The Size of the Offshoring Market

Experts in two of Mckinsey’s India offices have come up with projections for offshore outsourcing that are fairly dramatic.

First, ITO. Currently, the bulk of IT work going offshore consists of application and integration functions. Functions such as "hardware and software maintenance, network administration, and help desk services" accounts for as little as 2% of offshoring. But that could grow to as high as 47% over the next five years.

Yet, not surprisingly, BPO is where the report sees even faster growth. The authors write, "Banking and insurance account for nearly half of the addressable business process market, but companies have captured less than 10 percent of it thus far. In the next five years, the lion’s share of growth is likely to come from these two industries: there are opportunities worth $23 billion to $25 billion, for example, in the offshoring of retail-banking activities associated with deposits and lending, $9 billion to $11 billion in credit card processing, and $3 billion to $4 billion in mortgage processing. Among cross-industry functions, human resources (HR) and finance and accounting appear set to fuel growth.

Retail banking and insurace could reach 49% from its current 6% in banking and 9% in insurance.

The write-up concludes, "Our analysis indicates that approximately 35 percent of the work that could potentially be offshored, worth $110 billion and divided equally between IT services and business processes, actually will be offshored by 2010."

You can read the brief report here:

http://www.mckinseyquarterly.com/article_page.aspx?ar=1772&L2=1&L3=106&srid=17&gp=0