Since its inception in the 1990s, Business Process Outsourcing sector, more popularly known by its acronym, BPO, has been creating millions of jobs around the world. Many countries in the emerging world such as India and Philippines have been transformed by this industry.
Over the past decade, India’s BPO industry has seen remarkable growth employment and revenues have expanded several folds. The BPO industry has expanded at a CAGR of 13.7 percent over 2010–16.
Market size of BPM industry in India is estimated to rise from $ 41 billion in 2020 to $ 54 billion by 2025. BPM accounted for 22.63 per cent of total IT exports during 2016. Currently, IT and BPO sector employ 4 million people in the country. With a large pool of English speaking and talented graduates, India is one of the top destinations to offer BPO services for international clients. Today the country has a very mature market with vendors offering services across the entire BPO value chain.
Indian employees are particularly attractive to BPO employers. The reason is not far to seek. They are fluent in speaking English.
However, this growth cannot go on forever. The trend of BPO moving towards automation is one of the challenges faced by the sector. Add to this the traditional challenges faced across the BPO industry such scarcity of well-trained employees, high attrition rate and pressure to maintain profit margins.
Not just BPO – the rise of KPO
Changes are taking place in the BPO world on a fast pace. In order to not be left behind it is in the essential fitness of things that India focuses its close attention to trends that have the potential to alter the industry. If the BPO sector fails to keep pace with the fast changing BPO landscape, it could well find its BPO growth declining further.
Thanks to the rise in the demand for non-voice and high-quality services, Knowledge Process Outsourcing (KPO) is gaining momentum. KPO is defined as the outsourcing of core data-based business processes to another firm.
The KPO sector is seeing strong growth in India, where it has been easier to find the highly qualified employees needed to work in this new industry. The worldwide KPO market is estimated to grow at a CAGR of 23.12 percent from 2013-2018.
The Indian government has already recognized the trend of gradual shift from BPO to KPO. As a result, KPO’s share of the market is steadily increasing in the country and some of the world’s largest KPO service providers, such as Goldman Sachs, McKinsey, UBS, J.P. Morgan and AIG, are already operating in the country.
Finance related work has the largest opportunity in a BPO firm. Presently services related to BFSI about for about 35% of the total outsourcing market in India. BSFI segment is expected to contribute to 55 per cent of the total BPO market in the next five years. According to the estimates by NASSCOM, vertical- or industry-specific services in BFSI have been witnessing growth rate of about 20% CAGR for the last 3-4 years, which is much faster than the generic BPO services like F&A.
BPOs have saturated in most of the metro cites in India. Smaller cities are ideally suited to be next BPO hubs. Needless to say, they would be expanding into the Tier II cities such as Jaipur, Pune and Chandigarh. India will face stiff completion from Philippines.
High growth in the BPO industry in the next five years will result in the expansion of the companies looking for larger requirements. Robust growth in the sector will lead to increased M&A activity. A large number of Indian companies will be looking towards expanding their operations by setting up offshore delivery centres across the globe. Many of the BPO firms will venture into the KPO domain.
Growth in the next five years will be driven by an increase in demand for non-voice services. To remain high in the curve the BPO firms will have to hire, train and re-skill their employees. India has to be rebranded as a global BPO hub. If government reforms continue, the future of BPO in India seems bright while the naysayers will always paint a gloomy picture.
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