Look how BPO sector is beating IT industry in INDIA

Growing in sophistication, India's BPO industry is growing at a quick rate, a sharp contrast to the IT sector which has struggled to recover after the financial crisis of 2008.

The faster growth is attained by cost pressures at bigger corporations in Europe and USA which are now outsourcing whole processes rather than parts of processes they used to previously. Such a development, while helping in lowering costs, also asks for advanced skills and expertise at Indian BPO firms.

"Contemoprary BPO is moving towards high-end knowledge and skilled-based work. Clients are reducing their IT outsourcing spend and changing it to BPO budget. This has resulted in a huge gain in the BPO spend," said Biswajit Banerjee, senior analyst at the Indian arm of European outsourcing advisory Pierre Audoin Consultants.

Hence, in the December quarter, from 6 of the whole revenue earned by Infoysis, 41% was from its BPO sector, similarly for TCS BPO unit grew by 39% as compared to the 22% of the company's growth.

At about Rs 84,800 crore ($16 billion) in export revenue and an employment base of some 9 lakh professionals, India's BPO industry is still much smaller than the IT services sector that earned a little over Rs 2 lakh crore ($40 billion) from exports and employed as many as 13 lakh. Vipul Khanna, who heads BPO operations at Cognizant Technology Solutions, said that Indian BPOs are being called on to do complex work, which has in effect increased the potential basket of services they can offer.

In insurance while Cognizant earlier handled policy and claims management tasks, it now also helps insurers take business decisions on new underwriting support and claims adjudications. "Globalisation of businesses, regulatory changes and virtualisaton of business processes through mobility and cloud are driving rapid expansion," Khanna said. Cognizant is scheduled to announce its December quarter results on Thursday.

There is also a slight change in the type of demand, with more clients now demanding for more domain-focused skill sets, industry-specific knowledge, and all of it at client locations, said Rahul Singh, president for business services at HCL Technologies. HCL turned around its loss-making BPO arm a few quarters ago and recorded a double digit operating margin for the first time in the December quarter.

Revenue from BPO services fetch about 4.4% of HCL Technologies'. "Right now in the US there are major changes taking place in healthcare and banking which require an increase in labour to support them," said Cathy Tornbohm, research vice-president for BPO at Gartner. Gartner estimates the global BPO market to be worth $176 billion by 2016.

Sid Pai of ISG, one of the world's largest sourcing advisory firms, believes that there is a fundamental change in buyer behaviour with clients ready to outsource not just noncore functions.