These are India's 10 new BPO hotspots

Move over Bangalore, Delhi and Mumbai, lesser-known Indian cities, such as Kochi and Nagpur, have the most potential to be the next big outsourcing hotspots for major international corporations.

Alsbridge, the outsourcing experts, announced on Wednesday that its internal research shows India has more growth potential than just the usual top picks -- Bangalore, Delhi and Mumbai.

International companies can now start thinking beyond the three big cities and look at the top 10 up-and-coming cities of Ahmedabad, Nagpur, Pune, Chennai, Hyderabad, Kochi, Kolkata, Mangalore, Thiruvananthapuram and Visakhapatnam.

The Dallas-based firm ranks Ahmedabad as India's most attractive upstart. It's home to Gujarat University, and the local government is supporting widespread infrastructure improvements. Hewlett-Packard and Oracle are among the Western companies that have already discovered the place.

Top 10 Upcoming IT hubs
1	Ahmedabad
2	Nagpur
3	Pune
4	Chennai
5	Hyderabad
6	Kochi
7	Kolkata
8	Mangalore
9	Thiruvananthapuram
10	Visakhapatnam

These cities were chosen based on several factors including population, accessibility, education of the workforce and existing companies who have businesses in these cities.

"When most people think of India, they think of just one or two big cities like Bangalore or Mumbai," Ben Trowbridge, Alsbridge CEO, said.

However, the reality is that India is a very big and complex country with many cities that would be large enough to support an NFL franchise if they were in the US even beyond the next tiers that are commonly mentioned.

Alsbridge believes that in the next few years, providers will consolidate and move even more of their labour to India.

A report released by the company last week says the operating margins of American providers have hovered around 6 per cent over the last decade, whereas outsourcing providers in India are able to achieve operating margins up to 40 per cent.

Providers in India are also able to provide similar services as much as 25 per cent cheaper than in the United States.

"Some people have speculated that the future of outsourcing lies in China, but there are many challenges to be faced with this," Trowbridge said.

American corporations looking to outsource in China face many obstacles such as language barriers, intellectual property and other legal issues. India doesn't share these concerns. We believe that many companies that want to stay competitive will be focusing their outsourcing operations in one of these top cities in India, and they'll be very successful in doing so.

BPO sector seen employing up to 800,000 by 2010

MANILA, Philippines -- The country's business process outsourcing (BPO) sector can create jobs for up to 11 percent of the new labor force entrants between this year and 2010, a high contribution for a single economic activity, an Asian Development Bank study said.

A March 2007 working paper prepared by the ADB economics and research department projected that the total number of BPO employees could hit 600,000 to 800,000 by 2010, equivalent to seven to 11 percent of the expected new labor entrants during the period.

As of end 2005, the BPO sector employed 163,250 people.

The paper, "An Analysis of the Philippine BPO Industry," authored by ADB economists Nedelyn Magtibay-Ramos, Gemma Estrada and Jesus Felipe, was released at the sidelines of an ADB press briefing on its flagship publication Asian Development Outlook 2007.

ADB projection, however, was lower than the joint forecast of the government and the BPO industry at one million workers by 2010.

In 2005, the BPO industry generated total revenue of $2.4 billion, accounting for 2.4 percent of the gross domestic product.

The contact or call center subsector accounted for the bulk, posting earnings of $1.8 billion and employing 112,000 individuals or almost 70 percent of the BPO workers.

"Given improvements in human capital and the right policy environment, the Philippine BPO sector may indeed become an important employment-generating sector in the future," the study said.

To date, the ADB said, the BPO sector has had very little interaction with the rest of the domestic economy, which means that an increase in its output may not necessarily increase production in other sectors.

"Notwithstanding its low intersectoral linkages, the BPO sector has the potential of generating a significant increase in the total wage bill for the economy," the study said.

The biggest challenge is whether the Philippines can continue attracting fresh investments in BPO, given tougher competition from other locations, it said.

"Although the advantages of locating in the Philippines should be emphasized, constraints like low hiring rates, high attrition rates, high cost of electricity and weak governance must be addressed without delay," the study said.

The ADB said another challenge was how to move up the knowledge intensity ladder. It noted that while this is desired by the government and the industry, there is no specific strategy so far laid out to achieve this goal.

The third challenge is whether the sector would continue to require government support.

"If the government is seriously bent on moving toward knowledge process outsourcing (KPO), it is then important to identify strategies to entice more investors that are involved in KPO, as well as to encourage BPO firms to move into higher value-added activities," the study said.

Since the existence of a pool of educated workers with tertiary education is seen as a key to the development of the sector, the ADB study said the following two questions must be answered:

• Is it the right policy for a country like the Philippines to continue investing in tertiary education to satisfy the needs of the BPO sector?

• Are students who take degrees in disciplines such as engineering, statistics, economics, etc. to be blamed for their lack of appropriate skills to be employed in the BPO sector?

Software Industries in Ireland and China

Intel confirmed yesterday its 2.5B$ commitment to build Fab68 in Dalian, China Apparently it is the first green field development since 1992 when Intel came to Leixlip Ireland. Dalian is one of China’s greener cities, and set in Liaoning Province near the border with North Korea.

By complete coincidence, there is a large delegation of Chinese software companies and associated Government officials visiting Ireland at the moment, with many of them from Dalian. I attended a meeting yesterday morning hosted by the Department of Enterprise, Trade and Employment, along with the IDA, Enterprise Ireland and the Irish Software Association for the visiting delegation.

Listening to the alternate presentations – Irish and Chinese – it struck me how different our two software industries are at this time.

The Irish software industry focuses on the global export market, because the home market is so small. From the figures presented this morning, most Chinese software companies currently focus on their domestic market, and do not export very much at this time by comparison.

The Irish software industry has six times as much revenue generated by multinationals operating in Ireland as by indigenous Irish companies. The Chinese numbers are the converse: more indigenous activity than multinational at this time.

The Irish software industry is primarily focused on the creation of new software products, and associated services. The Chinese industry at this time is focused instead on software outsourcing and business process outsourcing.

One can understand the Chinese focus, given the need to create employment, particularly in the private sector. At the same time, it was interesting to hear an official from Dalian readily admit to staff shortages, leading to upwards cost pressures: in fact the local government is apparently offering housing subsistence allowances and tax breaks to software professionals, so as to keep labour costs down in the area. It would be wonderful if our own Government in Ireland took such an enlightened view!

One wonders how these positions will change over, say, the next five years. The Irish industry may need to become less dependent on foreign direct investment and more focused on its indigenous companies. The Irish Software Association is strongly lobbying the Irish Government to considerably increase its IT procurement from indigenous Irish software companies: it is very ironic that many Irish companies in general have much more success selling to Government agencies outside of Ireland than within it. Maybe the Irish domestic market can be grown for the indigenous companies.

The Chinese focus on outsourcing and BPO is also interesting. We were told this morning that in the same way that Bangalore is a centre for outsourcing and BPO for the US and the English speaking world, Dalian is as successful as a centre for outsourcing and BPO from both Japan and South Korea. However, I suspect the Irish appetite in general for outsourcing is more focused on central Europe, driven by the expansion of the European Union last year and the availability of low cost air connections directly out of Ireland to a large number of central European destinations.

Some Irish agency officials pitched Ireland as an opportunity for investment by Chinese companies as a gateway to Europe. In return, some Dalian officials pitched Dalian as an opportunity for investment by Irish companies as a gateway to both Japan and both Koreas. I think this reciprocal perspective holds a mirror to both arguments: frankly I suspect most Irish companies will chose to invest directly in Japan or a Korea and choose to bypass Dalian to do so; I suspect most Chinese companies may think the same in regard to the rest of Europe and using Ireland as a gateway.

A little bit of Yin and Yang this morning. The true opportunity for collaboration comes from a closer working relationship, and working together to deliver whole products jointly together to specific market niches and opportunities. There are many commercial opportunities in China, and my own experience shows that a visible commitment on the ground – for example by opening a development centre – reassures Chinese customers and prospects that a company is in it for the long haul.

Asia BPO market to hit US$15B by 2011

By Isabelle Chan, ZDNet Asia

Wednesday, March 28 2007 11:42 AM

Finance and accounting, customer care and HR (human resource), will continue to be the main drivers of business process outsourcing (BPO) in the Asia-Pacific, a new report reveals.

In its updated report on BPO trends in the Asia-Pacific region, excluding Japan, research house IDC forecasted the market to rise from US$7 billion in 2006 to US$15 billion by 2011, recording a compound annual growth rate (CAGR) of 16 percent.

IDC's previous report in 2006 also identified the finance and accounting and HR sectors as the main market drivers.

Australia will continue to be the biggest market for BPO in the Asia-Pacific region, said Conrad Chang, research manager for IDC Asia-Pacific's BPO services research, in a statement.

According to IDC, businesses in the region appear to have a better understanding of BPO. There is now a greater alignment of BPO solutions with business objectives, resulting in performance benchmarking and ROI (returns on investment) analysis as important deal clinchers in BPO project tenders, IDC noted.

Outsourcing boom seen to continue

Business process outsourcing (BPO) in the Philippines is showing clear indicators of a strong and steady boom. Not only does it continue to generate more jobs. It also powers a host of other industries — real estate, transportation, communication, food, personal care and even entertainment.

From 2,000 employees in 2001, the BPO sector registered 250,000 workers in 2006 with -billion worth of generated revenues, according to figures presented in February by the Department of Trade and Industry’s e-Services Philippines. Analysts project that the number of BPO workers will further grow to 1 million in 2010.

Such a phenomenon has significantly driven the success of the property industry, which is now in a frenetic pace of construction due to the large demand for office spaces.

"The steady growth of the BPO industry in the Philippines increased the demand for more offices," said Frederick Salcedo, senior vice president for Commercial Services of Century Properties Management, Inc.

Citing the latest study of the property research and consulting firm Colliers International, Salcedo said that office space vacancy rate has dropped to 3.9 percent in the last quarter of 2006, and is expected to further dip to 2.7 percent at the end of the year.

As this happens, the bullish BPO sector is estimating a requirement of 3 million square meters of office space by 2010, states a property industry report by a local newspaper. More than half of this demand will be met as the sector presently occupies "700,000 square meters in Makati and Ortigas" and several property firms are constructing, and committed to build about "900,000 square meters" more. Still, there is an expected shortage of about "1.4 million square meters of office space by 2010."