Warning that Indian call centre bubble

INDIAS burgeoning call centre industry, which has drawn thousands of jobs from Britain, is heading for contraction within the next two years, according to a new report published today.

The boom in outsourcing sales, customer services and other telephone work to low-paid, English-speaking Indians has generated competition that is driving down prices and pushing up pay, market analyst Datamonitor said in its study.

The report says newcomers to the market are aggressively discounting to grab a share of the £255 million business, resulting in shrinking margins and raising questions as to who will survive.

Datamonitor said a "shake-out" is inevitable within two or three years, and its report predicted this it will largely be driven by consulting companies exiting the market, and either spinning off their contact centre operations or turning over the management of their customer care services to third parties.

Scotland is home to about 200 call centres, employing about 40,000 staff. In Glasgow alone, the industry accounts for 16,000 jobs.

A recent report from Amicus, the white-collar union, warned that up to 10,000 jobs could be lost in Scotlands call centres over the next five years as banks and insurers transfer work to India.

Joint general secretary Roger Lyons said: "Business analysts and trade unions agree that hundreds of thousands of UK jobs are in danger of being exported out of the UK."

But Amanda Harvie, the chief executive of Scottish Financial Enterprise, said there was "no evidence" that Scottish financial services companies are relocating their call centre jobs.

Todays report from Datamonitor said: "The Indian outsourcing bubble is showing signs of contraction with some vendors shutting down operations and others being acquired by large Indian IT companies.

"Many prominent Indian business families ploughed investment into building contact centres in Indian hot spots, only to now be faced with under utilisation."

Datamonitors findings confirm recent report from industry insiders who said competition has been intensifying, cutting profit margins and favouring high-volume operators.