Despite its BPO edge of skilled manpower and low labour cost, India's 'Advantage BPO' position may not be sustainable in the long run as nations like China, the Philippines and Mexico are fast catching up, an ASSOCHAM-IDC survey says.

"While in India the advantages are availability of skilled manpower, linguistic capabilities, low labour cost, favourable time zone, sound Internet and telecom connectivity, the Philippines has also tremendously improved," a study undertaken by the BPO committee of ASSOCHAM and International Data Corporation says.

It says that China offered the advantages of a low cost economy, Mexico was cheaper than the United States, and Ireland had a good brand equity.

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Russia offered technological skills while South Africa, falling in the same time zone as Europe, could be a possible destination of BPO in the near future, the study said.

In a short span of time India's BPO segment, a virtually non-existent segment a few years back, has grown to US $2 billion.

However, the industry expected a steady growth in this segment, as India is still a favourable destination for back office jobs because of its well developed communications infrastructure, stable business environment and highly skilled technical talent pool.

As of now, certain limitations of these countries put them a shade behind India. China has limited English-speaking capability, Mexico is good for low-end jobs and Canada and South Africa are costlier than India and in order to overtake India in BPO they will have to overcome these disadvantages.

With the continuing slowdown in the global IT spending, declining revenues and depleting margins, the very business sustenance of the Indian IT players was under threat but BPO opportunity came as a blessing in disguise for IT providers, the study says.

It indicates that BPO brought in the much needed new revenue streams at an additional cost from the same clients, as these players could leverage on their global marketing infrastructure and establish client relationship.

Daksh (which has been acquired by IBM), EXL service, Vcustomers are third-party service providers who have successfully staged themselves in the global BPO market. Most of these units are either professionally promoted or are funded by venture capital firms.

"It has been really tough for the players in this segment," the study says, adding that upfront capital requirements, increasing competition, declining pricing and the much needed market reach in prominent markets like the US and Europe are business-critical issues that the players have to deal with.

Also international BPO service providers like Convergys, Sitel, efunds and Sutherland Technologies have shifted base to India to exploit the cost advantage factors that India offers to service their International clients. This is another segment which would be experiencing steady growth.