Indian IT-BPO Services: Time to Look Inward

Sudha Nagaraj Bharadwaj, Journalist | 12/25/2012 | 49 comments

Sudha Nagaraj Bharadwaj
It is high time the Indian software and services industry took a closer look at the domestic outsourcing market.

For more than a decade, the focus has been on exports, but the dismal economic conditions in the US and Europe have slowed growth. According to revised estimates from NASSCOM, the sector's export revenue for the 2012-13 fiscal year will increase 11 percent from a year earlier to a range of $75 billion to $77 billion. Earlier projections had called for growth of up to 14 percent.

The sector faces several challenges, including low visibility, delayed decisions, different growth rates among various verticals, and lowered revenue growth at the top IT services firms. These factors forced the industry body to conduct a midyear review for the first time.

Now is a great time for growth in the domestic IT-BPO market. Though the potential is promising, the industry has failed to make inroads. Indian corporate groups are going global and developing an appetite for state-of-the-art technologies. Government agencies -- both national and state -- need IT processes and systems to accelerate economic growth. But domestic IT-BPO revenue (excluding hardware) stood at a modest $16.6 billion in 2011-12. NASSCOM had projected that it will reach $28 billion in 2012-13, but there is no update as of yet.

Why do CIOs hesitate to give the domestic market top priority? For one thing, there is a perception among most Indian companies that outsourcing eventually leads to increased costs. The BFSI segment (which is by far the most adaptive) also prefers to maintain large in-house IT teams. Companies prefer to purchase packaged software and implement IT programs on their own to protect data and retain control. In addition, the IT industry has failed to project the image of a partner. Third-party outsourcing is seen as solutions provided on a piecemeal basis, rather than a business process management initiative. Many shy away from engaging with the government, due to lack of a uniform policy.

However, the early adopters -- including the BFSI, telecom, and government segments, where outsourcing is catching on -- are also experimenting with various contract models. They are moving from a purely transactional model to a more trusting managed services model and further on to a collaborative or cooperative one. The industry should recognize that the growth curve is maturing and cash in on the opportunity, since domestic markets are picking up.

According to Gartner, the Asia/Pacific (excluding Japan) BPO market will grow from $5.9 billion in 2011 to $6.45 billion in 2012 and $9.5 billion in 2016. Australia is the largest segment of that market, with more than $4.63 billion, versus India's $1.26 billion. China and India will be the fastest-growing markets in coming years, boosted by demand from the banking and financial services, communications, government (both local and federal), technology, retail, and travel and transportation verticals, the research firm said. In contrast to India, 90 percent of China's IT and software production is consumed domestically.

NASSCOM's strategic review of India's IT-BPO sector also backs this opportunity and says that, in the 2012-13 fiscal year:

  • Domestic IT services will reach $10.75 billion, driven by increased government, enterprise, consumer, and SMB adoption.
  • The domestic BPO segment will grow to $2.7 billion, driven by demand for voice-based services (including local languages) and increased adoption by traditional and emerging verticals.
  • The domestic software products segment, driven by the need to replace legacy systems and technology advancements around the cloud and mobility, will grow to $3.28 billion.
  • The domestic hardware market will reach $11.23 billion, driven by rapid uptake in notebooks/netbooks/tablets, mobile devices, and improved connectivity tools.

In 2013, we will definitely see the industry coming together to chart out a strategy to target these customers further. Therefore, CIOs will need to realign their focus to cater to India-specific needs.

View Comments: Newest First | Oldest First | Threaded View
Page 1 / 5   >   >>
Don K   Indian IT-BPO Services: Time to Look Inward   3/16/2013 8:25:21 AM
Re: It will happen, no doubt
@Geeky: Maybe you have something which I haven't thought that much of. I think it is a good point which you highlighted here. I agree with you on it and I rest my case :)
geeky   Indian IT-BPO Services: Time to Look Inward   3/16/2013 12:28:29 AM
Re: It will happen, no doubt
@Don: Yes and that is where the package issue comes up. I feel you still cannot measure the capabilities of a candidate until you get them as an employee. That is why I felt going for the lower salary one and evaluate first would be the best path. What do you think ? After that if you want you can give an increment.  
Don K   Indian IT-BPO Services: Time to Look Inward   3/12/2013 1:05:12 PM
Re: It will happen, no doubt
Then Geeky I would go for the lesser demanding person but we should also remember that a good leader should have good demanding capabilities.
geeky   Indian IT-BPO Services: Time to Look Inward   3/9/2013 11:04:28 PM
Re: It will happen, no doubt
DonK : I would be happy to join you if that is the scenario. Anyway what happens if you see two potentially same applicants where one demands higher than the other ? 
Don K   Indian IT-BPO Services: Time to Look Inward   2/27/2013 9:49:33 AM
Re: It will happen, no doubt
@Geeky: I really dont see why they should not. Its an investment for a company to have an educated experianced staff. 
Don K   Indian IT-BPO Services: Time to Look Inward   2/27/2013 9:47:49 AM
Re: It will happen, no doubt
Yes I would since if I see a potential talaented guy I would definitely go for it as the 1st option. If the expectations are high, themn I will give my offer and see.
geeky   Indian IT-BPO Services: Time to Look Inward   2/26/2013 10:06:54 AM
Re: It will happen, no doubt
Don: I dont think so. Will you do the same just becaue you see some sort of a potential which cannot be guranteed ? 
geeky   Indian IT-BPO Services: Time to Look Inward   2/25/2013 9:08:05 AM
Re: It will happen, no doubt
Don: You think that company's will pay a higher salary if they see potential in you ? 
Don K   Indian IT-BPO Services: Time to Look Inward   2/23/2013 1:08:03 PM
Re: It will happen, no doubt
True but demand is finally matched based upon how much you expect as the salary.

Not really geeky. If the company sees potential in you and even if your salary is way much higher, they might goive you an offer to think. 
geeky   Indian IT-BPO Services: Time to Look Inward   2/22/2013 11:50:04 PM
Re: It will happen, no doubt
"If you have the qualifications you can demand"

True but demand is finally matched based upon how much you expect as the salary. If you get two guys selected with basically the same experience and qualifications and one demands for a lower salary than the other definitely the lower salary expectant will be selected.
Page 1 / 5   >   >>

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