Business process outsourcing to India

In 2003-04, Indian BPO Industry progressed into the third phase of industry evolution - highlighted by the greater degree of depth, specialization and competition. As the supply-side dynamics matured, so did the demand. Signs of industry maturity, witnessed over the last year, were typified in the type of contracts entered, the proliferation of service offerings, the manner of resolving industry-wide concerns /issues such as managing attrition and building scale, and the pricing and engagement models adopted as the vendor landscape further consolidates.

The Indian BPO industry remained on a growth path, emerging as one of the key investment markets in the country. The sector witnessed considerable activity during 2004-05, including a ramping up of operations by major Indian and MNC players and stepped up hiring. The domestic BPO market, catalysed by demand from the telecom and BFSI segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, including captive units (of both MNCs and Indian companies) and third-party services providers.

Players in the Indian BPO industry are broadly classified into captive units and independent third-party services providers. Captive units continue to dominate the segment, accounting for over 65 percent of the value of work off-shored to the country. While the independent /third-party BPO vendors outnumber the captive units, the scale of work undertaken by each unit in the latter category is significantly higher.

Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. What’s more, this trend should continue over the next 12-24 months, according to a new report.

The findings are based on interviews with CFOs and MDs of 127 Europe-based and 151 US-based companies.

According to PricewaterhouseCoopers’ Management Barometer Survey released this week, 72% of European multinational companies have outsourced financial functions over the past two years compared with 77% in the US.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12-24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.

Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.

According to the findings of the survey, product sector companies (80%) are more focused on using these services over the next 1-2 years than service companies (63%).

Links to Indian Goverment sites on the BPO Industry

NASSCOM [1]

Ministry of Information Technology [2]

Software Technology Parks of India [3]