The global IT industry is a multi-billion industry with thousands of companies employing millions of workers . Within the industry one of the major subsectors that has experienced strong growth in the past few years has been the Business Process Outsourcing (BPO) sector. According to Wikipedia BPO “involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider”. For example, a BPO contract may involve Dell outsourcing all their call center operations for US customers to a BPO provider in India, Philippines or some other country thereby saving millions of dollar in labor costs.
The BPO industry continues to grow as large companies especially in the developed world try to maintain high profits by cutting costs. Among the emerging countries, India is the main destination for companies looking to outsource IT functions though other countries are trying to become competitive. The following chart shows the tremendous growth of the IT-BPO revenues in India:
Source: NASSCOM
Key highlights from a report on the NASSCOM site:
Milestone year for Indian IT-BPO industry-aggregate revenues cross the USD 100 billion mark, exports at USD 69 billion.
Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011, highlighting India’s continued competitiveness and the effectiveness of India-based providers delivering transformational benefits.
The industry continues to be a net employment generator – expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people.
As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 7.5 per cent in FY2012.
The industry’s share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to about 25 per cent in FY2012.
The Top 15 Global OutSourcing IT-BPO Service Providers Based on Revenues in 2009 are listed in the table below:
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Source: World Investment Report 2011, UNCTAD
U.S. IT giant IBM (IBM) employs over 426,000 workers globally. Since the implosion of the dot com bubble IBM shifted most of the jobs from the U.S. to other countries especially to India. Today the company has more employees in India than in the U.S. IBM’s focus on the growth of BPO services and the shifting of jobs to overseas cheaper locations has helped its earnings which in turn has contributed to the strong performance of its stock over the past few years.
IBM’s competitor Hewlett-Packard Company (HPQ) has over 324,000 employees in over 50 countries. More than one-third of its employees in the HP Services unit are based in India. Indian outsources Tata Consulting Services and Wipro (WIT) employ thousands of workers both in India and overseas and are large enough to appear in the global ranking list. All the other firms listed above also have some form of presence in India.
Disclosure: No Positions
