New deals rev up BPO sector

Source: BPO Watch India

Americans and Europeans love the concept of outsourcing, but Indians too are realizing the benefits of outsourcing their back-end and IT management. Apart from the natural recovery of the economy, there are other reasons too to this uptake and interest by Indian customers.

The first quarter of 2011 has witnessed 20 outsourcing contracts by Indian clients, against 12 in the same quarter last year. The last year's first quarter had only one BPO deal, which was signed between Genpact and Max New York Life Insurance. But this year, the number has reached to six, basically supported by the banking vertical, says a report by Everest Group in a report published in the Financial Express.

Amneet Singh, vice-president - global sourcing, Everest Group said that earlier the domestic outsourcing market was only skewed to IT. The year 2010 had only 18% BPO domestic deals out of the total outsourcing deals. This year they expect it to be 25%.

Nasscom too feels that IT services growth will be 16.8 % in FY 2011 driven by localized strategies of service providers. On similar lines, the domestic BPO segment will grow by 16.9% motivated by demand from new verticals and technology platforms.

Genpact chief operating officer NV (Tiger) Tyagarajan admits that the domestic clients are now looking at transformational deals. They are keen to adopt new technology, shared services and business analytics and want to get global expertise. This is a market which has a lot of scope for innovation and all the Indian clients are growing at a rate of 30-40% a year. The opportunity to be tapped is huge.

With growth in domestic IT market expected to outpace India's GDP growth, the industry had a strong focus in this segment. The domestic market grew by 16% to aggregate revenues of Rs 787 billion. Increased technology adoption across government, corporates and SMBs for providing citizen services, enhanced internal controls and customer service led to an increase in outsourcing within the domestic market also.

Dani from Everest Group mentions that while globally the split between ITO and BPO deals is 2/3rd and 1/3rd -- in India, it is 80-85% ITO deals and the rest is BPO. However, on the positive side, the contribution of Indian buyers to outsourcing deals is now 5%, which was negligible two years back. And industry analysts expect this to reach 10% within the next two to three years, said the Financial Express report.