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The BPO industry in India, like the IT services segment, has predominantly been an export-oriented sector, deriving the bulk of its revenues from the US, Europe and other regions such as Asia Pacific.

Currently worth around $11 bn, it is expected to experience a five-fold growth over the next five years. According to chamber of commerce, NASSCOM, the BPO industry is estimated to touch revenue figures of $50 bn by 2012 and provide jobs to over two million people.

The domestic BPO market too has made great gains as a result of a steady rise in technology adoption by players and an increased participation of vendors within this domain, NASSCOM says. In its annual study on the Indian IT-BPO industry, NASSCOM states that BPO spend in the domestic market is expected to jump by over 43 percent. Yet another survey by Avendus, a leading investment banking services firm indicates the rise of the domestic market and its emergence on the radars of vendors. Avendus' report on the domestic BPO market shows that Indian domestic outsourcing is emerging as an attractive target market for Indian BPOs.

The Avendus study, titled the “Indian Domestic BPO Market-An Emerging Opportunity,” highlights the fact that the domestic BPO market is expected to grow at a rapid 35 percent to touch $6 bn by 2011, (up from the current $1.8 bn).

The recent reverberations in the global markets-led by the sub-prime crisis in the US and the overall recessive trends in the American economy-are also likely to have an impact on the growth of the domestic BPO market. Indian BPO service providers, grappling with challenges such as a strengthening rupee and squeezed margins, are now expanding their focus to cover India's vast and burgeoning domestic market. The domestic segment, which has witnessed intensive computerization by key industry verticals, is gradually becoming a playground for the country's leading BPO service providers.

Foraying the domestic market

The gravitation towards the domestic market by BPOs began a few years ago, when leading Indian BPO vendors began to take a look at the opportunities emerging on home turf. Changes in Government regulations-where new legislation allowed BPOs in the country to share their domestic and international call center infrastructure-marked a turning point for the sector, enabling companies to harness under-utilized capacity.

It was in 2004-05, when interestingly, BPO exports slowed down but domestic BPO grew by a phenomenal 85 percent to touch Rs. 2,640 crore. The demand was driven by the domestic telecom, BFSI and retail sectors, by players such as Reliance, the Tatas, ICICI, Pantaloons, Pizza Hut and new airline and courier companies, who began to talk the language of customer fulfilment and CRM and were upbeat about services such as telemarketing and tele-support.

Over the last few years, following a rise in awareness about the importance of Customer Responsiveness, the domestic market has seen the mushrooming of call centers, set up by captive and third party BPOs. Recognition of the fact that technology, particularly Intelligent Communications, can greatly improve the efficiency and productivity of call centers and their agents, has led to a greater deployment of the state-of-the-art by these service providers.

Verticalization, the new name of the game

Going forward, and in order to build greater traction in the domestic BPO market, India's service providers will need to evolve a strong Verticalization approach to address the outsourcing needs of companies representing different industry segments.

There is need for Indian BPOs to create a portfolio of Intelligent Communications solutions that meet the specific needs of high opportunity verticals such as BFSI, retail, telecom, manufacturing, hospitality, airlines and transportation, media and healthcare. Take the instance of the Banking, Financial Services and Insurance sector, which has taken the lead in technology deployment over the past decade, and represents a huge opportunity for Indian BPOs in the area of outsourcing. Indian banks, in particular faced with stiff competition from the MNC entrants, have changed their look and feel, enhanced Customer Responsiveness and are rapidly embracing Intelligent Communications solutions from the leaders in the fray, to provide anytime, anywhere, on-demand retail banking to users and improve their own competitiveness, reduce operational costs and cross sell. A number of banks, alongside financial services companies and Insurance majors are also outsourcing some of their back-office and even core functions, involving more complex, higher-end processes to service providers.

Clearly then, Indian BPOs need to recognize these opportunities and cater to the burgeoning needs of different vertical industries.