IT BPO Industry

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IT-BPO Industry- Analysis


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Introduction

Wave I: Indian ITindustry started

growing in the 1980s

with first services

being made towards

automation of

manual processes.

Wave II: This was in

the late 1990s when

Indian IT offered low

cost solution to

American clients.

Wave III:

Consolidation of

BPO,KPO, IT Services

Wave IV: There is

emergence of

advanced services

like Big Data,

Analytics, Cloud to

provide wholesome

business solutions to

clients


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Indian IT-BPO Industry

The 1990s heralded the golden era of Information Technology in thecountry. It transformed the economic landscape of a nation that wasunder the clutches of the government till 1994.

Liberalisation, privatisation and globalisation became the norm,even as the Indian economy made giant strides in IT and ITes (IT

enabled services). Today, with a total revenue of US$70 billion, theIndian IT industry is touted as one of the most robust industriesworld-wide.

A study by National Association of Software and ServiceCompanies (Nasscom)-Deloitte shows that the contribution of theIT/ITes industry to the country's GDP has gone up to a share of 5%

in 2007 from a meagre 1.2% in 1998. Software exportsfrom India have increased and account for about 60% of India's totalsoftware revenue.


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STRENGTH

Leadership in sophisticated solutions that enable

clients to optimize the efficiency of their business.

Proven Global delivery model

Commitment to superior quality and processexecution

Strong Brand and Long-Standing ClientRelationships

Ability to scale Innovation and leadership

WEAKNESSES

Excessive dependence on US for revenues, 67% of revenues from USA.

Weak player in domestic market. Only 1 % of

revenues from India low as compared to peers.Low R & D spending as compared to global ITcompanies only 1.3 % of total revenues.

Low expertise in high end services like

Consultancy and KPO

OPPORTUNITIES

Domestic market set to grow by 20%.

Expanding into new geographies Europe,Middle East etc.

Acquiring companies to increase expertise inConsultancy, KPO and package implementation

Opening offices and development centers in costadvantage countries such as those in LatinAmerica and Eastern Europe

THREATS

Global economic slowdown may continue forseveral years hence low IT spending globally.

US Govt. against outsourcing.

Shrinking margins due to rising wage inflation,Rupee-dollar movement affects revenue andhence margins.

Increased competition from foreign firmslike Accenture, IBM etc

.Increased competition from low-wage countries

like China, Indonesia etc.

SWOT


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Competitive Analysis: Porters 5 Forces

Medium rivalry

No destructive competition due to low exit barriersEntry Barriers

Intense RivalryLevel of Rivalry

None; Input is manpowerSupplier Power

Buyer conc. v/s firm concentration- Varies for

companies. Tier II companies have higher Buyer concBuyer Power

However switching costs are high

Substitution with other vendors is feasibleSubstitute


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IT-BPO Industry Growth Over the Last 4 Years


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Key Highlights during FY2012

Milestone year for Indian IT-BPO industry-aggregate revenues cross the USD 100 billionmark, exports at USD 69 billion

Within the global sourcing industry, India wasable to increase its market share from 51 per centin 2009, to 58 per cent in 2011

The industry continues to be a net employmentgenerator - expected to add 230,000 jobs in

FY2012, thus providing direct employment toabout 2.8 million, and indirectly employing 8.9million people


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Software and services exports- 2012

58%23%

19%

% of total Software and services exports

IT Services

BPO

ER&D, Software Products


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Challenges faced by the IT-BPO

Industry Working in a BPO, many feel is a job that does not require much skill. Any

body possessing a basic education, good communication skills isemployable after some training. Companies do not mind taking in people

who are middle aged, and homemakers. There is no sense of

accomplishment among the employees.

Financial desperation is mostly the reason behind a person joining BPO

The tasks that BPOs perform are diverse like telemarketing, technical

support service, customer support service, insurance processing, data

entry and conversion services. Thus, there can be no standardized training

program suitable for all the BPOs.

In many cases, the outsourcers think only of achieving targets which can

at times be unrealistic. Thus , this creates dissatisfaction in an employee

Attrition in BPOs


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Future Prospects

Global GDP, which grew by2.7 per cent in 2011, is

expected to grow 2.5 percent in 2012

Developing economies togrow thrice as fast as the

developed economies.

Better economic conditionsin the second half of theyear signifying return of

consumer confidence andrenewal of business growth,

is expected to drive ITspending going forward.


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Future Prospects

Indian IT-BPO services

exports expected to

grow by 11-14 per cent

while domestic servicesto grow by 13-16 per

cent (in Rs terms)


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Action themes for the IT-BPO industry

to remain competitive and profitableTo increase operational

efficiencies, reinvent and

embrace new business

models to offer customers a

transformed business

proposition

Drive concerted initiatives

to strengthen theinnovation capacity and

research capabilities

through specific domain

focus and by encouraging

R&D collaborations and

public-private

partnerships.

Continue to strengthen the

long-term entrepreneurial

environment

Enhance the skilled talent

pool in the country and

focus on specialisation

Continue the use of ICT for

inclusive growth. Ensurethat the basic necessities

like education for masses,

quality healthcare and

employment and skill

generation is benefited by

ICT

IT BPO Industry

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