Business looks forward to Indian summer

India alone will soak up more than half the world's offshore business outsourcing revenue this year, according to IT analyst firm Gartner. Business tasks sent out to India from US and other firms include running call centres for banks and credit card companies, technical support desks and back-office transaction processing.

Recently Microsoft said it is relocating its customer support sites in Texas and North Carolina to India. The two centres provide tech support by email and phone, and employ about 800 workers each.

India's revenue from BPO (business process outsourcing) will grow from slightly under $1bn (£610m) in 2002 to $1.2bn in 2003 and will represent 66 per cent of the offshore BPO market. Business process outsourcing has become increasingly attractive in the last few years with the falling cost of voice and data networks between countries.

However, offshore BPO represents only 1.5 per cent of the total BPO market, pointing to a lot of headroom still available to Indian companies for growth. But to get the lucrative jobs, Indian companies have to improve the skills needed to take on higher-value business processes, said Sujay Chohan, research vice president for Gartner.

"Most of today's offshore BPO opportunity remains at the level of out-tasking a component of a business process, rather than outsourcing an entire business process, and is mostly relegated to contact centres and back-office transaction processing," he said.

Gartner also said that while India dominates in offshore BPO at the moment, other English-speaking countries with low labour costs were poised to pose competition. South Africa and the Philippines have been cited in other reports as posing stiff competition for India.

While offshore BPO is growing, it represents a tiny proportion of all BPO contracts. A Gartner telephone survey in April 2003 with 250 US clients of BPO showed that only 1 per cent are going offshore, with 19 per cent considering offshore sites within the next two years.

Globally, offshore BPO is expected to reach $1.8bn in 2003, a 38 per cent increase from the 2002 total of $1.3bn.

"Organisations have been cautious in their adoption of offshore BPO services, so growth in offshore delivery is expected to be continuous but moderate, compared with the excessive hype around the concept last year," said Rebecca Scholl, principal analyst for Gartner's sourcing group.

John Lui writes for CNet Asia