Business Process Outsourcing, whether viewed through the eyes of the vendor/provider or the corporate business owner, has historically been viewed myopically as a means for corporate entities to strip out cost and increase profitability through labor arbitrage as it applies to siloed business functions such as IT or finance and accounting. This business model led to the rapid expansion of specialized service providers and function specific, corporate captive centers. While these models have proven to be fundamentally and fiscally sound throughout the past two decades, the role of the discrete service provider is coming to an end. The end will be ushered in by traditional market drivers such as increased competition and emerging technology, but more importantly, the fate of individual IT-BPO service providers will be determined by the overall scope and value of the services provided across the client’s enterprise. Those who fail to adapt to customer demand will see their market share evaporate or find themselves the target of acquisition. The focus for the future must be the customer.

When addressing the future it is paramount to note that the market landscape is still bright. As per NASSCOM the Indian IT-BPO sector is estimated to grow over 19 percent in the FY 2011. Its total revenue of Indian IT-BPO is estimated to be $88.1 billion in FY 2011 of which 19 percent would be coming from BPO. Of the total revenue 33 percent would be generated from domestic and 67 percent would export revenue. Direct employment would grow by 10 percent reaching 2.5 million and over 2.4 lakhs jobs will be added in FY 2011. Total employment in FY 2011 is estimated to be 10.8 million.

The future of Indian IT-BPO industry looks promising for both domestic and export revenue. The size of global sourcing market has grown from $37 million in FY 2005 to $106 million in FY 2010. India’s share in global market is 55 percent in FY 2010 compare to 49 percent in FY 2005. Of this the India’s market share from BPO market is 34 percent in FY 2010 compare to 45 percent in FY 2005. Revenue from global BPO exports has increased from $12 million in FY 2005 to $42 million in FY 2010.

While financial statistics and generous forecasts are encouraging, the IT-BPO market is not immune to the boom and bust cycles that have affected mature global industries such as construction, manufacturing and retail. Although IT and BPO service providers have traditionally benefited from such market cycles, acting as a stabilizing agent for their clients, it is imperative to remain vigilant and understand that continued market share is not a given for Indian BPO and ITO organizations. To rest on past success by assuming that current competitive advantages such as cost, education levels and management expertise, will not erode can be fiscally fatal. Pressure from other BRICs members will continually increase and the impact of their continued assertiveness is difficult to predict.

Competition from outside India’s borders is a given and well covered by the business media. In of itself, competition is not the chief threat to our outsourcing leadership position; it is merely a contributing and ever present factor. Market share will continually remain in flux based on price pressures, regulatory shifts and trends largely out of our control. Business plans account for such variability and allow nimble service providers to react accordingly. However, as alluded to before, the chief threat is the infiltration of an overconfident and relaxed perception that the provision of largely commoditized services can be maintained. Relevancy will be determined by customer value and not solely on line of business expertise.