Indian BPO industry to reach $50 bn by 2012?

A joint study conducted by National Association of Software and Service Companies (Nasscom) and the Everest Group, a global strategy consulting firm reveals that the $11 billion Indian BPO industry in its current momentum is poised to touch $30 billion by 2012. However, with accelerated growth to capture the addressable spend in the international and domestic market could take the industry to $50 billion by 2012. Som Mittal, president of Nasscom spoke to Manu Sharma of CIOL Bureau on how the Indian BPO industry is shaping up.

CIOL: What was this study all about?
Som Mittal: The Nasscon-Everest India BPO study began in August 2007 to provide a comprehensive fact-based view of capabilities of sector, opportunities and growth imperatives for Indian BPO industry and its stakeholders. We found that the Indian BPO sector has evolved tremendously since its inception, not only in its size but also in terms of maturity - service lines, service delivery capability and footprint.

CIOL: Does India's BPO have the potential to touch the $50 billion mark?
SM: I strongly feel that the aspired target for the BPO industry is very much achievable however stakeholders will need to act on a number of initiatives to accelerate growth individually as well as collectively.

CIOL: What are the steps needed by the industry/government to achieve the $50 billion mark?
SM: The study highlights an eight point action themes for the Indian BPO industry to realize its potential and accelerate its growth. We will share the study with the industry and also the various governments. Some of the themes include: Protect India's cost advantage to ensure buyer interest; Create BPO hubs to drive this industry deeper within India; Increase employment and access untapped talent pools by creating greater linkages between the current education system and the needs of the BPO industry and Facilitating the development of BPO-specific education models.

CIOL: How will the BPO growth impacted the Indian economy?
SM: The five-fold growth in the Indian BPO market will bring huge payoffs to India's economy and employment. It contributes about 2.5 percent to India's GDP from export earnings and provides employment to over 2 million people that is expected to grow by 2-3 times. Besides growth in tier 2 and tier 3 cities and towns will see a six-fold growth in the number of delivery centers.

CIOL: In terms of employment where does it stand today?
SM: This US$ 11 billion industry today employs more that 700,000 people across 25 countries and accounts for approximately 40 percent of the global BPO offshore market thereby creating huge job opportunities and impacting the economy.

CIOL: Has the industry been able to penetrate into smaller towns across India?
SM: The industry has today expanded to tier 2 and tier 3 cities and towns and delivers services from over 30 cities with in India. In addition, the industry has acquiring global services delivery footprint with operations in over 75 cities across 25 countries.

CIOL: How has the BPO industry growth over the years?
SM: India has emerged as the destination of choice for offshore delivery of business processes. Today the BPO industry has touched $11 billion and growing annually at 35 percent over the past last five years. Earlier the IT industry involved only the engineers and technical people but now the fresh graduates are entering this industry.

CIOL: What are the areas of potential growth in this industry?
SM: About 30 percent of the opportunity will be in the under-penetrated industries such as telecom, retail, media and energy and so it is needless to say that the traditionally large areas such as banking, insurance, financial services and manufacturing will offer large opportunities as well. Today North America continues to be the largest BPO market for India. However, untapped opportunities in UK, Continental Europe and Asia-Pacific will offer larger outsourced opportunities as well.

CIOL: What is the Future of BPO industry in India?
SM: Our figures indicate that the global BPO industry is estimated at about $250-$280 billion. But presently only less than 4-5 percent of the industry is actually tapped. But we see a huge potential in the future in terms of growth and also employment in India.

Troubled times for tech?

It seems to be a very shaky state of affairs for the global economy and technology in the high-tech industry. What worried economists six months ago, is having them in an outright panic with "economic rescue" plan that may be on the brink of a depression. A depression? That may be pushing it. But if you believe this has little to do with the tech industry, think again. That mess on Wall Street means it's hard to get credit--whether if you're a giant company looking to make capital expenditures like new server station, or a start-up looking to buy office furniture or put money down for rent. Wall Street has always been a cutting-edge technology buyer, and that spigot is all but shut off for now. Enterprises are announcing plans to trim or freeze spending, and private customers probably aren't far behind.
On top of that, venture capital spending is on shaky ground, mergers and acquisitions in tech are down, and successful initial public offerings on the stock market are as unlikely as they have been at any point since the dot-com bust. What more, after witnessing a steady increase in billing rates for the last few years, Indian IT service providers could face pressure on the pricing front as demand slows down amidst worsening financial crisis in the US, the largest service market.
Already, we're starting to see signs of growing problems. Rumors are spreading of growing layoffs in Silicon Valley that is already having a global affect, and since the third quarter just ended, it's a good bet that surprising earnings shortfalls could be the big news in the coming days.
Nonetheless, while many may fear a replay of the dot-com bust, what could happen to the tech industry over the next year will be different for a combination of reasons: This isn't a self-made disaster, there's not as much public money on the table, and the rate of spending for Web 2.0 companies has been relatively modest when compared to the wild gold rush days of the late 1990s.
Some analysts feel that the US financial crisis will impact in India after December. IT Secretary Ashok Kumar Manoli said that about 35 per cent of revenue of major IT industries comes from Banking Service Finance Institutions world over, with banks in the US having a major share. "It is too early to say about the impact of the crisis on this."