UK firms could find it more difficult to obtain offshored IT services as the Indian national software body this week advised local firms to shift their focus to the domestic market.

The Roadmap 2012 report from the National Association of Software and Service Companies (Nasscom) and consulting firm Everest Group revealed that India’s domestic industry for business process outsourcing (BPO) has increased by 50 per cent in the last five years. Further predicted growth in this area is likely to have a significant impact on the current offshore model, which places India as the main outsourcing destination of choice.

Outsourcing consultant Richard Sykes said that if India focuses more of its efforts on building up its domestic BPO market, there will be less resources and people skills to devote to the international arena. Although firms supplying the domestic market could hire graduates without English language skills, he added that this is unlikely because graduates trained with language skills tend to be of higher quality.

The report revealed that there is a shortfall of one million skilled graduates in the current Indian BPO market, while it predicts five-fold growth for the industry over the next five years that will require another two million new jobs. Nasscom is also urging stakeholders to encourage the growth of domestic BPO in order to enhance the competitiveness of the Indian industry.

Sykes said until now the country’s domestic BPO market had been largely neglected by Indian providers, and although it might mean a skill shortage, Sykes welcomed the recognition Nasscom is giving to the domestic space.

“The growth of the domestic industry has caught the Indian BPO providers off mark because they were so focused on developing their offshore capabilities. This has meant the industry has been picked up by multi-nationals,” Sykes said.

Eric Simonson, managing principal of Everest’s research institute, supported this view, citing IBM’s dominance in the Indian domestic services market. He added that although some Indian providers such as Wipro and HCL have concentrated their efforts in the domestic space, many others such as Infosys have mainly focused on the export arena.