India Needs To Focus On Developing BPO Skills

by CXOtoday Staff    Aug 30, 2005

Gartner today announced in India the results of a study of attitudes to IT Outsourcing and Business Process Outsourcing by major vertical industries.

Speaking at the Gartner India Summit, Craig Baty, group vice president and chief of research said, “The worldwide market for outsourcing (including BPO) will grow at a CAGR over 5 years of 7.8% from $305.85b in 2004 to $445.9bn in 2009. The BPO component of this will grow at a CAGR of 9.2% from $114.8b in 2004 to $179.35b in 2009.”

This means that of the total worldwide outsourcing market, about 61% of global spending is for ITO services, and the remaining 39% is for the relatively newer concept of BPO. These growth rates are extremely healthy compared to other IT sectors. As companies have tried to lower the cost of IT operations and focus on their mission-critical and core business processes, outsourcing has become a well-accepted means of accomplishing these goals.

Giving an overview of his session ‘Global and Local Opportunities in IT Outsourcing and Business Process Outsourcing by Vertical’ at the Gartner Summit India 2005, Craig Baty, said, “Based on our late 2004 survey of outsourcing and BPO intentions by vertical, it is quite clear that although there will still be robust growth in the traditional areas of manufacturing and financial services industries, this will slow down as it nears saturation towards 2008.”

“Although many other verticals remain relatively untapped in terms of outsourcing, this does not necessarily mean that the ‘offshore’ model for outsourcing delivery will be the preferred means. Many of the emerging vertical industries such as government, retail and utilities may in fact prefer to outsource locally, so Indian companies wishing to keep on the growth curve via penetration of these markets need to establish local delivery capabilities in each market, especially when targeting Governments,” observed Baty.

Communication, which is the fourth largest vertical ranks high in maturity in outsourcing ITO and industry specific BPO but ranks mediocre in offshore possibly due its low maturity in vendor management.

According to the Gartner study, the financial services and manufacturing verticals while being the largest outsourcers also had the highest level of acceptance or interest in offshoring work. The government vertical, which is the third largest outsourcer had very little by the way of maturity for offshoring work. Another aspect that needs to be highlighted is that the government vertical lacks maturity in outsourcing ITO and generic BPO but has high maturity in outsourcing industry specific BPO.

Although all verticals are candidates for offshore work of many kinds, those that have a heavy tendency to consider a global delivery model (offshoring) are in the manufacturing, transportation and banking and investment areas. This is culturally more acceptable to these verticals as they have already been operating in a globalized market for some decades. Government, retail and utilities on the other hand are less likely to consider offshoring.

Said Baty, “Although Indian companies have proven themselves to be world leaders in the area of generic BPO based around customer retention and support via call centres, they need to seriously increase their delivery skills in the areas of industry specific BPO skills and processes.”

“Those organizations that are currently considering BPO are looking for more than just initial cost cutting. They are looking to outsource in areas where improved processes and skills can assist in the creation of a competitive advantage, and realize rapid business results,” added Baty.