Crunch to hit Indian BPO industry but opportunities await

Crunch to hit Indian BPO industry but opportunities await

India's BPO firms will be hit by the current global economic turmoil over the next few months but could be well placed to take advantage of the crisis in the longer term, says the National Association of Software and Service Companies (Nasscom).

Industry body Nasscom says spending by US financial institutions has been hit by the sub-prime crisis and this will affect Indian IT BPO firms for two to three quarters as clients become cautious in their discretionary spending and as decision making cycles get extended.

These concerns were reflected in Wachovia Capital Markets' decision to downgrade IT offshore outsourcing sector to "market weight" from "overweight" earlier this month.

But Nasscom says that ever since the sub-prime crisis began, BPO companies have been taking steps to insulate themselves and argues the industry has shown resilience to periods of reduced demands in the past.

This will leave BPO firms like Infosys, Wipro and Tata Consultancy Services well placed to take advantage as the global economy begins to recover, with banks looking to technology and offshoring to cut costs and gain a competitive advantage.

The country is now well established as a destination and "Indian companies will look to partner with their customers as the global financial sector realigns itself," says Nasscom.

But, despite the optimism, all six of the Finextra50 Financial Technology Index's Indian constituents fell more than 10% last week as market turmoil in India and lack of confidence in the global financial sector led the the Bombay Stock Exchange benchmark Sensex down 6.7%.

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