| Opportunities in the Indian Domestic BPO Market |
| Written by The ValueNotes Team | |||||||||
| Wednesday, 23 July 2008 | |||||||||
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Opportunities in the Indian Domestic BPO Market The Indian domestic market for BPO has traditionally not interested the large vendors. But this is changing rapidly, as companies are waking up to the potential opportunity in this hitherto neglected but rapidly growing market within India. A few large IT deals in the past few years, especially in BFSI and telecom helped spark the interest of IT vendors, which is now spilling over to domestic BPO. According to NASSCOM, Indian revenues from international BPO market are estimated at $11 b (Rs. 440 b) for FY08, while domestic BPO revenues are estimated to be $1.6 b (Rs. 69 b) for the same period. The offshore BPO services market grew at a CAGR of 37% over the last 5 years while the domestic ITES-BPO services grew at 50% (on a smaller base) in the same period. Domestic BPO Market Size  Source: ValueNotes' report on "Opportunities in the Indian Domestic BPO Market" The recently released report by ValueNotes estimates the share of third party revenues is 27% of the domestic BPO market, at Rs. 18 b for FY08. This is expected to grow at a CAGR of 44% over the next four years reach Rs. 77 b by FY12. Outsourcing Drivers While the offshore (international) BPO market faces pressures with economy-wide slowdown in developed markets, the domestic BPO market is getting ready to take off. According Arun Jethmalani, CEO, ValueNotes, "Unlike the overseas business, labor or cost arbitrage does not drive the domestic BPO market. It's strategic factors such as the need to scale rapidly, focus on core competencies, enhanced productivity and reduced time to market that are driving domestic demand". Telecom vertical leads the domestic BPO market In terms of contribution by vertical, telecom contributes approximately 40% of the total BPO market. Telecom together with Banking, Financial Services and Insurance contributes nearly three-fourths of the total revenues. Says Pranav Dixit, analyst and co-author of the report, "While we expect the Telecom and Banking verticals to continue to increase their outsourcing volumes, other verticals that will augment their outsourcing share significantly are Government, Financial Services, Insurance and Retail." Vendor Landscape There are over 700 third-party vendors offering a variety of BPO services to the domestic market. Based on their size and market focus, we have classified the third party vendors into four groups - International Leaders, India Leaders, Emerging Companies and 'Me-too' Players. We have evaluated key vendors offering BPO services in the domestic market from the four vendor groups (based on our proprietary analytical matrix).
While the existing vendors have aggressive growth plans, a number of international focused BPOs (including Infosys, Genpact, etc.) are seriously looking at the domestic market. According to Neeraja Kandala, analyst and co-author of the report, "Entry of international BPOs is a positive trend, which will witness growth in the number of contracts (and larger contracts) from clients. Over time the international BPOs will capture a larger share of the domestic BPO market." Future Outlook Going forward, we believe there will be increased buyer awareness and adoption of outsourcing across industry verticals, which will drive the future growth. Significant scale exists amongst banks, telecom operators and government departments. This makes them attractive targets for BPO vendors. However, reforms in the banking sector will trigger exponential growth for outsourcing. Post FY12, we believe that outsourcing will become a crucial competitive advantage. This article is an excerpt from the newly released report: "Opportunities in the Indian Domestic BPO Market" by ValueNotes. The report provides an in-depth analysis of the buyer as well as the vendor landscape. The study analyzes the sectoral opportunity and emerging trends in the large and emerging verticals - Banking, Financial Services, Insurance, Telecom, Government, Retail, Logistics, Airlines and Travel and Hospitality. To read the Abstract and Table of Contents, please click here . |
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