India's Outsourcing Industry Sets $50 Billion Revenue Target

Will tap into new markets to reach this goal by 2012

India's outsourcing industry on Jan. 29 set itself the goal of lifting revenue almost five-fold to $50 billion by the end of 2012 by tapping new markets and a booming local economy. The target set by the National Association of Software and Service Companies (Nasscom) was based on a study that said the industry could accelerate growth by an annual 50% in the next five years from 35% in the last five.

The study sponsored by Nasscom and conducted by consulting company Everest Group estimated the size of the untapped outsourcing market at about $280 billion. "Accelerated growth to capture the addressable spend in the international and domestic market could take the industry to $50 billion by 2012," the study added. The targeted growth can create two million direct jobs in India and add up to 2.5% to the nation's economic output, said the study.

India's outsourcing industry, excluding large software makers, has grown to $11 billion in annual revenue and 700,000 people by head count by doing work for global companies at a fifth of the cost in the U.S. or Europe. "We have barely scratched the surface so far," Nasscom president Som Mittal said. "The industry is now at an inflection point, ready to take off."

Work farmed out to Indian companies, which account for 40% of the world's outsourcing market, ranges from answering calls by bank customers to processing credit-card applications and insurance claims and equity analysis. About a third of the new business will be generated by under-penetrated industries such as telecommunications, retail, media and energy, the study said.

While North America will continue to be the largest market, there are "significant untapped opportunities" in Europe and Asia, it added.

India's outsourcing industry was hit hard last year by a more than 12% appreciation of the rupee that reduced the local equivalent of every dollar it earned. The industry also faces worries of a slowdown in technology spending in the U.S., the end of a tax holiday and rising wages and other costs, a shortage of skilled professionals and competition from countries such as the Philippines. India needs to protect its cost advantage and create an educational system that teaches students the skills required for the industry if it is to maintain its competitive edge as an outsourcing location, the report said.

Copyright Agence France-Presse, 2008

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