5 reasons why domestic BPO's hot
For long, India has been considered as the world's top outsourcing destination. And with the deepening global recession badly hitting the western markets, India continues to offer most lucrative opportunities matched with a talent pool for companies to expand their footprint here.
A recent study by Ernst and Young reinstates this fact by pointing out that even the domestic BPO industry of India has many untapped growth opportunities. India continues to be an attractive destination for companies to start their operations with cost advantage, abundance of skilled manpower and language capability. Here's what the study reveals.
Records 50% growth
The study by Ernst and Young reveals that India's domestic Business Process Outsourcing market has grown at a rate of 50 per cent over last five years and has reached $1.6 billion revenue in 2008. It is poised to reach $6 billion by 2012.
The study points that it has grown faster than the export BPO even though it is smaller than $11 billion BPO export market.
Untapped opportunities
The economic turmoil badly hitting BPO exports' key market (North America and UK), which account for 87 per cent of total exports revenue, the growth rate for exports is expected to fall further.
Hence, the domestic BPO market offers huge opportunities for growth. Its addressable market opportunity is in the range of $16-19 billion by 2012, with significant business growth coming in from sectors like BFSI, telecom, media, retail and government sectors.
High-growth areas
The study states that telecom, banking, financial services and insurance, the four main sectors that account for approximately 80 per cent of domestic BPO revenues, will be growth drivers for coming years. The BFSI sector is in fact expected to grow by 30 per cent over the next few years.
MNCs gaining footprint
Top IT companies are scouring for opportunities to expand their India operations. IT biggies like TCS, Infosys and Wipro plan to aggressively tap the domestic BPO market.
Top global players including IBM Daksh, Firstsource, MphasiS BPO and Intelenet Global Services are significantly expanding their presence in India. Revenue contribution from the domestic market has grown from 3.8 per cent in FY07 to 10.8 per cent in FY08.
According to analysts, India still remains an attractive destination for new BPOs to start operations with easy regulatory norms, cost advantage, abundance of skilled manpower and language capability.
Salaries
The report says that entry-level salaries for domestic BPO are between Rs 6,800-Rs 9,100 and wage costs have been increasing at a rate of 10-12 per cent annually.
According to the report, as compared with export-oriented BPOs, the annual revenue per full-time employee is 2.5 times in favour of export BPOs. However, the domestic BPOs are expected to ride on huge market size and the net margins are anticipated to increase to about 12.5 per cent by 2012 from about nine per cent in 2008.