"In India the business process outsourcing industry is growing at a relentless pace," Vikash Daga, consultant for the firm, told an outsourcing conference in India's technology hub of Bangalore.

"We see two shifts happening in this nascent industry. Indian firms will move away from the labour (advantage) as clients will push for more value addition," said Daga.

"And secondly, indiscriminate outsourcing by companies will give way to thoughtful reconfiguration of business systems," he said.

Daga said India's advantage of cheap labour, where call centre employees work for one-sixth of the salaries of their Western counterparts, has come under pressure.

"Billing rates have declined during the last two years in call centres. From 20 dollars an hour it has gone down to eight an hour now so companies surviving on (cheap) labour will not be able to maintain their margins," he said.

Daga said he expects the market to mature within five years while by 2006 India could even have an acute shortage of skilled manpower.

Daga said Indian firms would also have to learn how to deliver on a global platform and locations chosen by the clients.

According to McKinsey the emerging outsourcing destinations are China, Poland, Slovakia, Russia, Ireland, Mexico, Malaysia, the Philippines and Singapore.

Outsourcing contributed 29 percent to India's total software exports and posted revenue growth of 46 percent to 3.6 billion dollars in the fiscal year to March 2004, according to the National Association of Software and Service Companies, India's top IT body.

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