About the Event

India's BPO industry is at a significant turning point. Over the last five to six years the industry has grown faster than the IT services industry to achieve USD 11 billion revenues by 2008. However, industry leaders recognize that the next 10 to 15 years can be fundamentally different from the last 5 years. A number of demand and supply side factors are likely to alter the industry’s growth trajectory. For example on the demand side, the global economic crisis and changing socio-economic, demographic and environmental landscape are going to redefine the addressable opportunity. On the supply side, several factors like increasing competition from other low cost countries, shortage of talent and need for new business models are likely to affect the industry significantly. It is therefore imperative for BPO customers and providers to understand the impact of these factors and transform their approach and business models accordingly.

Demand side factors affecting the Indian BPO industry

In the near term, impact of the global economic crisis is going to be the biggest demand-side factor affecting the industry. What started as a sub-prime mortgage crisis has now engulfed the entire global economy—especially the traditional source markets for our industry. The crisis is likely to affect the source markets for BPO in potentially two different ways – i) though many outsourcers have indicated that outsourcing/offshoring as a percentage of their total employee base is not likely to drop, there is going to be significant pressure on pricing and delay in kick starting projects and ii) at the macro level, the threat from increasing protectionist policies from source market governments can negatively impact demand for offshoring in the short-term.

In the medium to longer term, the addressable market for BPO is expected to grow significantly due to demographic, macro and socio-economic mega-trends. First, the shrinking working age population in developed countries is likely to increase the demand for offshore BPO services in new areas (e.g. healthcare services for ageing populations, productivity solutions for addressing talent shortage). Second, the rise of Asian economies is likely to open up the demand for domestic BPO in countries like China, India. Third, improving connectivity is likely to increase demand for BPO services from new customer segments (e.g. SMBs, person-to-person offshoring services). According to the NASSCOM “Perspective 2020” Report, the addressable market for BPO services is likely to increase from USD 220 billion in 2008 to USD 900 billion in 2020 – a 4x growth. However, more than 80% of the incremental growth will be from markets that are currently untapped by the BPO industry (e.g. emerging verticals such as healthcare, new customer segments such as SMB and new geographies e.g., BRIC).

Supply side factors affecting the Indian BPO industry

India has continued to be the destination of choice for offshoring over the last 10 years and has marginally increased share to 46% of all offshore BPO services globally. However several supply side factors are threatening India’s leadership position in the BPO industry.

By far the biggest challenge facing the Indian BPO industry is a shortage of employable people. A very low proportion of graduates from Indian colleges are employable by the industry (e.g., 12 per cent for voice-based business services, 18 per cent for transaction processing). Meanwhile, atleast 30 other low-cost countries are making a determined effort to grab share from India. These countries are also moving fast with bold initiatives to further strengthen their competitive position. For example, an emerging location is undertaking a university program that will create an incremental 40,000 employable students per annum by 2010. China has close to 800,000 English teachers, a sizeable number of them from overseas locations. In addition these countries are offering significant incentives to the industry including tax benefits and better infrastructure. Our analysis suggests that if India does not maintain and strengthen its competitiveness, it can lose up ~10 per cent of its current market share, particularly to Philippines, China, Eastern Europe and other emerging economies.

Furthermore, there is an immediate need for providers to develop and nurture new business models to capture the new market opportunities (e.g., BRIC, SMB etc.). The global delivery model, with a thrust on delivering low cost services to customers worked very well in driving adoption in the first phase of the BPO industry’s growth. However to capture the next wave of growth, the industry needs to come up with newer business models, since 80% of incremental growth will be from new untapped markets, where a low cost, labor-arbitrage based value proposition alone will not be enough to facilitate adoption.

Depending on how effectively, the Indian BPO players can address the demand and supply side factors, India’s BPO industry could see generate revenues of upto USD 150 billion by 2020 (source: NASSCOM “Perspective 2020”).Keeping in view the critical juncture the Indian BPO industry is in and the need for innovative ways to ensure sustained growth and success of the industry, E18, the events arm of Network 18, will organize the “BPO INDIA FORUM 2009” in August 2009. The Forum is expected to be one of the largest gatherings of the outsourcing community and will include participation from over 500 key decision makers across two cities, including the key high –level representatives from BPO companies, enterprise community (BFSI, Telecom, etc), solution providers, analysts, government representatives and the media. Specifically, we hope to focus this years’ discussion on the following three themes:

Near-term outlook and imperatives: The global economic crisis is likely to create short term challenges for the BPO sector. How should the industry be looking to respond to changing client behaviour and what are the near term imperatives?
Growth engines and business model transformation: Even as near-term challenges remain, it is critical to take a long-term perspective on the BPO sector. What will be the engines of growth and the business models that are likely to evolve in this changing landscape? Discussions will focus on key emerging verticals – healthcare, government/PSU sector, domestic/ BRIC markets and the small and medium business (SMB’s) customer segments.
Agenda for change: With a new government and very different power dynamics in the country, what are the imperatives for the government vis-à-vis the BPO sector?