Business Process Outsourcing (BPO) is outsourcing of business functions generally performed by white collar and clerical employees to achieve various benefits such as cost savings, better quality and ability to focus on core competence. BPO involves outsourcing processes that are not core to a company, however, are essential for smooth operation of the company. The customer transfers the complete responsibility of these functions to the vendor who guarantees certain service quality standards. Such processes include customer service, payroll processing, inventory management, etc.
The global market size for BPO is estimated to be around USD 382.5 billion in 2004 according to market intelligence firm IDC. The research firm expects robust growth in the BPO industry with more and more companies reaping the benefits of BPO all over the world. The BPO market size is expected to reach USD 641.2 billion by 2009 with a Cumulative Annual Growth Rate (CAGR) of 10.9 percent from 2005 to 2009.
BPO has evolved over the years, beginning with time-sharing data processing in the 1960s; according to technology research and consulting firm ebs. Over these years, like outsourcing, BPO has moved from being transactional (task oriented) to being strategic (process oriented). Table 1 provides the key milestones in the evolution of BPO.
The BPO industry is a developing sector and is being studied by analysts and researchers all over the world. Analysts tracking BPO have observed the following trends in the industry:
The BPO market worldwide is expanding with new services getting added to the list of business processes that are outsourced and new locations coming up as potential offshore destinations, India being the most preferred destination for offshore BPO.
Cost savings is one of the most important drivers now. Information security, execution capability and financial stability are important considerations while selecting a vendor.
According to IDC, customer care and logistics are mature segments, while procurement and training are emerging markets and are expected to have a growth of more than 10 percent in the next five years.
Gartner has also observed the latest trend of offshore insourcing , in which firms establish their own offshore captive centers. These captive centers are generally shared service centers and allow the firms to retain control over the processes.