Gartner: India's BPO market likely to lose market share

India is likely to lose market share in offshore business process outsourcing, from its current 80% to about 55% by 2007, according to research firm Gartner.

"We don't expect any single country to challenge India," said Sujoy Chohan, vice president and research director for offshore BPO at Gartner. Instead, India's share will be whittled by a number of countries, which together will account for a 45% share of the offshore BPO market by 2007.

The BPO business requires English-speaking employees with a basic education - available in abundance in most countries where English is spoken, Chohan said. India will lose business to some of these countries as it does not have a long-term plan for improving infrastructure and increasing the supply of quality employees for the BPO industry, he added.

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India is likely to lose market share in offshore business process outsourcing, from its current 80% to about 55% by 2007, according to research firm Gartner.

"We don't expect any single country to challenge India," said Sujoy Chohan, vice president and research director for offshore BPO at Gartner. Instead, India's share will be whittled by a number of countries, which together will account for a 45% share of the offshore BPO market by 2007.

The BPO business requires English-speaking employees with a basic education - available in abundance in most countries where English is spoken, Chohan said. India will lose business to some of these countries as it does not have a long-term plan for improving infrastructure and increasing the supply of quality employees for the BPO industry, he added.

India earned about US$2.3 billion from BPO services last year, according to Gartner. By 2007, the worldwide offshored BPO market is forecast to grow to about $27 billion, Chohan said. Gartner's estimates refer to work outsourced to offshore third-party providers, and do not include work sent offshore by U.S. and European multinational companies to their wholly owned BPO subsidiaries.

A number of countries understand BPO's potential to create jobs and have put together integrated strategies to develop BPO business, Chohan said. These include Ghana, South Africa, Mauritius, Fiji, Malaysia, the Philippines, Australia, New Zealand and China.

"Even developed countries like Australia and New Zealand, which did not react to the IT services opportunity, are now coming up with integrated road maps for BPO," Chohan said.

China is also likely to cut into India's share of the BPO market when its BPO business goes on stream in about three to five years, according to Chohan. "China is still a long way (off) where English-speaking capability is concerned, and they won't compete with India where voice calls are concerned," Chohan said. "But they will chip away at the low-end of the market," including transaction processing work such as rules and form-based processing.

In contrast to countries with well-defined road maps for developing BPO, India does not have a clear strategy, Chohan said. India's poor infrastructure adds to the cost of doing business there, Chohan said, adding that in India BPO companies require a lot of redundancies such as backup facilities for power and telecommunications services.

India also does not have a formal long-term plan for creating a quality BPO work force. "In just three years of BPO (in India) there is already a huge staff attrition problem," Chohan said.

Most English-speaking graduates in India have to be trained before they can be employed by BPO companies. "Government should either reimburse companies for the cost of training, or put into place the training courses required either through the private sector or through primary, secondary and tertiary education in the country," Chohan said. Although countries like the Philippines have similar problems, the governments in these countries are being proactive.

The IDG News Service is a Network World affiliate.