The Second Gold Rush

While the US-led economic slowdown and the 9/11 tragedy may have left the IT

India Inc scouting for greener pastures in new geographies other than the US, a

Gartner Group report indicates that the US market offers Indian ITeS companies

the maximum potential. The forecast was part of the presentation on offshore BPO

market opportunities at the recently held Nasscom-Gartner Summit 2002.

According to senior Gartner analyst, Rebecca Scholl, North America alone

would spend around $ 107.8 billion on BPO in 2005 as compared to $ 71.6 billion

spending in 2000–a growth of 66%. This is much higher than the $ 68.9 billion

BPO opportunity offered by Western Europe, Asia Pacific, Japan, and Latin

America put together. While the report estimates that the size of the BPO market

in Western Europe will be $ 52.4 billion in 2005, Asia Pacific is estimated to

spend $ 10.1 billion on BPO in the same year. With an estimated $ 4.6 billion

spending, Japan is fourth on the list, followed by Latin America at $ 1.8

billion. The rest of the world, according to Gartner will be spending around $

1.7 billion on the same.

Says Sujay Chohan, GVP and country director, Gartner India, "Of the

global BPO market, a mere 5% is currently being sourced from offshore vendors.

While this market does not seem huge currently, it is the future estimates that

project an exciting opportunity for India-based BPO vendors. Gartner Dataquest

estimates the market to reach $ 170 billion by 2005 and for the offshore

opportunity to increase to 10-15%."

The Gartner report also forecasts a major boom in HR outsourcing amongst all

non-core organizational processes. Close to 80% of the 150 respondents surveyed

by Gartner in June 2002, stated that HR was their most outsourced process. This

is followed by finance and accounting, sales, marketing, and customer care

beside supply chain management, other business administration functions and

indirect procurement.

Talking about the primary drivers of BPO, the report says that a

concentration on core business, improving service levels, shortening

implementation times, reducing costs, and improving shareholder value were some

of the key triggers that forced companies to opt for BPO. The need to innovate

and technology migration were some of the other compelling reasons. However, the

need to focus on the core business remains the key BPO driver.

Gartner, which has called the BPO segment the next gold rush after the

Internet, also divided the Indian ITeS players under various categories–internal

back office centers, offshore IT services, pure play offshore BPO, offshore

contact center specialists, vertical offshore specialists, US consultants and IT

services and US contact center specialists. The research and consultancy firm

also presented an evaluation of the offshore BPO vendors indicating their

competitive advantage and weaknesses.

Commenting on the current BPO scenario in India, Chohan said that only

one-tenth of the existing Indian BPO players, at present, can be classified as

mature players. However, according to him, "with global drivers of BPO

demand expected to be consistently strong over the next five years, Indian BPO

service providers can be expected to rapidly increase their share of the global

market. This despite emerging competitors in Europe and Asia."

The final tip for Indian ITeS companies on how to achieve success: deliver

what you promise. "Don’t over promise, clearly communicate with the

client during delivery, provide responsive customer service and anticipate

change," is what Gartner has to offer the Indian BPO players.

SHUBHENDU PARTH in New Delhi