The latest study suggests that Indian offshoring is facing rapid growth globally. The trend in the Information Technology field is changing and now IT companies are shifting more towards overseas service providers. The study also suggests that IT companies globally are now seeking more help from Offshore Outsourcing Service providers.

In Information Technology, as far as overseas development services are concerned, countries like India, China, Russia, Philippines and many others are in demand. But among this list India is the leader for IT services, while China is on the second spot. Countries like Russia, Philippines and others are relatively growing and are new players for such overseas IT services.

India is now the ‘Center of Attraction’ globally for almost all types of IT services. Along with these IT services now India is in demand for call-centers, BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing) services.

Indian ITES players should feel happy as reports suggest that the US economic slowdown will increase demand for global services in 2008. But on the down side, the presidential elections next year could delay contract signing. This was revealed by NeoIT, the global management consulting firm in their latest report tracking the service trends for 2008.

It predicts the dollar will continue to weaken. So clients should expect to take more aggressive action that will include renegotiation or modification of contracts. Also, the US presidential election will lead to large companies to avoid announcing substantial agreements or employee reduction in 2008, to avoid any potential risk or negative publicity. This could lead to a backlog of unsigned agreements.

Moreover, the green outsourcing movement is expected to pick up momentum next year and move beyond its earlier hype. Service providers will take concrete steps to introduce environmental business practices and reduce their carbon footprint.

Global clients will turn to new countries as inflation and employee turnover in Indian cities like Bangalore and Pune will frustrate them. Talent shortage will push them to Tier-II within India, as well as Latin America, Eastern Europe and Asia. Markets, such as Canada, Brazil, Chile, Costa Rica and Mexico, will be among the new hot spots in providing sourcing solutions.

However, the study also predicts that moving operations to smaller cities will complicate matters for the clients.

The growing competition of global services will motivate vendors to strongly differentiate themselves. Vendors will focus on re-engineering their client processes and emphasising their ability to deliver tangible results.

The report suggests that software and IT will remain the strongest segment, but engineering will outpace BPO to become the second largest segment. Meanwhile, finance and accounting market will reach critical mass as processes and pricing become more standardised.

The Indian economy is on the upswing and mostly consumer-led. With companies across sectors like retail, real estate, telecom and BFSI going after the same customer, there is one factor which could help them beat competition — better and faster customer service. Here’s where BPOs come in.

This need has put the local Indian BPO industry on the fast track. According to Nasscom data, the domestic BPO market was estimated at Rs 6,600 crore in 2006 and is expected to grow to Rs 30,000 crore in 2011. The segment is growing at about 40% CAGR.

Says Firstsource Domestic Business head Sanjeev Sinha, “We see a lot of leading Indian brands wanting to differentiate themselves based on customer service – both back-office and front end services. They are now willing to invest in quality customer care and are eager to adopt global best practises. We expect companies to partner with BPO players to ensure scalability and consistent service delivery.”

Stating that the potential of domestic BPO work continues to attract new players to partake in the economic growth and fulfill the huge demand, HTMT Global Solutions (HGSL) National Operations & International Business Development senior vice-president BN Narasimha Murthy adds, that “some of the key verticals that are experiencing huge growth include telecom, BFSI, retail, airlines & travel.”

The in-demand backoffice services include sales of credit cards, managing service centres and call centres and processing payrolls. Some of the companies who have outsourced work locally include Bharti Airtel, HP, Dish TV, Barclays and State Bank of India.

This segment is also where the mid-sized firms like HTMT, Firstsource and Infovision are outracing their more well-known peers like Wipro BPO. They already account for a majority of the domestic BPO revenues though some largely-export-oriented players have now started to look at the Indian market to ward off the rupee impact.

This group of companies also employ staff of between 3,000 and 9,000 people each focused on domestic clients. This figure is expected to grow rapidly in next two-three years.