The phenomenal growth story of the Indian BPO industry

October 19, 2011: The BPO industry in India has witnessed a dramatic growth during the ten year period between 2001 and 2011. The revenue has multiplied over eighteen times according to the latest NASSCOM report.

The report showed an increase of direct employment by 12 times. The Indian BPO industry has emerged as the leader in the global BPO market over the ten year period. This growth has a significant impact on the Indian economy. During the financial year 2011 the total exports amounted to 14.1 billion US dollars and the BPO industry accounted for 25 per cent of the total software and services exports.

Another upcoming segment is the domestic BPO industry which accounts for a revenue of 2.8 billion US dollars. It is projected that the growth will accelerate within the next few years as a result of adoption of outsourcing across Government, Banking, Retail and telecom segments.

During the initial years, the impact of BPO was tactical in nature. But as time passed by the service quality and domain capabilities of BPO industry increased which has led to a significant strategic impact on the client’s business. The main driver behind outsourcing was to reduce cost, but with the advent of sub-process level re-engineering and green belt projects, it started to add more value to the clients which amounts to two times the normal. During the last decade of growth the Indian BPO companies were able to create a higher level of trust and commitment with the customers. This has helped them to acquire capabilities that will enhance the outcome of the business.

Indian BPO companies were able to benchmark the best practices of the market leaders and were successful in making use of the domain knowledge and the business insights to make a tremendous impact, which was to the range of 10 to 100X.

The major impact that was a result of the growth of BPO industry was the large number of jobs the industry generated. During the ten year span of 2001-2011, the industry had created direct employment to 835,000 Indians. Thus the direct employment has increased by 12 times with a Compound Annual Growth Rate (CAGR) of 28 per cent. The BPO industry provides indirect employment to around 3.5 million people across India.

Now, the Indian BPO industry offers services such as Customer Interaction Services (CIS), Financial and Accounting services (F&A), Knowledge services, Vertical Specific Services, HR and procurement. The revenue share of the different services is: 

1)      Customer Interaction Service : 42.5 %

2)      F&A services                        : 22.3%

3)      Knowledge service               : 17.7%

4)      Vertical Service                     : 13.7 %

5)      HR, Procurement                  : 4.8 %

The strength of the Indian BPO industry is the large number of English speaking graduates with almost 4 million graduates passing out every year. This is the reason why US and UK accounts for 82 per cent of the revenue during 2011 as our outsourcing services are predominantly consumed in these markets.

Though off late, other countries like Philippines, China as well as some countries in LA and Eastern Europe have emerged as BPO destinations, India demands a bigger market share and role in the global BPO Industry.

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