Long term deals are now rare in BPO Industry

September 28, 2011: Is the BPO sector in India unable to find long term relationships with the service buyers in US?

It might happen in the near future…!!!!

Yes! Service buyers are becoming more conscious in maintaining long term relationships with the offshore vendors as to reduce the risk which may occur if recession hits. In the past few months we have noticed the trend in the industry that US based global companies becoming more particular in selecting vendors and maintaining conscious steps while entering into new contract. At present we could also notice that service buyers decreasing the number of long terms contracts with the service providers.

It is obvious that this strategic step taken will end up in a huge impact on the Indian BPO sector business. Indian BPO sector is the least affected industry while considering the various impacts created by US economic down trends globally. But there are expectations that in the coming year there will be impacts which can affect the business of service provider or Indian vendors. And it is because the global clients, particularly the US based are looking for outsourcing units which has the potential to deliver cost effective services at much lesser time.  

If this continues then adverse impacts are sure for outsourcing service providers in the country as it can end up in unhealthy relationship management between two ends. Moreover near shore service providers can find it as an opportunity. There are many fresh vendors in the near shore and onshore markets which are looking for small business in the initial stages to gradually capture the market. Once these service providers can prove that depending on them in this economic down trend is less risky, then it is obvious that more contract will flow down to the near shore compared to the offshore.   

This slowing down long term contract can be considered as first indicators of future threats in the BPO industry. Companies such as TCS and Infosys have already started facing small blows. Genpact recently has to lose a major contract related to Human Resource outsourcing. The contract deal was with Nissan. It is expected that outsourcing jobs related to retail and healthcare will see more blows very soon.

It is know to every one that a small issue in the US has direct impact on Indian BPO and IT sector. Indian players has enough confidence that the nation will have the least impacts and also believe that Indian companies hold enough experience from 2008 to tackle the recession, but even though it is obvious that we need to face some consequences due to economic down trends in the United States.  

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