cent), followed by technology (27 per cent) and retail (six per cent) are currently the top three industries that outsource traffic to Indian contact centres. In a few months, the Indian contact centre market dominated by third party outsourcers has seen the rush of western multinationals locating their own facilities in India. "Seeking to shorten their time to market, they have engaged in the poaching of agents from the local outsourcers, resulting in climbing attrition rates and agent salaries for outsourcers,'' the report says.

Mr Phaneesh Murthy, prime mentor of the US-based Primentor Inc, a consulting firm on outsourcing, says there is not much to disagree on the conclusions of the Datamonitor report.

"I still believe that the Indian contact centre industry is in its early stages and the growth rates will continue at least till 2007 — that is when the law of large numbers starts applying (growth rates as percentage come down). I expect pricing to be bearish over the next few years," he says.

According to Nasscom President, Mr Kirank Karnik, each of the report is based on a set of hypothesis and certain primary research. "It would not be judicious on our part to comment on a particular report without being fully aware of the assumptions on which it bases its analysis and projections.''

Unlike the dotcom industry, which attracted all kinds of people with or without specific business plans, the ITES-BPO sector demands huge investments in infrastructure and training as well as domain knowledge. Besides, the market share of the sector is well balanced with captive units contributing 58 per cent of the total ITES-BPO revenues and third party vendors 32 per cent.Thisexplains that players who have ventured into the ITES-BPO sector have a long-term vision and strategy in place, says Mr Karnik.

Mr Avinash Vashistha, Managing Director, neoIT, a Bangalore-based offshore consultancy firm, feels that the offshoring trend globally is just starting to take shape. "We do not see this (offshoring) as a hype — but a much well founded trend that is increasing and will continue its momentum". The next five years look good for India in IT applications, with increasing trend in certain towers of IT infrastructure, call centre and BPO.

The Philippines, Mexico, South America, Eastern Europe and China would benefit from increased BPO activity while India would dominate IT applications offshoring with the Philippines, China, Russia supporting the trend, he says.

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