June 24, 2013
Earlier this month, research firm Frost and Sullivan predicted that the growth of the global BPO industry would be driven by the Asia-Pacific (APAC) region. Based on its analysis of the industry’s previous year’s performance—the contact center market in APAC (which is at 39.6 percent of the total market) grew at 8.4 percent in 2012—it forecasts the growth to continue at a similar rate.
While globally there has been a decline in the outsourcing industry due to the volatile economy, Indian companies have clocked growth higher than that of their global counterparts. According to Gartner, the top five Indian providers grew 13.3 percent last year, hitting $34.3 billion in revenue. Gartner also noted that Indian firms made “significant strides” in developing industry-specific BPO services through acquisitions and organic growth.
Predictions for FY 2013-2014 also follow a similar trend. Industry experts forecast a double digit growth of 12-14 percent, driven by high-end transformational services. BPO companies seem highly optimistic, with EXLServices, WNS, and Genpact expecting growth in the range of 12-16 percent, surpassing Nasscom’s 12-14 percent forecast for the IT-ITes industry. With research suggesting that the Banking and Financial Services Industry BPO grew at 16 percent when other BPO sectors were at 10 percent, the industry is looking toward areas such as banking, financial services and accounting, supply chain, and healthcare to drive its next phase of growth.
Though historically offshore revenue has been the driver of BPO industry in India, experts forecast that the future of the industry will be driven equally by domestic markets. Demand from local Asian markets and the subsequent opening of rural BPOs are expected to help sustain growth.
While Indian companies are highly optimistic about growth, China and the Philippines are fast emerging as competing destinations. In January this year, investment advisory firm Tholons named Manila among the top three BPO cities in the world, behind Bangalore and Mumbai. The BPO industry in the Philippines is positive about achieving the target of $25 billion by 2016 that it has set for itself. The Philippines, however, has the problem of an appreciating currency that may hurt their growth in the BPO sector. In the last three years, the Philippine Peso gained 6 percent against the US dollar, while the Indian Rupee lost 22 percent, making India the more economically viable destination.
On the other hand, China is also quickly catching up. According to experts, the BPO market in Greater China will grow 16.1 percent annually, while the Indian outsourcing industry will increase by 15.7 percent annually by the end of 2015. With several global majors setting up contact center services in China, Indian BPOs must work doubly hard to keep the growth rate advancing. Hansa Iyengar, an analyst with Ovum, attributes the dramatic growth in the Chinese BPO market to the fact that it is an emerging market and the focus is on volume. On the other hand, India is a mature BPO market looking to move up the value chain.
Amneet Nivsarkar, vice president of Nasscom notes that only about 30 percent of the BPO work done out of India is voice based, as against the Philippines, where nearly 100 percent is voice based. “This is how the outsourcing model will evolve. India does a lot of transformational work in this space, including higher-end BPO work in sectors such as banking and telecom.” As India moves up the value chain, it will become prepared to handle non-core, complex tasks from clients. While the governments in the Philippines and China play a consistent role in training their workforce to meet the needs of the industry, training remains India’s biggest challenge.