The BPO industry arose to solve problems of rising costs and a shortage of skilled workers. The industry has grown in size and scope since then. Most developing nations have benefited from the great advantage of Western economies in the last two years. There has been an increase in business outsourcing, but there sure has been a reduction in profit margins. Callous as it may seem, the impact of the recession gripping the US and other major world economies has had a positive, though not complete, impact on major outsourcing hubs such as India and China. Let’s see why?

The recession in the US economy has affected all of its business segments, including banks, financial institutions, healthcare, manufacturing, and the service industry. This has led companies to take desperate measures to control costs and increase their profits. There have been layoffs, pay cuts, and hiring freezes across the United States. Amid the chaos and panic, some companies have been looking for outsourcing alternatives to help them navigate this difficult time. Another thing that needs attention is the US policy on outsourcing. It has become increasingly difficult for companies to justify large layoffs. The new fiscal policy is not helping them either. With this in mind, it has become difficult for companies to decide on outsourcing. But is cost reduction the only driver for businesses in the US? Are lower prices the only reason companies would consider outsourcing their business processes to other countries? If that were the case, countries like India and China would be celebrating their growth numbers.

The fact is that while companies are looking for less expensive options, they are also looking to increase the efficiency and effectiveness of their business. They are trying to reduce business risks and product development time by hiring specialized professionals. Some companies have also explored and embraced the idea of ​​mergers and acquisitions to prevent their ships from drowning. Others are looking for cheaper options within the US, such as rural outsourcing or nearby contracting. Whatever the recession’s impact on US markets, the lion’s share of the outsourcing pie went to countries like India and China.

For example, the Indian IT and BPO industry generates around $40 billion every year. Growth in the IT sector has been considerably slow in recent years. There have been layoffs and hiring freezes, but they have been fewer than in the US. Pay increases have been subdued and promotions have stalled. To make matters worse, there have been currency fluctuations affecting profit margins, and competition from China and other fledgling BPO hubs has pushed companies to change their prices.

Indian companies have entered cost saving mode. But despite all these problems, Indian BPO companies have been able to sustain themselves. Indian markets, though volatile, have been on the rise since late last year and the Indian economy continues to grow at a rate of 7.5% to 8%. BPO companies in India have also started to capitalize on domestic companies that want to outsource to cover the losses of their Western clients. They have also begun moving their businesses to Tier II cities in hopes of lowering their labor costs. They are finding ways to reduce their dependence on the US by doing so. The other challenge that major BPO centers may have to deal with is the increasing inclination of companies towards independent providers within their country. With layoffs occurring at most companies in the US and UK, the freelance economy has gained momentum. Most of the unemployed and skilled workers turned to self-employment during this economic collapse. The availability of qualified UK IT professionals offering freelance services is also on the rise.

So is the outsourcing industry recession proof? The Wall Street Journal in 2009 reported that Indian entity HCL Technologies Ltd. topped the list of outsourcers in 2009 with almost 94% of companies surveyed saying they would definitely consider India as an outsourcing destination for the right price, second only to for the US market. The outsourcing industry is not an independent entity that would not be affected by changes in the global economy. But one thing is for sure, the industry has learned to take the hits and survive.