What is BPO all about?
BPO (Business Process Outsourcing) is the contractual service to completely manage, deliver and operate one
or more (typically IT-intensive) business processes or functions. This could include processing to contact
centre operations to payroll processing, among others. A simpler way to think of BPO is to compare it to the
functions most organisations include in the general and administrative category. Some key business processes
that are outsourced and form a large part of the BPO market are administration, finance and accounting,
human resource, payment services, manufacturing services, distribution, logistics, sales and marketing,
customer care among others.

What is the potential size of the BPO business?
Gartner Dataquest has forecast the global BPO market to grow to $ 64 billion in 2006, at a CAGR of 21%.
Distribution and logistics comprise the largest portion of the market today at 29 % followed by human
resources at 24 % and payment services at 16 %.

At present, the US comprises 50 % of the global BPO market. Of the various BPO areas, Customer Relationship
Management (CRM) is expected to undergo most rapid growth projected at over 20 p.a. Within CRM BPO, more
specifically, call centre outsourcing is expected to grow at 29 p. a. over the next five years.

Why would a company outsource such jobs rather than do it in-house?
Principally due to pricing and cost. If a business entity could outsource its mundane functions and achieve the
desired result at a significantly lower cost, that would be the primary initiative for BPO. Besides, a potentially
better service level and continuous improvement in processes are key objectives for outsourcing. More than
reducing costs and improving service levels, there exist several other growth drivers. As IT outsourcing has
become more accepted, organizations are more willing to outsource additional work, leaving themselves free to
focus on their core business. The early BPO successes are now attracting the attention of additional companies.
As globalisation moves forward, the pressure to cut costs also increases.

How can India gain from the BPO boom?
India stands at a great advantage owing to several factors like low cost manpower, English speaking people
and India’s advantageous time zone. Large MNCs, especially in US and Europe already understand and in many
cases are utilizing India’s advantage as a cost efficient base for software development and maintenance.
Companies like GE, American Express and British Airways, have successfully demonstrated the benefit of the
model, with total annual savings of a few hundred million dollars between them alone.

What kind of BPO business are Indian companies handling?
In India, BPO essentially implies IT-enabled services, as manufacturing services have still not picked up.
Amongst IT Enabled Services (ITES), contact content development and administration are key areas. Other
ITES areas are legal database outsourcing, HR outsourcing and geographic information system. The market
size of ITES in India currently is Rs. 4, 100 crore. While call centres are known in India, the trend for contact
centers is picking up as voice telephony. Back office processing is expected to pick up in India significantly.
Banks and aviation require large-scale data processing and decision-making capabilities. For instance, large
insurance cos need to process claims they receive regularly. With well laid out rules regarding processing, such
processing can be done anywhere, provided there are a large number of graduates available.