Who Will Dominate Offshoring in 2020?

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You will see also the stabilisation in growth of the captives [inhouse offshore operations] turned third parties, such as Convergys did many years ago spinning out from Bell South. You will find you will have a few captives that have achieved the scale and size and become very successful third parties.

Will companies still be setting up their own inhouse offshore operations or captives by 2020?

As the market matures for commoditised services it gets tougher and tougher to establish the cost structure or attract the talent that would be viable in a country like India.

When you go for a commoditised service the case for outsourcing that in an offshore environment is growing as the capability of the vendor base grows.

For example there are very few IT captives on the application development and maintenance side. The ones that are there are very large, have been there for some time and can warrant the scale economies.

You will begin to see a very similar trend on the business services side.

What sectors will outsource the most work by 2020?

Fast forward to 2020 and we see almost 80 per cent of the incremental growth coming outside of today's core verticals of banking, insurance, telecoms and manufacturing. They won't decline but there are other areas that will assume greater or as much significance for outsourcers.

Today, in terms of outsourcing, government or public sector is slightly smaller than BFSI [financial sector]. The second sector we are excited about is healthcare, with the demographic changes imminent in US and most of Europe we think that healthcare provision are going to go through the roof. Automation and offshoring is one of the levers that government and companies will use to take care of that.

The two others are utilities and media.

Outside of the verticals we think the Bric [Brazil, Russia, India and China] nations are going to be a great source of domestic outsourcing growth for many companies.

The offshoring industry has largely focused on Fortune 1000 clients and we think going forward small and medium business will be a very interesting source of growth.

What type of new tech services will be being outsourced by 2020?

Energy efficiency and climate change, mobile applications and clinical products are just three examples.

In energy efficiency, another McKinsey study estimated that up to a third of the carbon abatement potential worldwide in greenhouse gases will be directly or indirectly induced by technology. If you look at the innovation around smart grids, industrial innovation or green buildings, a lot of this is technology enabled. That is a huge opportunity to innovate from a low cost environment.

Or it could be another product innovation such as the Tata Nano car.

If you look at what's happening in India or any other of the low-cost countries, a lot of the work that we do is replication of a service done somewhere else.

We have a whole new opportunity on to offer new products and services that have not been created somewhere else.

What will effect of protectionism be on offshoring industry?

We saw it in 2001 after the dot com bubble burst and we are seeing it again.

As economic cycles go up or down and unemployment grows you will see some degree of noise and bills being introduced.

We did some research showing the economic growth enabled by offshoring $1 of work from North America to India creates wealth worth more than that value in North America. It's an economic win-win.

So far I have not seen major political movements being pursued in earnest by both governments and we are very hopeful that the trade barriers stay down and we don't get a whiplash effect that will hurt both countries.

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