Outsourcing Trends of 2006
By
VendorSeek
2006 was a profitable year for Indian outsourcing giants TCS, Infosys, and Wipro-all three of which reported high-profile deals and double-digit profit growth. As usual, the outsourcing industry continues to thrive despite controversy and consumer resistance. However, 2006 also saw some changes in the industry-many of which indicate that the industry is coming into its maturity. Following are some of the major trends in the outsourcing industry in 2006.
Outsourcing goes global. India has dominated the market from the industry's birth. 2006, however, saw increasing globalization, with overseas call centers opening in Malaysia, China, the Philippines, Central and Eastern Europe, Mexico, Brazil, and many other companies. While India used to receive around 80% of all outsourcing revenue, it now earns only around 59% of the market. Indian outsourcing companies are themselves opening divisions in other countries, and country-wide boundaries are becoming less and less meaningful as the industry evolves.
China could be the next India-and the next Silicon Valley. China has been growing significantly in the outsourcing industry, particularly in 2006. In terms of cost and resources, low wages and educated workers, it's considered the country most equipped to challenge India's domination of the market. Not only that, but its technology industry is advancing at a rapid pace-rapid enough to challenge dominant U.S. companies in the near future.
Outsourcing continued to grow-despite controversy. Undercover stings by U.K. reporters uncovered an unsettling underside to the Indian call-center industry-lax security of customer data. Reporters managed to uncover criminal rings that sold data from millions of customers, accessed from Indian call centers. As a result of this, many companies pulled out of the Indian call center industry over the last year, but in spite of this, many large companies moved their call centers to India last year-including HSBC, which made plans in 2006 to open a 2,000-seat call center facility in Kolkata.
Multi-sourcing is the new buzzword. 2006 saw many businesses outsourcing different technological needs to many different outsourcing companies, instead of bundling all their outsourcing needs into a single deal with a larger company. This led to fewer high-profile deals in outsourcing, although the industry itself continued to grow.
Fewer labor disputes. 2006 saw fewer contract problems, failures to deliver, job loss struggles with unions, and other disputes than in previous years. Many experts believe that this suggest the industry may be maturing as both buyers and suppliers gain in experience.
Consumers aren't pleased. Despite the industry's growth and coming maturity, consumer reports suggest that customers still see outsourcing in a negative light. There is no doubt that this is due to job losses as well as what customers see as poorer service delivered by offshore companies. However, the cost savings businesses can incur by moving many of their operations offshore appears to be too tempting to resist-despite consumer ire.
Predictions for 2007 suggest that the globalization trend will continue, and that more high-skill jobs will move offshore as the industry grows. There is still plenty of debate among American and U.K. businesses over whether or not outsourcing is a positive trend-but there's no doubt that, positive or negative, it's here to stay.
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