The local outsourcing industry worlwide is celebrating the recent initiative by the US Senate to reject the anti-outsourcing bill. Continued growth is expected, though at a marginally lower rate than the previous year. Revenue increased 13.9 percent to $425 billion, as compared to last year’s figures, which showed a 14.4 percent increase from the previous year, to a total of $373 billion. Growth has been tempered by global economic issues, and the American bill highlighted two concerns for the industry.
The industry needs to be viewed in a positive light (or, at very least, to not be viewed negatively) by the US The defeat of this bill has, for the most part, takes care of that first concern. Looking at American political shape-shifting, it would be best to view this development as a, “for now” solution; meaning the ebb and flow of political will, seems very much a direct factor of which political party is in power. The long-term impact, of this new political dynamic, remains to be seen; but for now, it would suggest a change in US political control and preferences could affect industry growth, every bit as much as recent floods in Manila affected the industry, and its perception in its ability to deliver.
A tangible example of this dynamic is reflected in the growth of China’s share of the global market. Current year growth for China showed the largest growth share, compared to the next two largest players (India and the Philippines). This reflects how political instability in the US has a smaller impact on China, which has actively sought out customers in the Asian market. Industry volume for India and the Philippines has historically focused on gaining share of US outsourcing.
The second concern addresses where the respective players fit into the recipient list of that global outsourcing. For example, the top beneficiaries of outsourcing include: The BRIC (Brazil, Russia, India and China) Countries, Indonesia, and the Philippines; however the lion’s share is clearly dominated by India remaining the pre-eminent power. XMG Global forecasts the Philippine industry to grow from US$11B to US$12.7B in revenues from 2011 to 2012, respectively. The top rung still belongs to India growing from US$59B in 2011 to US$63.2B in 2012. A close-second is China with revenues of US$45.7B in 2011 to US$53.8B in 2012.
To put that in perspective, the last three years (2010 to 2012 projections) have seen growth, in the Philippines, of 25.4%, 23.6%, and 15.7%, respectively (comparing annual change in revenue). This same period saw growth by the other two primary players. India showed 13.2%, 8.6%, and 7.1 percent during that same period; while China’s numbers were, 43.5%, 63.6%, and 33.0%. These numbers, collectively show a gradual chipping away of India’s stronger historical dominance; though time will tell if it will be significant.
At this point, China and the Philippines are each showing “real growth”, in terms of total market share, as compared to India’s current dominant position. In billions of dollars, India’s last three-year growth cycle was, 54.33, 59.0, and 63.2. China’s market share was 35.76, 45.7, and 53.8. In 2010, India’s revenues were $18.6 billion more than China, but by 2012 the difference was down to $9.4; a significant reduction. The Philippines modest contribution rose from $8.9 to 12.7 billion; a not-so-insignificant 43 percent increase in revenue. That is only slightly lower than China’s 50 percent revenue increase. This trend suggests new opportunities for other players to gain market share as well since the growth of the offshoring outsourcing industry will remain relentless.
The offshoring outsourcing market is positioned to continue to thrive and grow, but the relative positions, of the respective players, is changing. If current trends continue, China is on target to overtake India as the dominant BPO player, potentially within the next two to three years. This shifting paradigm would also indicate room for new players aside from market leader India to gain a share of an industry which continues to show growth potential.
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