ALTHOUGH the business process outsourcing (BPO) industry may benefit from the economic crisis as more companies seek to cut costs, the sector will nevertheless take a hit as it strives to bag new business contracts.
In a study released yesterday, titled "Contact center outsourcing trends in the Asia-Pacific Market, 2008-2011," research firm Frost & Sullivan said it projects the region’s contact center outsourcing market to grow 14% annually from 2008-2011. It estimated the market last year at $13.7 billion.
The study classified the region’s markets into emerging, growth and mature segments.
Emerging markets include Indonesia, Thailand and Vietnam; growth markets include India, the Philippines, Malaysia and China; while the mature markets are Australia, New Zealand, Japan, South Korea, Hong Kong, Taiwan and Singapore.
It noted that growth markets like the Philippines accounted for about 54% of total sales last year.
Clear preference also a risk
The US continues to be the leading source of offshore work in Asia and the Pacific, accounting for nearly 70% of the total.
The study noted US firms’ clear preference for Philippine-based outsourcing service providers, which could hurt growth in the Philippine market this year.
However, it added, while a slight slowdown is expected from the US "in the near term, the US will continue to be the top market for outsourcing players to target for growth opportunities."
"The restructuring of the American financial services industry and the accompanying economic downturn is sure to have far-reaching effects on off-shoring industry activity worldwide. As unemployment rates rise and industrial production declines, the first rumblings of a full-blown recession are already being felt across the industry," the paper read.
"Since there will be continued pressure on financial institutions to cut costs, it is likely that existing contracts will not be scaled back," the paper read.
"However, new deals will be few and far between."
Still, the study noted, "well-established destinations" India and the Philippines should be able to attract new contracts since they pose less of a risk when compared to emerging markets like Vietnam and Indonesia.
New contracts, however, can be expected to start trickling in only in the second half, the paper read.
The recession will also likely trigger consolidation among outsourcers, it added.
Rather than compete, some Indian and Philippine outsourcing firms, for instance, work together to offer a complete solution to foreign clients. "A typical arrangement would involve an outsourcer from the Philippines being responsible for voice services, while its India counterpart oversees data services," the study noted.
Business Processing Association of the Philippines (BPA/P)Chief Executive Officer Oscar R. Sañez, however, said business should remain strong because of the growing need of companies to cut cost in a time of crisis. "The business continues to be strong and we are still looking at 20%-30% growth revenue target for the industry this year," he said.
Mergers will likewise also be brought about as businesses seek better efficiency to cut cost. "Mergers are a global trend, more so in a fast growing industry like the BPO sector, where companies are looking for more ways to leverage their industry by reducing costs. It will be a normal part of the industry," Mr. Sañez said.
Last year, Aegis BPO, part of India’s $50-billion Essar Group conglomerate, bought California-based PeopleSupport, Inc, which has 7,000 seats in Makati and Cebu, in a $250-million deal. — J. B. F. Santos
No comments:
Post a Comment