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Last Updated: Tuesday, 2 September, 2003, 11:00 GMT 12:00 UK
Indian outsourcers face price war
India call centre
Indian call centre workers are paid 60% less than in the US
The rush to cash in on India's outsourcing boom will lead to price wars and could squeeze Indian entrepreneurs out of the market, according to new research.

Smaller profits and an industry shakeout are inevitable, according to independent market analysts Datamonitor.

Multinationals and large Indian conglomerates will be much better placed than local entrepreneurs or smaller Indian businesses to survive the shake-up, it said.

"Once the big boys start moving in the smaller firms find it harder to compete," Datamonitor analyst Robin Goad told BBC News Online.

Domination

Many Western firms have shifted call centres and back-office processing units to India, tempted by cheap labour costs and a pool of trained workers.

Now the boom - which has created a $400m marketplace - is set to enter a period of consolidation as the extra demand for outsourcing workers begins to push up prices.

India's outsourcing market Projected expansion
2003:
Contact centres - 250
Number of workers - 51,000
2007:
Contact centres - 387
Number of workers - 121,000
Datamonitor projections
Many of the newcomers are large, foreign firms who use aggressive strategies to enter the market, including poaching workers at higher prices.

Big multinational consulting companies such as Accenture are beginning to set up their own India-based centres on behalf of Western customers.

That is driving down profit margins and squeezing smaller, stand-alone Indian firms, according to Datamonitor.

"If you're looking at it from the point of job creation, it doesn't really matter who owns the call centre, and higher wages will be good for the agents," Mr Goad said.

"But it's bad for entrepreneurs who have already - or want to - set up their own businesses," he explains.

Indian workers at contact centres earn an estimated $2,700 (1,700) a year.

Their employers charge their corporate clients 60% less than equivalent companies in the West.

Staff turnover rates hover around 25% rather than the 90% seen in the US.


SEE ALSO:
IT outsourcing row grows
12 Jun 03  |  Business
Outsourcing lifts Infosys profits
10 Jul 03  |  Business
India warns US over outsourcing
12 Jun 03  |  South Asia


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