Although there has been some speculation about a possible slowing in demand for offshoring, fueled by news of rising salaries and shrinking labor pools in popular offshore destinations such as India, that doesn't appear to be the case for BPO.
India's National Association of Software and Services Companies (Nasscom) and Everest Group are predicting a boom in BPO, reports InfoWorld. While India's BPO industry should grow from $11 billion to $30 billion by 2012, it has the potential to reach $50 billion. With that kind of revenue, BPO would account for 2.5 percent of India's gross domestic product.
Yet there's a caveat. Nasscom and Everest Group say India's government must take a more active role in making education and infrastructure improvements to help the BPO industry overcome possible staff shortages.
The chairman of a BPO provider called Quattro tells InfoWorld says that while his company looks for employees in small cities, "...we cannot set up operations there because the infrastructure does not exist." Some BPO companies deal with this problem by shuttling staff between suburbs and larger cities.
The industry would like the government's help in establishing regional hubs. It also wants the government to lift a regulation that prohibits companies from using the same facilities for domestic and international business. If the ban were lifted, service providers could perform local BPO work in the daytime and work for non-Indian customers overnight. This could help providers satisfy growing domestic demand for BPO.
Peter Allen, chief marketing officer for TPI, also was bullish on BPO's near-term prospects in my recent interview with him. According to TPI, 2007's fourth quarter saw the highest total contract value in two years for BPO, and the highest annualized contract value since the second quarter of 2004.
Allen cited companies' desire to monetize their offshore captives, in many cases by selling their BPO services. He says:
The whole proposition (of captives) is built upon scale and the leverage of scale. So you have to come to grips with the fact that to get scale, you will have to serve others. You leverage facilities and people and applications. You leverage as much as you can.
He also noted growth in industry-specific BPO, which he sees as a more sophisticated model. He says:
So instead of looking at accounting and HR and payroll, you take a more vertical look at things -- claims processing for insurance or mortgage processing or call center operations that do sales order management. This says that you are bundling your technology and your operations. It's a much more strategic direction for companies to engage a third party to provide those sorts of services.