BPOs set to clock 40% growth in '06

Malaysia, Sri Lanka likely to give stiff competition, says report.

The Indian outsourcing industry is set grow at 40 per cent and see a significant rise in the number of acquisitions in 2006. According to NeoIT, the offshore Business Process Outsourcing (BPO) advisory firm, Malaysia and Sri Lanka are likely to give stiff competition to the Indian BPO industry over the next one year.

"Beneath the surface of an exciting growth rate of about 40 per cent year-on-year, 2006 will be a year of enormous activities impacting both mature and emerging markets with significant convergence, consolidation and re-alignment," NeoIT said in its annual report on the projections for the BPO industry for 2006.

The industry will also move away from cost arbitrage being the primary reason for outsourcing to leveraging the full potential of supply markets.

"The industry will witness the advent of 'services globalisation', where it will leverage the full capabilities of supply markets to source IT and other back office services," the report said.

The other trend that the industry will see is the enhancement of "services sourcing options"""the emergence of new supply locations.

"India is expected to maintain its supplier leadership role in the US market, but will be challenged in some areas by the increasing strength of the Philippines, Brazil, Mexico, Israel, Russia, China and other aspiring supply markets," the report said.

China will remain the most preferred sourcing location for Japanese clients, similar to what the Czech Republic, Poland and Hungary are for Western European clients. The extent of China's influence on the sourcing options for the US market would be lower than widespread market predictions, the report said.

Last year, the advisory firm's report had predicted that there will be a steady growth and emergence of new BPO supplier markets, with China, the Philippines and Central Europe, particularly Poland, Czech Republic and Hungary gaining strength.