‘India well poised to ride BPO wave’

Source: IRIS

BANGALORE: Investors in Indian IT stocks have reasons to feel happy, if one goes by the latest findings on BPO outsourcing by Forrester. Even leading Indian software companies have opened up BPO divisions to supplement their revenues and make up for pressures on volume and margins resulting from the current downturn in the US economy.

Forrester`s survey throws light on how India stands better in competition over other countries for pursuing BPO business over the next four years. Forrester surveyed over 82 senior IT executives and held in-depth interviews with 12 BPO early adopters. The survey brings out the fact that BPO vendors across the globe are promising more than what they can deliver. The issue boils down to the lack of breadth in the vendors` capabilities, which in turn is causing problems for clients.

While there is severe competition for BPO business from China, Russia, the Phillipines, Canada, Mexico and Ireland, India has its own strength. With 75000 IT and two million English speaking graduates being turned out every year, India is an attractive destination for US companies wanting to outsource. China does not pose serious competition at the moment as most of the around 50,000 technical graduates churned out of the universities every year migrate to US and Europe.

US companies outsource a variety of services. Of these, `simple bulk transactions`, such as processing of stock trades or credit card transactions is the easiest for providers to master. The market size of this segments is forecast at $58 billion in 2008. It is also the largest BPO segment, with forecasted revenues of $58 billion in 2008, out of a total of $146 billion for all segments put together, according to Forrester. Here, one cannot rule out the possibility of countries like Uruguay and Vietnam competing for the `simple bulk transactions` segment more and more.

BPO services covering human resources and finance and administration call for more sophisticated skills from vendors. This segment is almost as big as the first one with expected revenues of $57 billion in 2008. India can well hope to grab more and more of this segment as IT system integrators in human resources services and in finance and accounting.

Then there is the segment of high-volume vertical processes such as the administration of insurance policies and the processing of loan applications. This is a small segment with forecast revenues of $6 billion in revenue in 2008. Vendors are expected to battle here fiercely.

Notwithstanding the current growing pains in the downturn, companies are likely to invest more and more in BPOs. And Forrester believes that the overall BPO revenue will hit $146 billion in 2008. India`s BPO revenues are estimated to grow to $ 1.2 bn in 2003, from their 2002 levels of just below a billion.

Even as the Indian IT companies grapple with pressures on their billing rates, the unfolding BPO scenario certainly offers a promise.