Outsourcing providers around the world expect demand for their services to expand rapidly, and are adding staff and investing in new services to meet expected growth, according to a PricewaterhouseCoopers survey.

The survey found the industry is transforming due to the emergence of new providers worldwide, as well as existing outsourcers’ efforts to expand into new markets.

It also revealed 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. This includes service areas such as contact centres, business process outsourcing, and IT outsourcing.

According to the survey, 62% of service providers said they plan to expand the scale of their existing offerings.

“Growing competition has transformed the outsourcing industry into a global race for market share,” says PricewaterhouseCoopers MD, Dr Charles Aird. India’s success as the world’s back office has motivated other developing countries with well educated and underemployed populations to seek to duplicate their experience, he adds.

On the rebound

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

The International Association of Outsourcing Professionals (IAOP) agrees, saying: “Companies will return to using outsourcing to recapture innovation and provide flexibility in 2010 versus simply saving money.” However, global economic uncertainty will continue to impact the industry, it adds.

“Coming off a year of tremendous pressure, the outsourcing industry is expected to enter the next decade with positive signs of rebounding,” says IAOP chairman, Michael Corbett. As companies recover from these tough economic times, outsourcing will enable them to emerge as leaders in the new global economy, he explains.

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