Captive BPO players rule the roost

By agencies   |   Tuesday, 23 August 2005, 07:00 Hrs
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NEW DELHI: The share of third-party BPOs is on the decline. But captive players continue to rule the Indian BPO market. According to a report by credit rating agency Icra, the percentage of third-party vendors to total players declined from 57 percent in 2001 to 36 percent in FY04-05. But the number of captive players increased sharply from 43 percent to 64 percent during the same period.

More than 30 companies have set up captive BPOs in India since 2003. The major ones among them being Ventura, Fidelity, AIG, JP Morgan, Tesco and Reuters. The trend is likely to continue for the next 3-5 years. Companies are wary of outsourcing their core business because of the risk, so they prefer setting up captive centers. The IT industry will especially witness captive centers being set up, as technology is core to their business. In the BPO segment, the next 3-5 years will see huge consolidation in the number of players, with major third party BPOs acquiring smaller players.

Only those providing niche services will be able to survive. But in the longer run, the tide will reverse. Third-party players will rule the market in the longer run. According to a report by Evaluserve, 5-10 large captive spin-offs generating $1.5 billion are expected by 2010. Acquisitions of the tune of $2-3 billion are expected in the next five years. Banking, financial services and the insurance business have seen a large number of captive BPOs being set up in India.

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