The pre-budget Economic Survey 2012-13, which was tabled in Parliament on Wednesday, said India faces stiff competition from several emerging countries in the BPO sector. It called for information campaigns by the industry to dispel the myths and fears about outsourcing in the developed economies.
Countries like Malaysia, China and Philippines in Asia; Egypt and Morocco in North Africa; Brazil, Mexico, Chile and Columbia in Latin America; and Poland and Ireland in Europe are emerging as attractive destinations for voice contracts, posing a significant threat to Indian firms, it said.
"According to Nasscom, in the last five years, India has lost about 10 per cent market share to the rest of the world in the world BPO space, most of which is in the voice contract segment," it said.
According to industry body Nasscom, in FY13, IT services would account for $50 billion, while Business Process Management (BPM or BPO) and Engineering services would contribute $20 billion and $10 billion, respectively.
In terms of competition, though China faces challenges like language proficiency, it is making large investments in the mission mode to increase English proficiency. "Thus, (China) may eventually emerge as a threat to India," it added.
The Philippines, which is the second largest destination for outsourcing, is also a serious competitor having developed both the hardware and software segments of IT.
Outsourcing has become a national issue in many developed countries like the US and the UK, who are supporting the local BPO industry through various means.
"In such a situation, the Indian BPO industry needs to gear up to address the challenges. Information campaigns to dispel the myths and fears about outsourcing needs to be undertaken by the industry in the developed economies," it said.
In the overall IT and IT-enabled services space, new competitors like China, Israel and the Philippines have emerged in recent years.
Between 2005 and 2011, the annual average growth of IT-ITeS services was 69 per cent in Philippines, 28 per cent in Sri Lanka, 59 per cent in Ukraine, 27 per cent in the Russian Federation, 37 per cent in Argentina and 35 per cent in Costa Rica.
"Even if in some cases the export values are relatively low, the average annual growth of computer services in these economies is well above the average of the top exporters," it said.