BPO MARKET INDIA

India is at the forefront of the rapidly evolving Business Process Offshoring (BPO) market and is well
established as a ‘destination of choice’. Having grown manifold in size and matured in terms of service
delivery capability and footprint over the past decade, the Indian BPO industry is now at an inflexion
point – and faces a unique opportunity to enhance its role as a full-service, value-adding partner. There
is significant headroom in the addressable BPO opportunity for buyers and providers, and there are
sizeable untapped opportunities across a wide spectrum of segments. Also, Indian BPO industry is
favourably positioned to benefit from its established delivery capabilities, which bear a key
influence on buyers’ decision to expand their global sourcing exposure. Over the next five years, the right
choices by stakeholders of the Indian BPO industry could effect a fivefold growth. The aspired target is
aggressive, but it is achievable, and will bring huge payoffs to India’s economy, employment and role in
the global marketplace.
This study is a comprehensive fact-based view of capabilities, opportunities, and growth imperatives
for the Indian BPO industry that will allow for focussed decision-making by all stakeholders — providers
(third-party vendors and captives), buyers, NASSCOM and the Government.


Evolution to date
Growing at more than 35 percent over the past three years, BPO is the fastest growing segment of the
overall offshore market3, and is currently estimated at US$ 26-29 billion. While labour arbitrage has
been a key driver for this growth, other factors such as access to talent, service quality, productivity, and
time-to-market have gained importance.
The Indian BPO industry’s growth and increasing maturity is reflected across multiple dimensions. In
just over a decade, the industry has grown to reach nearly US$ 11 billion4 in export revenues, employs
more than 700,000 people, and accounts for more than 35 percent of the worldwide BPO market. This
growth has been driven by 1) accelerated adoption by buyers of different sizes, from across industry
verticals and geographies, and 2) rapidly evolving supply-side maturity across service segments. This is
reflected in widening service portfolio, increased scope of services, greater penetration across vertical
and geographic markets served, evolution of business and engagement models, and development of
global delivery capabilities by the Indian BPO industry.
Most horizontal BPO5 segments (e.g., Customer Interaction and Support6, Finance & Accounting,
Human Resources, Procurement Services, and Knowledge Services) have matured significantly and
account for more than 70 percent of the Indian BPO industry. While Customer Interaction & Support (CIS) and Finance & Accounting (F&A) have been the dominant horizontal market segments, other
service segments like Knowledge Services are increasingly becoming important and continue to drive
market maturity. Many horizontal services are now demanded and offered across verticals — Everest’s
full-service index for the aggregate industry shows providers offer CIS, F&A and Knowledge Services
across multiple verticals. In addition, both buyers and providers increasingly cover end-to-end services
within each horizontal.
Another dimension of increased maturity of the industry is reflected in the growing importance
of vertical-specific processes7. More than 25 percent of the Indian BPO market today consists of
delivering functions and processes that are specific to a particular industry or vertical. In response
to evolving buyer needs, providers have expanded their service footprint into core vertical-specific
processes and are developing vertical specialization to increase breadth and depth of service delivery.
As an example, our analysis shows that more than 50 percent of providers servicing Banking, Capital
Markets and Insurance verticals have developed credible vertical specialization.
Further, the buyer (i.e. customer) profile of the industry shows increased diversification in terms of
geography and size. Buyers from the UK, Continental Europe and Asia Pacific are increasingly offshoring
delivery of business processes to India. Similarly, there is increased awareness and adoption amongst
mid-sized and small buyers. In addition, the domestic Business Process Outsourcing market8 has also
grown rapidly and is expected to reach about US$ 1.6 billion by FY2008.
The provider landscape has also witnessed significant changes. In addition to establishing
captive BPO centers, buyers now have a substantially large choice of third-party vendors to engage. In
addition, several hybrid sourcing models like build-operate-transfer and virtual captives are also being
used. The market is witnessing increased merger and acquisition (M&A) activity, as providers are looking
to build scale and acquire new capabilities rapidly, particularly to increase geographic reach and acquire key
service segment capabilities. Efforts are also underway to deliver value beyond cost savings and
sustain high growth levels through increased use of tools and technologies, adoption of standards and
best practices, and leveraging a global delivery model. The delivery footprint of the Indian BPO industry
now extends to over 75 cities across 25 countries outside India. Within India, the delivery footprint of the
BPO industry now extends to more than 30 cities across the country, and covers many Tier- 2/3 cities.