Tuesday, October 16, 2007

BPO contracts grow strong

Source : offshoringtimes.com
Outsourcing will remain strong in 2008, with HR outsourcing contracts worth US Dollar1.1 billion and finance and accounting outsourcing FAO contracts worth US Dollar 600 million coming up for renewal, according to offshoring advisory firm Everest Research Institute. In its study 2008 Market Predictions, the firm said that demand for FAO services will continue to be strong in the next 12 to 18 months, as large buyers in the exploratory phase begin to initiate actual engagements. On the supplier side, battle for market share will intensify. While companies like Accenture, Genpact and IBM hold over 65 percent share, companies like Xansa, WNS, HP, Infosys and Wipro are fast emerging as notable contenders, the Everest study said.

The firm also expects greater location diversification among suppliers, and a shift in the nature of contracts. Transactionbased FAO engagements will evolve to judgmentintensive processes such as regulatory reporting, compliance and analysis, it said.

In 2008, captive units, niche BPO players and technology providers would be prime acquisition targets. Some captives, particularly in the financial services space, would see change in ownership and become thirdparty suppliers, the offshoring advisory firm has predicted.

According to apex software and services association, Nasscom, finance and accounting F and A accounts for about 40 to 45 percent of Indian BPO revenues. HR administration services, including payroll and benefits administration, travel and expense processing, talent acquisition and talent management services, account for about 2 percent of revenues.

Says HCL BPO chief executive officer N Ranjit, As of now, the market is focussed on finance and accounting outsourcing. There is not much traction in HRO. Customers have to feel confident before they outsource their HR services. We are beginning to see some shift and are in talks with a few clients for HRO. Next year is likely to see some action on that front.

Everest says that in the HRO market, two discrete segments will emerge with different target markets and buyer characteristics. Large global companies will outsource multiprocess, transformational HRO services and constitute a smaller chunk of deals in the space. For suppliers new to the HRO market dominated by the likes of IBM and Accenture, the opportunity would lie in catering to companies looking for pure cost savings, it has pointed out.

Among Indian players, IT BPO firms will have an edge in the HRO market, against pureplay BPO players, says offshoring advisory firm Tholons CEO Avinash Vashistha.