Rays of light shine through the clouds.  Offshoring countries will rely on their comparative advantage to sustain business.

 

MANILA, Philippines (September 23, 2009) – For its annual year-end prediction of where the offshoring and global outsourcing industry will finish, Canadian-based ICT research and advisory firm XMG Global today announced its 2009 year-end forecast.

After posting a 19% growth rate last year, the global outsourcing market will end 2009 with total revenue of US$373 billion or 14.4% higher than the US$326 billion recorded in 2008.  According to XMG Global senior analyst Vincent Altez, “We still forecasted double-digit growth exactly one year ago, but there is no doubt the economic turmoil has been the major cloud of the global outsourcing industry in 2009.”  Global outsourcing market includes both inshore and offshore services worldwide.

Analyst estimates further predict the performance of the top three offshore countries, namely: India, China and the Philippines.  India and China will remain at the top list with expected revenues amounting to US$48 billion and US$28 billion, respectively. India captures 44.8% of the total while China handles 25.9%.  Altez adds that, “The market share of India is similar to 2008 and has mostly to do with the Satyam accounting adjustments and the shifting of work to other offshore countries.  In other words, we are seeing new levels of normalcy in which the recession has provided the opportunity to rationalize and shift work to other offshore destinations other than India.”

The Philippines is expected to close the year with US$7.3 billion or 21.7% growth - lower than the 24% growth forecast due to the slower growth for IT services and the delay of expansion plans of several captive players.  Foreign direct investment is also expected to slide this year as investors are streamlining capital. The Philippines is expected to post 6.9% of the total offshore revenue which is close to the 6.7% share last year.

Looking forward to 2010, the prediction cites factors that will affect both the market value and the dynamics of global sourcing.  Some of the factors mentioned include the economic recovery of the US and Europe which is expected to create a shift for BPO demand over IT services, application development and support being absorbed into BPO deals, the attractiveness of other offshoring countries namely South Africa, Egypt and Mexico, the continuing agility and commitment of the Chinese and Vietnamese governments to attract foreign investors and build out advance infrastructures, improvements or a decline in a country’s productivity index, and the rising costs of mature offshore countries such as India.

Demonstrating double digit growth in ‘no-growth times’, XMG Global asserts a permanent shift on how the new economy will view outsourcing and offshoring.  “In an industry where double digit growth is not ordinarily seen during a global recession proves that offshoring and outsourcing is part of a natural ongoing economic revolution notwithstanding a financial crisis”, added Altez.