BPO services surpass IT services

  Acquisitions by Indian outsourcing companies are continuing unabated, driven by an increasing need to both deepen and broaden their capabilities in their search for growth and scale. A key driver of this activity is a little noticed long-term trend that should become more obvious as the years roll by that of the business process outsourcing (BPO) sector growing faster than information technology (IT) services outsourcing. Acquisitions are happening rapidly and mostly finance and accounting sector is on the move. Also BPO firms are joining hands with telecom service providers as well. Most of the experts opine that unlike IT services, the BPO sector was not hit as hard by the downturn of 2008-09. IT services has now bounced back strongly and is growing much faster than BPO as a short-term trend. In the long-term, however, especially given that the IT services market is very well penetrated, it is BPO which will outpace growth, they points out.

According to some reliable data point the worldwide IT outsourcing expense is growing at 4% while BPO is growing or will grow at 6-8%. When you analyse the actual IT spend of companies, you can see that is growing at only around 2%, reflecting their actual growth. On an average, for every $1 billion spent on IT, a company would spend $4-5 billion on BPO.  Outsourcing is a much larger market and it is not that well-penetrated. So the long-term road ahead is clear. As with IT services, BPO clients are becoming more demanding and looking as much to solve business problems as to reduce costs. This calls for a deeper industry domain knowledge as well as global capability—the other key factors driving acquisition activity in the space.