Demand for overseas outsourcing to dive if U.S. economic crisis continues

MANILA – The economic slump in the U.S. has not had a major impact on the Asia-Pacific contact center applications market in 2007, says analyst and consulting firm, Frost & Sullivan .

However, the firm predicts that if the U.S. financial crisis continues, demand for contact center applications will dive in late 2008 and 2009, especially from the BFSI (banking, financial services and insurance) sector.

Except for the Philippines where some deals were deferred, almost all other Asia-Pacific countries saw contact centers increasing their investments on equipment and applications to improve customer interaction services.

Revenues in the Asia-Pacific contact center applications market rose 12.2% (year-on-year) in 2007, and is expected to grow by 14.2% this year.

The firm’s report, Asia Pacific Contact Center Applications Market, finds that the market–covering 14 Asia-Pacific countries–earned revenues of US$665.4 million in 2007 and estimates this to reach US$1.31 billion by end-2014, at a CAGR (compound annual growth rate) of 10.2% (2007-2014).

The top three markets by revenue in 2007 were Japan which accounted for about 24.9% ($165.5 million), followed by India at 17.8% ($118.6 million) and Australia at 15.3% ($101.7 million).

The Philippines is ranked sixth (after Japan, India, Australia, China and South Korea), in terms of revenues for contact center applications.

In an e-mail interview with Computerworld Philippines, Shivanu Shukla, Frost & Sullivan industry manager, said that the Philippines’ contact center industry is highly U.S.-centric, and hence the U.S. economic downturn is having a slowing effect on the (contact center) expansions in the Philippines.

“However, due to the on-going economic downturn in the U.S., outsourcing service providers are expected to see an increase in their services, as U.S. enterprises get more cost-conscious and offshore more processes to the Philippines, especially collections processes/functions,” he said. He adds that the industry in the Philippines continues to be a key growth driver for the industry in Asia-Pacific, and is expected to show strong growth throughout the forecast period.

According to Shukla, the Philippines contact center applications market earned revenues of $23.8 millions in 2007 and estimates this to reach $55 million by end of 2014, at a CAGR of 12.7% (2007-2014).

“Offshoring and outsourcing operations continue to thrive in the Philippines, India, Malaysia and China, as more deals were seen from the U.S. and Europe due to the cost-friendly factors such as cheaper labor and overheads of Asian outsourcing hubs,” he says, adding that the credit crunch in the U.S. is expected to drive more growth in the offshoring business as cost reduction takes top priority for U.S. businesses.

Shukla said that countries like Malaysia gained stronger traction from other ASEAN countries, while China continues to add momentum from its burgeoning domestic contact center needs, as well as from Hong Kong and Taiwan. Mature contact center markets such as Australia, New Zealand, Japan, Singapore and South Korea saw increasing migration toward IP-based contact center solutions. In fact, these countries experienced a higher degree of replacement and upgrade exercises by existing contact centers, rather than new center developments.

“Customer service has taken high priority amongst organizations in Asia,” says Shukla. “Business users are placing greater emphasis on contact center performance, thus investing more on sophisticated applications such as quality monitoring, voice portals and analytics solutions.”

According to the study, other key growth drivers include strong economic growth in Asia-Pacific driving new call center set-ups and expansion in some countries, the migration to IP driving upgrades and replacements, as well as offshoring business from high-cost markets such as the U.S. and Europe.

“The call center industry saw robust growth in the ASEAN region by way of new greenfield sites, over and above expansions and upgrades,” notes Shukla. He said that in 2007, uptake of contact center solutions in the government sector saw a marked increase, particularly in the mature markets, as citizen emergency help lines, tax offices and other sites supporting such e-Government initiatives got underway.

Shukla believes that self-service contact center applications and unified contact center solutions will see greater adoption as the need to keep labor overheads low and the merits of unified communications become increasingly apparent.

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