The BPO industry in India has been a global leader in offshore outsourcing since the early 1990s. At the turn of the century, however, BPOs in India emerged as one of the world’s leading outsourcing destinations. It was driven primarily by the Indian IT services sector. Today, twenty years later, India’s ITES-BPO industry is poised to continue being a popular outsourcing destination for decades to come. Multiple factors have contributed to India’s success in the BPO space:
1. India has a highly skilled and educated workforce.
2. The cost of services provided in India is much lower than in other countries, especially developed countries.
3. India offers a wide range of services that are in high demand.
4. A more favourable and liberalised policy framework is also helping drive the Indian IT outsourcing market.
The ITES-BPO market has been growing exponentially over the past 20 years. The industry is expected to grow at an 8 per cent CAGR and reach US$225-250 billion by 2025. This growth is being propelled by the increasing demand for digital services, which is being driven by the growth of new technology-focused businesses and the explosion in data volumes. The packaged software segment is also estimated to grow rapidly during this time, contributing to additional volumes for BPO in India. India’s IT proficiency will fuel this growth, and it’s anticipated that the country will be a primary provider of software, including fintech, SaaS, and network security in the future.
The ITES-BPO industry in India is expected to generate significant employment opportunities in the near future. The industry currently employs nearly 4 million people and is likely to create almost 6 million jobs by 2025. This growth will be driven by the increasing demand for IT and digital services, which will require new skillsets and manpower. The biggest employment generators are likely to be high-level outsourced services such as application development and maintenance, software testing, and the integration of technologies such as Artificial Intelligence (AI).
“In this regard, India’s skills and knowledge have been a key driver in the growth of BPO to India, particularly the ITES and KPO segments of the industry. With more graduates from MBA, PhD, IT, and engineering programmes than virtually any other offshore outsourcing destination, India is well-positioned to continue meeting the global market’s needs for IT services. This will only help the country develop a stronghold in the BPO and KPO services sectors for the foreseeable future,” says Ralf Ellspermann, CEO of PITON-Global, a leading BPO provider.
Another factor for India’s BPO success is the low cost of services provided. In countries such as the US and UK, the cost of labour can be as much as 70 per cent higher. However, with the increasing commoditisation of offshore outsourcing services, low costs no longer ensure dominance in BPO markets. And although the Indian BPO-ITES industry is well-positioned to capitalise on the growth opportunities in the global market, one area where the country does not have an advantage is voice-related BPO services. In this regard, the Philippines has been the dominant outsourcing destination since 2010.
“Despite the fact that the Philippines entered the global BPO space later than India, it has capitalised on some of its inherent advantages. One of these is the Philippines’ very close cultural affinity to the US, which has helped it become a leading destination for voice-related services. The Philippines’ familiarity with US business processes, in addition to the country’s English-speaking workforce, has also helped them become one of the world’s BPO powerhouses along with India in the last two decades,” explains Ellspermann. With that said, India’s IT sector, fueled by its cost competitiveness and skilled workforce, is still the primary driver of BPO in India. This segment will continue to lead India’s outsourcing economy.
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