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Industry Research : Strong Peso to Boost Desi Non-voice Business
While it emerged as the largest call centre destination in 2011 surpassing India, the Philippines' strengthening currency is likely to hit BPO businesses there. The Philippine peso, which appreciated 6.5% in calendar year 2012, could make business in the country at least 30% more expensive than in India.
Industry observers in India believe that while it may not lead to many changes in the voice outsourcing space, it opens up a window for increased competitiveness of India-based outsourcing operations in higher value outsourcing segments.
"The Philippines started emerging because of a combination of factors - cost, skillset , time zone, alternative destination to India - and many of these factors continue to remain true even today. Cost is only one of the factors and companies won't start switching overnight. The currency fluctuation won't impact voice much but higher up the value chain, where transaction costs are significant, the effect will be much more. This may prove advantageous to India-based operations," said Sanjay Dhawan , technology practice leader at PwC. "Switching from one country to another is very costly but this is likely to affect the newer contract negotiations , some of which may consider moving a part of work to India."
Some Indian firms with operations in the Philippines are looking to spread the work more among their various global centres . Adi Saravanan, president of Allsec Technologies, said that companies, including his, today spread work across various centres and such fluctuations may mean that more work is done out of India centres for some clients. Allsec has centres in Trichy, Bangalore, Chennai, Bedford in US and Manila in Philippines. "Currency appreciation is definitely going to hit profits. Companies will take that into account while going for newer contracts," said Saravanan.
"American firms clearly prefer the Philippines when it comes to voice but there is a small window of opportunity for India in other areas of higher value outsourcing if the peso continues to strengthen," said Milan Sheth, partner and leader of technology practice at Ernst and Young. The Economic Survey of India, released last week, also pointed out that the Philippines is facing a challenge due to appreciating currency. Between 2005 and 2011, the annual average growth of computer services industry in the Philippines was 69%. At the same time, India has lost about 10% market share to the rest of the world, mostly in the voice segment. About 80% of the outsourcing industry in the Philippines comprises of voice-based work.
However, many see this trend as significant for Indian firms only if it persists for a longer period. "Most companies take a 10-year view when setting up operations in any country and currency fluctuations are unlikely to change that immediately," said Kumar Parakala, partner at KPMG.
Posted by Veronica Silva Cusi, news correspondent
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Published: Wednesday, February 27, 2013