"It is estimated that in the on-going decade India might lose $30 billion in terms of foreign exchange earnings to Philippines, which has become the top destination for Indian investors," Assocham secretary general D S Rawat said.
Thus there is a need to reduce costs and make operations leaner across the BPO industry," he added.
BPO companies could reduce the total operating costs by 20-30 per cent by moving to a low-cost city within India, with a cost differential of around 10-15 per cent for non-voice processes and upwards of 20 per cent for voice processes, the report pointed out.
Several Indian firms have set up substantial operations in Philippines which has a large pool of well-educated, English-speaking, talented and employable graduates. Almost 30 per cent graduates in Philippines are employable unlike 10 per cent in India where the training consumes considerable amount of time, according to the report.
"Cultural proximity to the US together with availability of talented manpower are key reasons as to why BPO companies prefer expanding their operations in Philippines," Mr Rawat said.
Expansion of non-English BPOs in Tier-2 and Tier-3 cities, to provide low cost services to the telecom and aviation sectors, are set to play a significant role in growth of domestic outsourcing industry, the report found.
"Lower attrition rate in smaller towns is a big positive owing to lower recruiting and training costs, while there is comparatively high attrition rate of 30-35 per cent in tier I cities. Transportation costs for BPO employees and real estate prices are also lower in smaller cities," Mr Rawat said.
Cities like Ahmedabad, Chandigarh, Coimbatore, Dehradun, Jaipur, Kozhikode, Nagpur, Nashik and Palakkad can help meet 50-60 per cent of the projected talent requirement of BPO industry over next five years, the report said.
Government projects like the National e-governance Plan (NeGP) and the Unique Identification Authority of India (UIDAI), among others, are likely to provide a fillip to the domestic BPO sector in smaller cities, it added.