Is Offshore Business Process Outsourcing Running Aground?

By Edward Cone  |  Posted 05-05-2005

The theft last month of $350,000 from citibank customers via Indian outsourcer MphasiS BFL might be just the beginning of bad news in the offshore call center market. There is nothing unique to India about criminals talking people out of their passwords, and the thieves in this case—16 people in all, including current and former employees at the MphasiS contact center in Pune—were apprehended quickly.

But the negative publicity hit at a moment when some structural problems with BPO are coming into public view.

"The contact center outsourcing model is under siege from a number of different factors," says Forrester Research Inc. analyst Bill Martorelli. He contributed to a post-heist Forrester report predicting that growth of BPO call center deals could drop 30 percent over the next 18 months as a result of multiple factors.

"The initial rush to offshore locations for contact center jobs now looks to some extent misguided," he says. "The theft will just embolden critics within companies that have debated the move."

Security fears are certainly an issue, although perhaps the easiest problem to fix. Increased Indian regulation and oversight could make American companies more comfortable. NASSCOM, India's industry association, promptly announced a training initiative for Pune's cybercrime unit, which caught the bad guys from MphasiS.

But regulation will almost certainly add to the cost of these call centers, the main reason jobs go to India in the first place.

"It was widely believed that these jobs were viewed as a godsend in India, even to highly educated people," he says. "But we're finding out it's not viewed that way after all."