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BPO to Outpace IT Services

by: Ronald Escanlar

Friday, May 6, 2011 | Outsourcing News |

Rising competition among outsourcing companies

Outsourcing companies based in India are gobbling up other companies to widen their portfolio of services as they scale up their growth in the global marketplace, especially with rising competition from other outsourcing destinations such as the Philippines and China.

For example, Aegis Ltd. has spent up to USD 400 million in acquiring 18 companies for the past few years. Early this year, Genpact bought Headstrong for USD 550 million, while US-listed EXL Service Holdings Inc. announced on Tuesday their acquisition of Outsource Partners International for USD 91 million.

According to Gaurav Gupta, a managing partner at outsourcing consulting firm Everest Group, the fast growth of IT-related services in the outsourcing sector was only a short-term trend.  "[Information-technology] services has bounced back strongly and is growing much faster than BPO. In the long-term, however, especially given that the [infotech] services market is very well penetrated, it is BPO which will outpace growth."

EXL Service president and CEO Rohit Kapoor agrees with Gupta. "A data point that we have considered suggests that worldwide IT outsourcing spend is growing at 4% while BPO is growing or will grow at 6-8%," he explained. "Look at the actual IT spend of companies. That is growing at only around 2%, reflecting their actual growth."

"[BPO] is a much larger market and it is not that well-penetrated, so the long-term road ahead is clear," Kapoor concluded.


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