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September - 2007 - issue > Cover Feature
Indian advantage continues
Venkatesh Roddam
Tuesday, September 4, 2007
The global process offshoring industry is transforming the Indian Business Process Outsourcing (BPO) industry. Globally, corporates are adopting BPO as a strategic business solution, as a business inevitability. The same is evident by increased spending in Process Offshoring services in the last 36 months. According to Gartner research report, the global BPO market size by the end of 2007 will be U.S. $173bn, of which U.S. $24.23 bn would be outsourced to offshore service providers, and India has the potential to generate U.S. $13.8 bn in revenue by end of this financial year. The projection includes revenues of pure play Indian BPO service providers, captive operations of MNCs operating in India, third party service providers, and BPO subsidiaries of IT services firms.

From back office towards Knowledge Process Outsourcing (KPO) and beyond
Broadly, the industry is divided into three segments: pure-play BPOs, IT-industry BPO outfits, and captive BPOs. Two of the largest pure-play BPO organizations have been gobbled up by IT outfits in the last couple of years.

Though over 65% of India’s outsourcing services professionals are engaged in transaction-intensive services, every Indian BPO company is carving out its niche. The main players are discovering a rapidly changing array of new global opportunities from different geographies. Over the past 24 months, the industry seems to have achieved a critical mass providing high-end knowledge process outsourcing (KPO) services.

India BPO industry has undoubtedly changed the global process offshoring game by moving up the value chain in a short span of time. The emergence of other BPO hubs around the world poses a serious threat. Ireland, China, and the Philippines are currently not as favorably positioned as India in terms of availability of low-cost skills, but they are making significant efforts in improving the quality and quantity of their manpower. Yet, the inherent advantages, a strong mix of low costs and depth in human resources, will keep India a very competitive market for next 5-7 years.

A major shift in the Indian industry has been witnessed wherein the multinational company captives or former captives, are moving out of the market. A collaborative commitment between an organization and its outsourcing partner forms the basis of a high pay-off outsourcing agreement that transforms the organizations enterprise-level performance and outcomes, driving change throughout the business.

What’s critical for any company is a deep understanding and commitment at the higher levels to discovering what’s cost-effective, and adopting a global sourcing strategy.

Indian Outsourcing industry is playing a vital role to ensure business with large and medium corporates across the U.S. and Europe, and remain competitive and spur top-line growth. The corporates are increasingly seeking to enter niche markets to serve local markets.

I see the Indian BPO industry moving to the higher end of the complexity spectrum in the near future.

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