Currently, BPOs earn a large chunk of their revenues from the US market. Fifty-two percent of all deals recorded in 2008 originated from the US, according to ValueNotes Outsourcing DealTracker. While there has been a reduction in the number of deals, the deals have been largely awarded by US-based companies. Further, three of the five largest deals in 2008 were awarded by US-based companies and the remainder was awarded by the UK telecom and insurance companies. The exhibit below provides the geography wise break-up of the BPO contracts in 2008.

Contracts by Geography in 2008

 
      Source: ValueNotes Outsourcing DealTracker

However, BPOs are now paying more attention to geographies like Europe, Australia and Asia Pacific. In 2008, 7% of the deals were awarded by companies in Asia which includes India, Japan, Middle East, Malaysia and Philippines. Oceania representing Australia, New Zealand contributed 4%.

The focus on the US market is already reducing. We believe that this will reduce further in 2009 for several reasons. The slowdown in the US is making vendors aggressively de-risk their sources of business. Service providers such as TCS, Genpact, Wipro, FirstSource, and Intelenet among others are making aggressive efforts to de-risk their business and diversify their client base. Further, several large service providers have matured rapidly and have acquired the financial, managerial and operational capabilities to build and run centers at multiple locations around the world.

At the same time, the growing maturity of buyers in Europe, Middle East and Asia is opening up these lesser explored markets. For instance, with the (relatively) rapid economic growth, proliferation of technology in various sectors and an increasing number of companies going global, Asia is witnessing a marked rise in IT spend. Although Asia-Pacific constituted only a 6% share of the total global IT services market in 2006, IT spend in the region is growing at a much faster rate compared to the mature markets. IT spending is a precursor to outsourcing (of both IT and BPO) and Asia-Pac (especially India and China) will attract increased competition. Several domestic companies in these geographies are realizing the benefits of outsourcing to a third-party service provider.

Going forward, we believe that there will be greater adoption of outsourcing across geographies, which will drive the future growth.