Indian BPO Industry

Information Technology-Business Process Outsourcing (IT-BPO) sector has played a very

significant role in the growth of the Indian economy. It has transformed Indian economy from
rural and agriculture based economy to a knowledge based economy. Indias share in global
trade in the sector of services has increased manifold mainly due to the enormous growth in
Information Technology and IT Enables Services. Indian IT-BPO services includes software
programming, design, engineering, accounting, legal and medical advices etc.
Indian IT-BPO sector can be broadly classified into three categories based on the services
provided by them.

Services
o IT services
Project Oriented Outsourcing
Support
Training Services
o Business Process Outsourcing
o Electronics Research
o Offshore Software Product Development
Products
Hardware
o Software products
o system software
o Enterprise applications
o Vertical applications

In India, according to NASSCOM, 65% of the companies are engaged in IT services, 30% in
BPO, 42% in Product Development, 12% in Engineering, R&D and Embedded and 22% in
others.

IT Services and BPO are the main contributors in the export basket of IT-BPO sector. In 2008,
total IT BPO (domestic + Export) revenue in India was US Dollar 62903 million, in which export
amount was 40918 million. In 2012, total IT-BPO export from India has grown to US Dollar
69102 million. According to the forecast by NASSCOM, the IT-BPO sector will generate the
revenue of US $12-15 Billion to the existing $118 Billion IT industry of India in financial year
2014. During the same financial year 2014, the BPO industrys exports are estimated to grow by
13% at $86 billion, with domestic revenues up 9.7% at Rs. 1,910 billion. It is also estimated that
by 2020, the Indian IT and ITeS industry will grow to about $300 Billion. This growth will be
mainly due to growth in emerging sectors like e-commerce, software products and the IT market.

The IT industry in India has affected the exports significantly and has helped the economy in
faster growth. The Indian IT-BPO sector has resulted in huge growth in Indian exports. The
graph shows the trends in exports of goods and services in US Dollars.

Advantages
The main advantages in India for the growth of BPO industry are as follows:

Cost Competitiveness, which consists of cost of labor, infrastructure costs and currency
exchange rates.
Labor Competitiveness, consisting of the size of the available labor, level of education,
domain skills, fluency in the English language, cultural compatibility to western markets
and attrition rates.
Well-qualified, English speaking labor force to offshoring organizations.
Well-developed social infrastructure to support residing population.
Rapid industrialization and growth of IT parks in the country
Partial privatization of telecommunication
Development of SEZ; which also help IT companies get tax benefits
A large number of resource readily available in the country
Low operating costs
Tax breaks and sops offered by the government
Many initiatives by the government to help the growth of IT sectors such as The GI
Cloud which will help in leveraging cloud computing for effective delivery of E-Services.
Emergence of many Tier-II cities which offers cost advantage due to the relatively lower
cost of living.

Future of Indian IT-BPO Industry

The Indian IT-BPO industry has huge potential of growth. The key factors for the growth are
rapid advancement in technology infrastructure, increasingly competitive business firms, Strong
economic growth, enhanced focus by the government and emergence of business models. As
the result of several initiatives by the government and with increasing telecom infrastructure, the
demand from consumers and enterprises are increasing which will result in steady growth of IT-

BPO market. Local BPO fragment is relied upon to become quicker determined by interest from
voice-based administrations and expanding reception by both conventional and developing
verticals, including the legislature. The local programming items fragment is consistently
determined by the need to supplant legacy frameworks and engineering progressions around
cloud, portability, and so on. Throughout the most recent three years, there has been 18%
increment in the number of IT-BPO organizations procuring quality certificates; 30% increment
in execution accreditations; 20% increment in security certificates. IT-BPO organizations in India
give extraordinary consideration regarding security of data that they handle with, particularly
touchy information of clients of their customers. Also the Indian IT-BPO industry is expected to
grow by 13% at $86 billion, with domestic revenues up 9.7% at Rs. 1,910 billion. It is also
estimated that by 2020, the Indian IT and ITeS industry will grow to about $300 Billion.

Challenges
There are many challenges in front of the Indian IT industry which can affect the growth of the
sector. The major challenge is high attrition rate. In India, an average employee of any BPO
works with the company only for an average of 11 month and hence the attrition rate is about
40%. This high attrition rate results in loss of skillset for the company. Also due to this,
companies incur recruitment and training cost frequently. Another major challenge is from the
growing competition from the countries like China and Philippines. In order to overcome this
challenge, Indian companies should provide incentives to their employees and also apart from
providing basic services, they need to innovate and start offering other high-end services along
with varied skillsets.