Asia Pacific is emerging as a key outsourcing market, but it offers its own challenges to service providers. Cost differential or labour arbitrage won’t work in this market and players have to develop new offerings, says Gartner BPO research director T J Singh. Excerpts:
What sort of growth do you see for BPO services globally?
In North America, we continue to see growth, but it’s lower than what it used to be a year ago. The deal sizes are getting smaller and the duration is getting shorter. However, the drive to reduce costs is higher. For instance, everyone said mortgage processing would fizzle out. However, while mortgage origination has seen number of deals go down, the number has gone up in mortgage servicing where companies want reduced cost per client. We have seen a lot of deals in the UK. In continental Europe, companies are still looking at whether they should offshore/outsource. Some have set up captives, which are outsourcing. So, companies are taking a slightly different approach to outsourcing. Asia Pacific is emerging as a key growth market for outsourcing. It has a burgeoning middle class that is tech-savvy and wants new services. I was talking to the CEO of a contact centre in India whose company supports a telco. He was speaking about how this telco wants to provide services in Punjabi, Marathi and other languages. This market also has a lot of small and medium businesses and the golden nugget would be how to crack this segment.
What are the key verticals in Asia Pacific?
Financial services continues to be attractive. In case of telcos, companies have to be selective in certain markets. South East Asia is also big in utilities. The government is also very active in the outsourcing space in the region, but they prefer local delivery and players. In India, retail vertical could become important in the future. The SMB space hasn’t been looked at aggressively. The mid-market, which comprises SMBs in Asia Pacific, is huge. Indian outsourcing firms are looking at expanding in Apac. What are the challenges? Companies are setting up centres not only for multi-country delivery but also to cater to the domestic market. For instance, Indian companies have, in the last 12 months, started focusing on their domestic market, but the mindset is still the same as when dealing with North America and Europe. Companies will have to develop new offerings for Asia as there is not much of a cost differential. It’s also important that service providers don’t treat it as a secondary market.
How do you view Indian service providers’ China strategy for tapping its domestic market and Japan?
In China, Indian service providers are following the multinationals’ path by going after state-owned enterprises (SOEs). It’s an opportunistic strategy but it might not be sustainable while competing with the MNCs. China is a good springboard for the Japan market. The play in Japan for Indian companies would have to start with application services with support from centres in China.
What about various outsourcing destinations in Apac? How would you rate them? India will have the lion’s share for the next couple of years. Malaysia is looking at captives, especially those targeting utilities, banking, financial services and logistics. Other countries are also looking at carving out a niche for themselves. Philippines is establishing itself for voice business. It’s now looking at finance & accounting and animation. China is developing 10 cities as BPO hubs. So, while banking and financial services BPOs would come up around Shanghai, call centres would be centred around Dalian. Vietnam is doing low-level design and testing as well as programming.
What changes are you seeing in terms of offerings?
There is this new trend in BPO called business process utility or one-to-many service, which is non-customisable but configurable. What this means is that 80-90% of the process is standard while the remaining 10-20% permits configuration to suit certain markets and regions. For instance, in case of payroll processing, most of it could be standard, except for certain regulatory and taxation issues. China has seen some development on this front. A company that has used this approach got 10,000 clients within three months of launching it. However, these were all small companies. In India, it’s called platform-based BPO.*
*Reference Economic Times
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