While the IT-ITES industry is gradually recovering from the impact of the global economic slowdown, the opportunity in the domestic market in India has been growing steadily. With economic growth, proliferation of technology in various sectors and increasing number of companies going through a global facelift, India has become an attractive ‘buyer’ market.

Indian companies from high-growth sectors like telecom, retail, banking and financial services are amongst the leading buyers of IT and BPO services. Aggressive adoption of IT and centralization of operations will further serve as key enablers to outsourcing.

Captive model more dominant

Large banks and telecom operators including ICICI Bank, HSBC, VSNL and BSNL established their captive centers way back in the 90s. According to Nasscom-Everest, the total domestic BPO market is estimated to be $1.6 b (or Rs. 69 b) for FY08. Of this, the captives constituted approx. 74% of the total market. Many Indian companies have in-house units, which are not captives (i.e. separate offshore units) in the normal sense. Further, these companies prefer to keep processes in-house simply because the processes are not developed enough to be outsourced to a third-party provider.

In India, multi-national corporations have been at the forefront in outsourcing their processes owing to their focus on technology. Despite the emergence of third party players, majority of banks and telecom operators still keep a large part of their processes in-house. Management mindset, lack of in-house systems and processes and skill sets required to execute outsourcing are some of the factors that act as obstacles to outsourcing in the domestic industry.

For instance, while there are over 80 large banks in India, not all banks are currently equipped/ ready to outsource services to third party service providers. Centralization, automation, willingness and readiness to outsource are crucial aspects for outsourcing. However, the scenario is gradually changing with companies opening up to the concept of contracting third party providers for certain services.

Growing interest from the Government sector

Until recently, very few vendors serving international corporations were targeting the domestic BPO market. However, over the last two years, some of the large IT and BPO companies including Infosys, TCS, Wipro, Genpact, FirstSource and WNS have made in-roads to the domestic market by capturing some large deals in the industry. Several providers are exploring the opportunity in the domestic market to de-risk their dependency on the US and European markets.

While the telecom and banking verticals will continue to increase their outsourcing volumes, the Government sector is increasing its outsourcing share significantly. Over the last one year, we have seen increasing interest from the government sector.

 Deals in the Government Sector