India’s domestic BPO market, with nearly 500 players, is set to grow at a CAGR of 33.3% to touch revenues of US$ 6.82 billion by 2013, up from US$ 1.62 billion recorded in 2008.

A detailed report on the sector by global IT intelligence firm, IDC India, reveals that the industry would evolve into third-party ‘transformational outsourcing’ relationships from the existing captive dominated market structure. This implies that rather than merely running isolated processes for customers, BPOs would engage more deeply to identify and transform core business processes to add greater market value in the ‘creation and delivery of end products and services’.

The industry currently offers a range of services from customer care to research and analytics. The BFSI vertical contributes the lion’s share of 37% to revenues, followed by Telecom contributing one-fourth to it. Other verticals--Utilities and Services, Energy, Food and Hospitality, Aerospace and Automotives, Consumer Durables, Government--contribute 17%, while the travel segment contributes 8% to the revenue

Figure 1: Indian Domestic BPO Industry, 2008-2013

Source: IDC India, 2009

Positive market indicators of an economic recovery, unbundling of mega outsourcing deals and large unaddressed white spaces such as regional language services support the current optimism that the domestic BPO industry would be able to achieve its aspired growth target over the next five years. BFSI, Telecom, Utilities, Travel and Hospitality segments of the BPO industry are expected to continue to grow over the forecast period. However, it is non-English BPOs in Tier-II and Tier-III centres that can provide services to the Telecom and Aviation sectors at a lower overall cost that are expected to play an increasing role in the growth of the domestic outsourcing industry, says the IDC India study. Currently, such sub-regional / local BPOs are estimated to have capabilities to offer services in 10-15 Indian languages.

With rapidly developing infrastructure, availability of trained manpower, better connectivity and lower real estate costs, Tier-II and Tier-III cities like Kochi, Nagpur and Chandigarh have fast emerged as the new BPO ‘go to’ destinations, says the IDC India study. However, higher training costs in Tier-II and Tier-III cities and lack of availability of adequate talent pool continues to be an area of concern for players.

“The domestic BPO market shows promise of growth, especially in verticals like BFSI and Telecom in the short term”, says Arpan Gupta, Lead Analyst for the BPO, Industry Verticals and Government sector at IDC India.

“The concern areas for the BPO industry, that services overseas customers, such as Rupee-US Dollar volatility, rising infrastructure costs in Tier-I cities, over dependence on North American and European markets are expected to have minimal impact on the domestic BPO sector”, added Arpan.

Voice processes in the Indian domestic BPO market contribute 55% to the overall domestic revenues while non-voice market makes up the rest.

“As the industry enhances focus on Human Resource Outsourcing (HRO), Legal Process Outsourcing (LPO), Billing and high-end Analytics, the BPO market would see a gradual shift from Voice processes to non-Voice processes,” Arpan further stated.

About IDC
IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 45 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

About IDC India
IDC (India) Ltd., set up in 1987 is an ISO 9001:2008 company. IDC (India) Ltd., a subsidiary of CyberMedia, is regarded as the country’s most comprehensive, dependable and respected source for market intelligence and consulting in the fields of IT, telecommunications and consumer technology. With its head office at Gurgaon (near New Delhi), the company has branches in Bangalore, Chennai, and Mumbai. IDC ranked amongst Top 10 Consulting Firms: Business Today-Cirrus Newsmakers Study 2008-09. Additional information about IDC India's research, advisory and Go-To-Market service offerings can be found at www.idcindia.com. 


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