"Over the last three years, the Chinese, Philippines and Malaysia have emerged as very strong contenders in the IT-related services," Milan Sheth, partner of business advisory services and leader in technology and telecom Verticals, Ernst & Young India, told ZDNetAsia in a phone interview.

"It will be naive not to take the threat from these countries seriously," Sheth said. The Philippines, he said, has emerged as a very strong threat to India in the provision of voice-related services.

James Huang, CEO at BPOVIA Ltd. China, said in an e-mail interview: "Poor urban facilities [impacting quality of life] and increasing crime rates are making India a less attractive destination for expatriates–a critical factor in establishing captive centers."

There are several factors why India may be losing business to other countries, including the strengthening of the rupee, high attrition rate and poor infrastructure.

"Over the last decade, the depreciating rupee has contributed about 12 percent to the bottom line of IT-ITES (IT and IT-enabled services) companies. This had helped them maintain very healthy gross and net margins in Rupee terms," James said.

The current trend in the depreciating dollar has not only wiped out this advantage, it is also eroding the margins and will continue to do so since the U.S. current account deficit and inflation are showing no signs of reversing.

India‘s other problem has been high attrition rate, rising salaries and escalating real-estate costs. These factors have resulted in higher costs, even though India continues to enjoy considerable cost advantages over other nations.

Hari Rajagopalachari, executive director at PricewaterhouseCoopers India, said: "While India has an edge in terms of cost arbitrage and lower explicit costs, outsourcing and offshoring companies are paying increasingly greater attention to implicit or hidden costs, like the cost of quality.

"While the Indian IT industry has come a long way in adherence to process parameters [process quality], there is still a huge scope for improvement in the area of customer experience," he added.

Sheth noted: "In BPO (business process outsourcing), transformational outsourcing is becoming increasingly popular."

Popularity: 5% [?]

BPO, China Business, India, Offeshoring, Outsourcing, Threat