Indian call centre outsourcing 'set for shakeout'

The Indian outsourcing boom is slowing, with an influx of cut-price competition shrinking margins, lowering bottom lines and raising concerns about an apparently inevitable shakeout.

Research firm Datamonitor claims it is now only a matter of time before the call centre market hits its first real patch of turbulence, driven by a 'price war', and the company believes the shakeout will claim a number of victims - especially smaller Indian outsourcers frozen out of the market by large multinationals.

A Datamonitor report entitled Indian Contact Centre Outsourcing: Surviving the Shakeout claims: "Within five years, the highly fragmented Indian outsourcing marketplace of today will be dominated by large Indian IT conglomerates, smaller Indian specialists and large Western multinational companies using India as a base for the business process outsourcing practices."

The multinational companies have moved in, to the detriment of smaller Indian outsourcing companies, as a result of heavy promotion of India as an outsourcing haven. Among the main benefits cited include the ready availability of well-educated English-speakers who are prepared to work for less money than their Western counterparts - typically wages are 80 per cent lower in India.

The message for those companies hoping to survive the shakeout would appear to be the old business cliché 'get big or get niche'.

Brian Huff, lead analyst of Datamonitor's call centre research program said: "Over the past year, [a number of Indian outsourcers] have been acquired by larger IT firms. Onshore outsourcers with an Indian presence or Indian vendors that are divisions of larger IT companies provide a greater sense of viability than standalone vendors without access to capital pools large enough to maintain survival during the Indian offshore outsourcing price wars.

"To effectively compete against multinational outsourcers, Indian outsourcers must establish a global operational presence. Those without the resources to expand their global reach must become vertical specialists."