Why BPO business lags behind ITO market in Russia

Russian ITO market is showing a steady growth since 1991 whereas the BPM business is still lagging behind by some distance. Let us analyze the reasons behind this situation.

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Estimates from Russian software development outsourcing association reveal that IT outsourcing services stand at about $3.5 billion, which seems much higher than the estimated figures for Russian BPM market. Market estimation for Russian BPM business can’t be done much easily, since it is largely fragmented and is still in the developing phase.

Lack of Offshore Orders

Reduced number of offshore orders is one of the reasons behind the lag of BPM business in Russia. ITO (information technology outsourcing) market is growing due to offshore orders where as BPM services are completely driven by domestic demand. Obviously this will hinder the consumption of BPM services when compared to ITO services.

Late entry to Market

Russian IT outsourcing companies started their BPM services in 1989-1991, whereas BPM players entered this space only in 2000. This late entry to market has also impacted their pace of growth.

Fragmented Market Structure

Fragmented nature of BPM market is also a cause for its slow growth. Encouraging mergers and acquisitions among BPM companies can rescue the situation, thus increasing the outsourcing margin, and hence increased revenue.

Lack of project management culture

Occasionally managing a distributed team will be more risky when compared to the management of an in-house team. Likewise BPM, offering services by an outsourced team, need to be managed well and may get time expensive also. Therefore, demand for BPM is a matter of management skills.

Lack of Transparency

Business process management is the process of outsourcing of the organization’s entire operations to an external provider. For successful BPM, processes needs to be transparent and compliant with the law and standard requirements.

Lack of Trust

Business is a process of trust. It is a trustworthy relation between an employee and an employer or a client and a service provider. According to the European Social Survey, Russia holds the fourth place in the matter of trust. Such lack of trust worthiness the customer and the provider and also the society as a whole affect the growth of BPM business in Russia.

Russian BPM firms are trying to regroup and accelerate their growth in the market. They are focusing on getting more international contracts rather than relying only on domestic services. Merging BPM and ITO services, and delivery of BPM services in SaaS mode are other possible solutions. This will help providers in cost reduction and processes optimization

Incorporating good infrastructure for telecommunication helps in easy delivery of services to distant regions of the country. Also Russian BPO market is expecting for healthy economy and reduction in shadow business. Through these efforts, we can hope that Russian BPM market volume will potentially rise in the next three years.

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