Outsourcing providers around the world predict that demand for their services is expanding rapidly, and they are adding staff and investing in new services to meet expected growth, according to a new survey from PricewaterhouseCoopers.

The survey of 514 outsourcing service providers in 50 countries found that the industry is transforming due to the emergence of new providers around the world and efforts of existing outsourcers to expand into new markets.

Outsourcing companies in North America and India, which have long dominated the industry, are being challenged by competition from Latin America, Eastern Europe and Asia, in service areas such as contact centers, business process outsourcing, and information technology outsourcing.

According to the survey, a large number of service providers expect to begin new software development and IT service contracts in the next 18 to 36 months.

The survey suggests that the number of service providers planning to offer new finance and accounting, human resources, and innovation services more than doubled from the previous year. Overall, 62 per cent of service providers said they plan to expand the scale of their existing offerings.

“India's success as the world's back office has motivated other developing countries with well educated and under-employed populations to seek to duplicate their experience," said Charles Aird, PwC’s managing director.

Although India remains the outsourcing market leader, other emerging economies are seeking to expand into the sector. Among those efforts, the Chinese government has designated 20 cities as outsourcing hubs in an effort to attract more international investment, while the Philippine government has declared outsourcing a priority industry.

However, only 16 per cent of Indian service providers see competitors from other emerging economies as a threat.

“The economic slowdown of the developed countries, which generated pressures on companies to reduce costs, as well as the relatively low cost of the Romanian labour force, might generate opportunities for the local outsourcing services providers”, states Dan Iancu (photo), Partner Advisory, Performance Improvement, at PricewaterhouseCoopers Romania. ”We should not ignore the fact that there is a global competition for attracting investments and that Governments and local authorities worldwide are providing facilities, fiscal or of other nature, to the service providers. As such, Romania should grant facilities, at least to a level similar with other countries in Central and East-Europe, in order to increase its market share in this industry”, added Dan Iancu.

The survey found that the economic crisis of 2009 surfaced once again the importance of cost savings and efficiency improvement as the top strategic reasons for outsourcing, followed by access to qualified personnel.

The emergence of legal services outsourcing

The growth of legal services outsourcing has been strong and is likely to remain so, particularly in India, the survey found. Legal services outsourcing is growing at a rate of 40 per cent annually in India, with about 110 services providers in the country. The Philippines and Sri Lanka provide 20 per cent of legal outsourcing.

The economic benefits of legal services outsourcing are undeniable, PwC said. It provides the highest profit margins for services providers and as well as the highest cost savings for companies.

The emergence of available outsourced legal services and the impact of the economic conditions have changed the perception of the legal industry, once regarded as too sensitive to be outsourced.