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Tech Industry

Overseas outsourcing to rise in 2003

Research firm Gartner predicts that the amount that companies spend on farming out business tasks to foreign lands will jump 38 percent this year, with India heading up the market.

The amount that companies spend on farming out business tasks to foreign lands will jump 38 percent this year, according to a new study from market research company Gartner.

Gartner predicts that the market for so-called business process outsourcing (BPO) done offshore will hit $1.8 billion in 2003, up from $1.3 billion in 2002. Still, the offshore BPO market will make up just 1.5 percent of the total BPO market this year, Gartner said.

"If enterprises that have been developing offshore sourcing strategies over the last few months successfully conclude pilot projects, the growth in offshore BPO during the next couple of years will be significant, as a result of contract expansions and new adopters," said Gartner analyst Rebecca Scholl.

BPO refers to an outside company's management of various business tasks such as call-center operations or finance and accounting. Moving work overseas has appealed to some corporations, partly because of low salaries in countries such as India, the Philippines and Mexico. U.S.-based organizations that offer information technology services, such as Electronic Data Systems and Computer Sciences, have been eager to take on BPO work as IT spending has flagged.

According to Gartner, more than one-third of companies with more than 1,000 employees obtain offshore BPO services from U.S.-based BPO providers.

The overseas outsourcing push has met with some resistance in the United States, as domestic workers see their jobs shipped offshore. For example, the New Jersey state senate has approved a bill requiring that only citizens or legal residents of the United States work on certain state contracts.

India is the top country for delivery of offshore BPO services among large companies, Gartner said. India's revenue from BPO will grow from slightly less than $1 billion in 2002 to $1.2 billion in 2003 and will represent 66 percent of the offshore BPO market, according to the research firm.

But other countries are gunning for a share of the business, Gartner analyst Sujay Chohan said. These include Poland, Russia, the Philippines and Sri Lanka.

"Although India dominates the market today and for the near future, Indian service providers should not get too complacent as other English-speaking nations across the world are ramping up their delivery capability and putting into place aggressive investment-friendly policies to attract BPO investment," Chohan said.