Increased demand in outsourcing is forcing many providers to add staff and invest in new services to meet anticipated growth, according to a new survey from Duke University's Offshoring Research Network and PricewaterhouseCoopers.
The survey, which was made from 514 outsourcing service providers in 50 countries, found that the industry is transforming at a rapid rate due to the emergence of new competitors in a wider variety of countries, along with outsourcers making a stronger push to expand into new markets.
Outsourcing companies in North America and India, which have long dominated the industry, are being challenged by competition from Latin America, Eastern Europe, and Asia, in service areas such as contact centers, business process outsourcing, and information technology outsourcing.
The survey also suggests that an increasing number of service providers expect to begin new software development and IT service contracts in the next 18 to 36 months. The number of service providers planning to offer new finance and accounting, human resources, and innovation services more than doubled from the previous year. Overall, 62% of service providers said they plan to expand the scale of their existing offerings.
"Growing competition has transformed the outsourcing industry into a global race for market share," says Dr. Charles Aird, managing director for PricewaterhouseCoopers. "India's success as the world's back office has motivated other developing countries with well educated and under-employed populations to seek to duplicate their experience."
Although India remains the outsourcing market leader, other emerging economies are seeking to expand into the sector. Among those efforts, the Chinese government has designated 20 cities as outsourcing hubs in an effort to attract more international investment, while the Philippine government has declared outsourcing a priority industry. According to the survey, only 16% of Indian service providers see competitors from other emerging economies as a threat.
The growth of legal services outsourcing has been strong and is likely to remain so, particularly in India, the survey found. Legal services outsourcing is growing at a rate of 40% annually in India, with about 110 legal services providers in the country. The Philippines and Sri Lanka provide 20% of legal outsourcing.
"The economic benefits of legal services outsourcing are undeniable," Aird said. "It provides the highest profit margins for services providers and as well as the highest cost savings for companies. The emergence of available outsourced legal services and the impact of the economic conditions have changed the perception of the legal industry, once regarded as too sensitive to be outsourced."