The BPO saga continues. Even in FY 2005-06, there were no signs of India's honeymoon with BPO souring in the near future. For the third year running, the sector witnessed a 40% growth, clocking Rs 31,839 crore in revenues as against Rs 22,718 crore in the previous fiscal. No prizes for guessing that exports, at 87%, still contributed the lion's share of the pie: in fact, exports grew faster in FY 2005-06 than FY 2004-05; pegged at Rs 27,789 crore it grew by 37% from Rs 20,290 crore of FY 2004-05. Like IT services, the domestic BPO market too went northward; after a whopping 85% growth the previous year, it registered another more than healthy 67% upswing to close at Rs 4,050 crore.

This year witnessed the consolidation of a few key service lines for the BPO exports sector-finance & accounting, customer interaction services and HR administration finally emerged as the top three in the pecking order accounting for 89% of the total revenues. Voice-based call centers still dominated, the proof being customer interaction services, which accounted for 46% of the revenues.

The industry structure of the Indian BPO industry during FY 2005-06 was relatively more fragmented as compared to software services-the top ten third-party players accounted for a market share of approximately 30%; throw in the MNC captives into the fold and still the top 15 BPO players would contribute less than 50% of the overall pie. The corresponding figure for software services was well over 70%. Further, unlike in software services, where MNCs accounted for roughly a quarter of the exports, MNCs with captive BPO operations in India, be it end-customer captives such as E-serve for Citigroup or third-party service providers such as IBM and Accenture, accounted for nearly two-thirds of the exports.

While call centers of large banks and telecom service providers did account for a lion's share of the domestic BPO market, there were significant third-party players too involved here. Tata's domestic BPO venture, e4e, led the rest while even export-oriented players like Hinduja TMT and mPhasiS BPO entered the domestic fray handling large clients like Bharti or State Bank of India. Customer contact activities accounted for over two-thirds of the value of the domestic work outsourced, while finance and accounting and HR administration remained the other top service lines. However, quality of manpower in domestic BPO left much to be desired.

Just like the exports sector, there was a heightened visibility of deals in the domestic market during FY 2005-06. Bharti outsourced its call center operations, supporting its mobile services customers across 23 circles, to IBM-Daksh, mPhasiS BPO, Hinduja TMT and Teletech. Whirlpool outsourced a range of customer interaction services including inbound complaint management and queries, plus outbound dealer calling to Infovision. Air India outsourced its inbound customer interaction activities, such as bookings and reservations, flight information, tele check-in to Sparsh (Spanco Tele).

Though nearly five lakh employees were working in the BPO sector during FY 2005-06, manpower constraints continued to plague the sector throughout the year.

In light of this increasing antipathy amongst large sections towards routine BPO functions, there is a possibility the industry might see a change in dynamics soon. Whatever form the industry might take, it is imperative that all leading players of FY 2005-06 as well as the overall industry need to be analyzed in much greater detail. Dataquest will undertake this exercise and bring the details out during Vol 3 of the Top 20 annual survey space. Watch out for this space.

Rajneesh De
rajneeshd@cybermedia.co.in

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