Indian IT companies themselves have begun to set up centres outside India as backup, and India's 80 per cent share of the outsourcing market could be halved by 2007, as the industry expands to new locations, including the Philippines and Eastern Europe, the Wall Street Journal said quoting a report by Gartner.

Outsourcing and India: Complete Coverage

The paper said that Raman Roy, chief executive of Wipro Spectramind, is one of the pioneers who made India the locus of the global outsourcing phenomenon.

But now, Roy is discovering that India alone is not enough for a new generation of call centre clients, it said. Increasingly, they are insisting on "Plan B" locations such as the Philippines to hedge against the risk of earthquakes or civil disruptions disturbing back office work.

The growing demand for backup, said the paper, is adding a dimension to the quickly proliferating outsourcing industry. Traditionally conservative businesses such as insurance companies and mortgage brokers are contracting out back-office and customer service work, mirroring the way corporate titans such as IBM and General Electric moved such tasks away from the US several years ago.

As new clients are handing over duties to third party companies rather than to their own subsidiaries, and in countries where they often have little experience, they feel more comfortable with suppliers who have good backup plans.

"Our customers are telling us they want us to expand our footprint to mitigate geopolitical risk," Roy said, adding "we already have seven locations in India. We have to look somewhere else." That is where the Philippines comes in. Like India (a former British colony), English is widely spoken in the Philippines.

It also has a large and youthful population of 84 million, with many studying in the higher education system. The downside is that the Philippines faces an annual typhoon season and its recent history is marked by sporadic political upheavals and coup attempts, the paper said.

Nevertheless, Wipro Spectramind, a unit of Wipro, is moving in, opening a call centre that initially will hire at least 1,000 Filipino workers, the Wall Street Journal said.

The dispersal of outsourcing business around the globe, the Journal said, is expected to erode India's dominant position in the call centre industry, which features Wipro, Infosys Technologies and Tata Consultancy Services among others.