A McKinsey consultant from Mumbai says India will retain its offshoring crown but could lose share to Russia and China if education doesn’t keep up.

When will the decline begin to happen?

We have seen an increase in India’s market share in 2008.

The global financial crisis has given India a bit of breathing room, it’s dropped the growth rates. In 2009/10 we will see low growth, so a supply side constraint will not come through in the next two years.

Beyond that, if gets back to original growth rate and we don’t see any change in the education system, we could see those supply shortfalls happening very quickly thereafter.

Which countries look most likely to take that market share?

You have got to separate out those countries that are the volume hubs and those that offer more niche services.

When you look at the volume hubs, it’s very hard to get away from China and Russia, which are two of the largest by population locations. China tends to be a lot more engineering, design and infrastructure services led, more catering to North Asia. Russia tends to be outstanding for software product development.

In Latin America, Brazil is one of the few nations that offers an emerging working population of that size. Much of Latin America is Spanish speaking, southern-US focused.

In Eastern Europe the talent pools are not as deep as in India and China and more fragmented by language.

Vietnam and Egypt has a reasonable talent pool and a lot of government support to promote this industry, support by real initiatives on the ground making changes to the education system and infrastructure to support this industry.

What sectors will outsource the most work by 2020?

Fast forward to 2020 and we see almost 80 per cent of the incremental growth coming outside of today’s core verticals of banking, insurance, telecoms and manufacturing. They won’t decline but there are other areas that will assume greater or as much significance for outsourcers.

Today, in terms of outsourcing, government or public sector is slightly smaller than BFSI [financial sector]. The second sector we are excited about is healthcare, with the demographic changes imminent in US and most of Europe we think that healthcare provision are going to go through the roof. Automation and offshoring is one of the levers that government and companies will use to take care of that.

The two others are utilities and media.

Outside of the verticals we think the Bric [Brazil, Russia, India and China] nations are going to be a great source of domestic outsourcing growth for many companies.

The offshoring industry has largely focused on Fortune 1000 clients and we think going forward small and medium business will be a very interesting source of growth.