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Industry Research : Outsourcing Growth Drops to Single Digit
The global outsourcing industry, including offshoring and onshoring, is estimated to reach $464 billion in 2011, a 9.2-percent increase from 2010’s $425 billion. The year 2010 has seen stronger growth at 13.9 percent from 2009’s $374 billion.
This is according to the 2011 year-end forecast report of Canadian-based ICT research and advisory provider, XMG Global as part of its mid-year review of the global outsourcing market.
The race to be the top offshoring destination continues in 2011 between China and India as providers seek other markets outside Europe and the US.
XMG Global said it estimates total revenue of the offshoring segment to amount to $144.8 billion.
India will capture 42.5 percent of the offshore market to reach $61.5 billion in revenues, while China will continue to lag India with revenues reaching $45.7 billion equivalent to 31.5 percent of the market, XMG said.
The Philippines will still hold the third spot with estimated revenue of $10.7 billion capturing 7.4 percent share, the analyst firm said.
According to XMG Global chief analyst Lauro Vives, "The US economy, which remains to be a large market for offshoring, is still on the road to recovery with a forecasted 2011 GDP growth rate of 2.6 percent, slowing down from last year’s 2.9 percent."
The report added that Indian and Philippine providers, which are highly dependent on the US market, feel the effects of the US dollar depreciation. China, with a strong East Asian client base like Korea and Japan, is less affected.
The 2011 earthquake that hit Japan has only temporarily halted outsourcing contracts, XMG said. The disaster may in fact open more opportunities as Japanese companies consider increasing offshoring contracts for non-core operations to reduce business risk, it added.
China also has a stronger hold in the domestic BPO market. In 2010, more than 75 percent of service outsourcing revenue is from the domestic market. Chinese companies are looking at outsourcing locally as an option to compete globally, XMG said.
Indian outsourcers are also starting to realize the importance of the growing domestic market. Indian service providers such as Tata, Infosys, Wipro and Satyam, which used to shun the domestic Indian market three to four years ago in favor of higher revenues from the US and UK, are now looking to diversify their client base.
The Philippines is likewise taking steps to gain more of the offshoring market share from non-English speaking countries. The Board of Investments announced in July 2011 that it would be teaming up with IBM Philippines to conduct research and implement programs to build the multi-lingual talent pool of the country for business process outsourcing.
Vives concluded, "Given the continued growth of competition and increasing demand from other countries besides the US and Europe, XMG Global expects a sustained displacement and redistribution of market share not only between India and China but in other emerging outsourcing destinations such as Brazil, Mexico and Malaysia."
Posted by Veronica Silva Cusi, news correspondent
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Published: Friday, July 8, 2011