IDC: Asian firms riding BPO bandwagon

IDC: Asian firms riding BPO bandwagon

Organizations in the Asia Pacific are implementing significant business transformations, including seeking new BPO business models and services, said IDC Monday.

The major reason for this move, said IDC, is the impending market recovery in 2010.

BPO services providers at present are ironing out platform-based services (platform BPO) offerings to suit current market conditions and are doing away with the traditional lift and shift business models, IDC noted.

Given these movements in the market, IDC expects to see long-term market growth in the region's BPO market starting 2010. Based on forecast and analysis of the market between 2009-2013, the market is predicted to grow at a CAGR of 11.2 percent from US$17 billion in 2008 to US$29 billion in 2013 lead by Platform BPO services.

The domestic markets in the emerging economies are particularly well positioned to see rapid growth during this period. For example, the Indian market, boosted by the adoption of BPO entering the mainstream, a strong domestic demand especially from the telecoms sector, and transformational process activities including Platform BPO, will see strong growth of 17 percent from 2009 to 2010, said IDC.

The traditional BPO business models with full-time equivalent (FTE) pricing as well as providing pure cost arbitrage advantage are now taken for granted rather than being perceived as a significant benefit of BPO services, IDC added.

"The BPO market, especially platform BPO, will see increased adoption that will be accelerated, to an extent, by the current economic downturn," said Suchitra Narayan, research manager for IDC's Asia/Pacific IT Services Research. "The value-add brought by Platform BPO such as standardization, scalability, economies of scale and pay-as-you-use functionalities are areas that fit well in the CFO's agenda in today's market. We are seeing an increasing demand for BPO vendors that are able to go the extra mile and transform businesses as well as contribute to growth as opposed to traditional models."

The need to manage costs, maintain efficiencies, and focus on sustainability are factors driving the market and creating an increased interest and awareness for Platform BPO, said the research house.

The pay-as-you-use, scalability and SaaS offerings are ideally suited for this economic environment, IDC said, adding that organizations are re-assessing capex investments and aligning strategies to an opex model into which platform BPO fits perfectly. Besides, platform BPO also enables SMBs to outsource some of their non-core activities at a nominal opex, with the scalability factor built in, should their growth in business demand the same, IDC added.

More risk exposure for BPO vendors

BPO vendors today are moving to offer complete end-to-end solutions of people, processes, technology and analytics. With the emergence of the new 'risk-reward share' type business models, there is an increased expected risk exposure for BPO vendors, according to IDC.

The vendors stand to gain from continuous process improvements that they are able to provide clients on an ongoing basis and for initiating or improving processes that impact customer revenue, said IDC. BPO is no longer viewed as a mere cost arbitrage tool but as a potentially strategic transformational service, IDC noted.

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