This wide-spread outsourcing of non-core business processes by companies in industrialized countries is likely to have profound implications. Preliminary estimates suggest that the efficiency gains made possible by this global division of labor are remarkable. Through offshoring some of its customer-service activities to India, Prudential, the British insurance company, is planning to save $26.2m through the creation of 1,000 customer-service jobs in India.<sup>6</sup> The Pharmaceutical giant GlaxoSmithKline (GSK) plans to outsource all its global IT operations and experts expect savings of around 35 percent savings a year on the IT budget.<sup>7</sup> General Electric saves about $350 million per year through the 18,000 offshore employees it has in India.<sup>8</sup> Studies suggest that the U.S. banking industry alone saved as much as $8 billion in the last four years due to outsourcing<sup>9</sup> and estimates on future gains (until 2009) for the overall U.S. industry range to U.S.$390 billion,<sup>10</sup> with $138 billion in annual cost savings for the world’s top 100 financial institutions.<sup>11</sup> All in all, the savings figures usually range from 30 to 60 percent.<sup>12</sup> Whereas most industries have started to outsource operations because it allows them to significantly cut labor costs, they have also reported significant productivity gains, ranging from 15 – 25 %. As only around 5% of U.S. firms with revenues from 100 million to 4 billion have started to outsource, much untapped potential for this sort of cost saving and productivity gains remain. The size of the outsourcing market will certainly grow when smaller and medium sized enterprises seek similar efficiency gains.

More specific estimates confirm the potential of BPO services. A survey by Deloitte Research, for instance, found that the world’s 100 largest financial services firms expect to “transfer $ 350 billion of their cost bases abroad” by 2008<sup>13</sup> . The value of medical transcription outsourcing in America alone is expected to double by 2005 to $4 billion.<sup>14</sup> . The US market for ‘contact centers’ alone has a turnover of $ 100 billion.<sup>15</sup> Given the enormous size and rapid growth of the BPO market, the economic implications for developing countries could be enormous.<sup>16</sup> For example, if half of India’s 50 million English-speakers were to eventually earn $10,000 per year in IT-related services, this would more than double India’s current GDP of $450 billion<sup>17</sup> . Given that IT-enabled exports tend

> 6 “ India fears impact of bid to curb jobs exports”, in: Financial Times, June 4, 2003.

> 7 “GlaxoSmithKline considers outsourcing deal”, in: Vnuet.com, December 12, 2002.

> 8 “US firms saved $8 bn via local outsourcing”, in: Business Standard, April 16, 2003

> 9 “US firms saved $8 bn via local outsourcing”, in: Business Standard, April 16, 2003

> 10  “U.S. gained $17 b from outsourcing to India”, in: Deccan Chronicle, July 7, 2003

> 11 “Looking for savings on distant horizons”, in: Financial Times, July 2, 2003.

> 12 “U.S. gained $17 b from outsourcing to India”, in: Deccan Chronicle, July 7, 2003, “Indian outsourcing cuts costs”, in: vnunet.com, January 1, 2003, “The case for, and against, shifting backoffice operations overseas”, in: Wharton Papers, October 9, 2002.

> 13  “The Cusp Of A Revolution – How Off-shoring Will Transform The Financial Services Industry”, Author: CHRIS GENTLE, Deloitte Research, March 2003. According to another estimate, a typical bank can outsource 17-24 percent of its cost base.

> 14  The Economist (5 May 2001).

> 15  Financial Times (22 October 2002).

> 16  See ”The New Global Job Shift: The next round of globalization is sending upscale jobs offshore”, in: _Business Week_ , Cover Story, February 3, 2003, “Call Centers: The Revolution Revs Up”, in: _Financial Times_ , March 10, 2003. “The Cusp Of A Revolution – How Off-shoring Will Transform The Financial Services Industry”, Author: CHRIS GENTLE, Deloitte Research, March 2003, U.S. firms move IT overseas, in: _CNET News.com_ ,  December 11, 2002, by ED FRAUENHEIM.

> 17  Estimate on the number of English-speakers from: "Outsourcing to India: back office to the world," in: _The Economist_ , May 5, 2001.

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