The global IT-BPM outsourcing market has expanded rapidly from the year 1990, with India emerging as the largest exporter among developing economies. However, others such as the Philippines, People’s Republic of China (PRC), Mexico and Eastern European nations have caught up with the time as India’s share of international offshoring declined from 67% in 2004 to 56% in 2015 (source: NASSCOM). In the Asian region, India, Malaysia, Philippines, People’s Republic of China (PRC) and Singapore are the major exporters of IT-BPO services. The availability of skilled labour and low-cost business environment are the key factors that contribute to the growth of IT-BPO exports from developing countries such as India and Philippines.
The key to India’s success in the IT-BPO offshoring industry was its timely development of technical, managerial and entrepreneurial genius. Additionally, the English language fluency, multi-cultural adaptability, low cost of labour, digitisation and better governmental support gave the nation a definitive edge over other countries. Furthermore, domestic IT-BPO industry has started to perform well and contributed approximately 30% of the total industry revenue in 2015.
Philippines is the second largest exporter of the IT-BPO services. The BPO exports grew by ~46% from 2004 to 2008 and 18 to 30% between 2008 to 2012 (source: BPAP), on the other hand, its IT exports were relatively modest (less than 5% of the BPO exports). The main difference between India and Philippines was the growth in talent and intellectual property, while Indian companies evolved to provide greater value addition through packaged software products and niche IT skills. On the contrary, Philippines focused more on BPO (given the cost advantage over India), presently the country is a major hub of captive offshoring for various multinational firms.
Apart from these two nations, the third one, Malaysia was initially successful in the electronics industry (in 1980s-90s) and developed the support services export industry. However, this lead was lost specially in IT-BPO services, due to higher costs.
China is quite different in structure as compared to the other Asian economies. Although, the country has a much bigger IT-BPO market than India, but most of it caters to domestic customers. China’s IT-BPO exports are primarily to East-Asian nations such as Japan and South Korea. The country has intended to be a major player in IT-BPO industry, but it lags behind India mainly owing to the English language constraints.
A simple analysis of employee costs by country indicates a clear advantage for India and Philippines. Whereas, employee cost in India and Philippines are comparable, the chart depicts lower cost for the Philippines due to low-end service exports (mainly voice support). Eastern Europe has the highest employee cost, but is still preferred by many developed European nations because of the compatibility in terms of German, Spanish and Italian languages.
In addition, a recent study by A.T. Kearney puts India in the top position on the global services location index followed by China and Malaysia. Although China is low on financial attractiveness (Includes employee cost, infrastructure, tax and regulations) it scores higher on people’s skills and availability.
In conclusion, based on the above analysis, India and Philippines will continue to be the most favourable spots for the IT-BPM outsourcing industry, while Central Europe gained some traction owing to the time zone and language edge during 2006-2009, but cost pressures have forced the companies to relocate jobs to India and Philippines. However, due to changes in the political situation in the US, Western Europe and heightened automation, re-shoring of jobs appears to be a possibility which can severely impact the existing status of the outsourcing industry.