Indian BPO growth to slow down

By agencies   |   Wednesday, 12 July 2006, 19:30 IST   |    1 Comments
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NEW DELHI: The growth of offshore business process outsourcing industry in the country is likely to further slow down over the next one year amid concerns over data security breach, high attrition rates and staffing costs, rising competition and continuing margin pressures, global research firm Forrester said. The US-based technology and market research major said in a report on the offshore BPO industry that the growth rate would come down to 28-30 percent over the next 12 months from nearly 35 percent currently, the Financial Express newspaper reported. In the past 12 months, the Indian BPO growth rate dropped from 48 percent in the fiscal year ’04-’05 to 35 percent in fiscal year ’05-’06. Forrester said that the recent instance of data leakage at HSBC’s India center reaffirms that offshore BPO growth will slow down amid security concerns, the paper said. The incident has come as a major blow to the prevailing common belief that captive BPO and its centers are a safer approach to offshore outsourcing and that such frauds are more likely to happen when working with a third-party outsourcer, it added. An employee at HSBC’s Bangalore center allegedly leaked the personal and debit card information of more than 20 British customers to a racket of fraudsters in London, while 233,000 pounds worth of money were stolen from the Customers’ bank accounts through ATMs, debit cards, and telephone banking. Police has arrested the employee and investigations are on to identify his accomplices in London. Forrester said this episode is much more sophisticated and involves a nexus of offshore data piracy with onshore physical theft, as compared with the past events. This incident validates the predictions that such incidents would further obstruct the Indian Call Center and BPO business prospects, the paper reported quoting Forrester. But unlike an earlier event involving offshore outsourcer, this incident happened at a center owned and staffed directly by HSBC—typically referred to as a “captive facility”, Forrester said. Forrester research India country head and senior analyst, Sudin Apte, who authored the report said, “compared with past events, this instance is much more sophisticated and involves a nexus of offshore data piracy with onshore physical theft.” “The incident once again brings up the subject of information security in offshore operations. While instance of data leakage leading to account theft is a universal phenomenon, massive media glare, coupled with limited government action to prevent reoccurrence, will further slow down offshore business process outsourcing (BPO) growth,” the paper quoted Apte as telling. He added that third party vendors’ employee due-diligence and security practices are typically better than the captives because vendors try their best to win the confidence of clients and prospects. “In fact, the security is often much greater at IT and BPO facilities in India than it is at vendor or user facilities in the US and UK,” Apte said. In addition to security concerns, challenges such as high attrition rates and staffing costs, rising competition, and margin pressure are the key factors contributing to the slowdown in the industry, Forrester said.