Business Process Outsourcing Market: Call deflection strategies will continue to become more advanced, more prominent, and more necessary

Business Process Outsourcing Market: Global Industry Analysis and Forecast (2022-2029) by Service, Outsourcing Type, Application, Organization Size, Ownership, End-User, and Region.

The Business Process Outsourcing Market size was valued at USD 169.763 Billion in 2021 and the total Business Process Outsourcing revenue is expected to grow at a CAGR of 7.09% from 2022 to 2029, reaching nearly USD 293.650 Billion.

Outsourcing is an arrangement in which one firm provides services for another firm that could also be or usually have been provided in-house. Manufacturing outsourcing is nothing new. The fast growth of the IT sector, which has resulted in increased cross-border trade of IT-enabled services (ITES), has broadened the scope of outsourcing. However, in recent years, the paradigm of outsourcing has undergone a significant change. The traditional view of outsourcing has enhanced much beyond the usage of other local businesses in various processes (such as hiring law firms for legal advice or companies like FedEx or UPS for logistics control). ITES provides firms with more complicated operations that enable organizations to accomplish transformative results faster (such as payroll or bank loan processing, and customer relations management via contact centers), hence the term Business Process Outsourcing .

Countries including India, Brazil, Philippines, Dominica, Israel, China, Romania, and the Russian Federation have seen an increase in the number of BPO provider firms catering to the demands of developed-world organizations, providing significant job opportunities in the process. FDI from developed economies is also increasing significantly in these countries' BPO industries. Cheaper labor costs, higher efficiency, and better quality are the main driving factors of these BPO providers, and increasing the adoption of business process outsourcing eventually, increases the business process outsourcing market growth.

Business Process Outsourcing Market Trends:

1. Technology:

 Process Automation: In order to keep up with cost demands, BPO companies are expected to be investing in Process Automation to complete work faster at a more economical rate. This eliminated the need to hire and manage people for small tasks such as data entry, processing, etc.

 Social Media Management: Social Media is the third most popular online activity. BPO companies can reach customers via social media channels to gain insight, answer questions, and solve issues for their customers. Essentially, customer service is moving from the traditional call-center model to social media and digital tools.

 Cloud Computing: Cloud computing eliminates the need for state-of-the-art infrastructure, offering higher data security, more storage space, and a standardized system between BPO companies and their clients, improving collaboration.

2. Personalized Outsourcing: Allowing customers to choose which services they need instead of selling a one-size fits all service package is a growing trend in the industry. Most BPO companies offer a generic bundle of services, so giving personalized services as an option sets companies apart from the competition, and creates an improved customer experience. Providers should offer customized solutions that help customers overcome challenges specific to their industry.



Business Process Outsourcing Market Opportunities for developing countries:

According to the MMR analysis, significant improvements in IT infrastructure, a substantial drop in the costs of telecommunications and IT devices, and improved Internet connectivity have opened the door for the growth of BPO services in both developed and developing countries. The process has been accelerated by the growing need for cost-cutting strategies among businesses in the United States and Europe. It is said that hiring qualified and specialized staff may save operating expenses by up to 60%. As a result, the rising globalization of these services provides emerging countries with an opportunity to exploit higher-value niches.

The benefits of BPO services in developing countries include direct employment opportunities, a favorable influence on infrastructure development, and the spread of technology and ideas in national industries and even agriculture. This is notably true for the supply of marketing and pricing information, assisting with business-to-business interactions and e-commerce applications, and even the processing of certain domestic firms' services. In the BPO industry, emerging economies may also attract significant funds of FDI. Women are also often engaged in other sectors such as call centers and data entry occupations.

However, the Business Process Outsourcing industry has created an attractive niche for SMEs from emerging economies, as the businesses require little start-up capital, basic telephone, and other ICT equipment, and low-wage personnel. National governments in many countries with international support can win a slot in the Business Process Outsourcing market in the absence of largely English-speaking, highly skilled, and professionally trained manpower, particularly in non-voice-based low- to medium-skill segments of BPO such as payroll and database preparation.

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Business Process Outsourcing Market Dynamics:
Increasing Investments in Smart Cities

The Business Process Outsourcing market is expected to be aided by rapid growth in investments in smart city projects in many countries globally. Smart city technologies use information and communication technologies to efficiently manage and operate urban services including transportation systems, water supply, and law and order. Smart cities use a system that uses internet capabilities for the transfer of data over a network without human interaction and minimal human-to-computer interaction. As smart cities use a host of software for efficient functioning, the demand for service is expected to increase. In 2022, more than 5000 smart city projects were under progress in India which were worth about USD 26.3 bn.

Meanwhile, in the UK, communications infrastructure provider BAI Communications is to build a 5G-centric network, powered by Mavenir’s MAVedge offering, to accelerate the adoption of transformative digital services for sectors including manufacturing and logistics, education, and social care, as part of a smart city project for Sunderland City Council in 2021. In addition, The Ho Chi Minh City (HCMC) government signed an agreement with the state-run Vietnam Posts and Telecommunications Group (VNPT) in September 2022. They will collaborate to deploy a series of digital transformation projects for the 2022-2025 period, toward building a sustainable smart city.



Scarcity of skilled professionals

The emergence of startups as major clients of BPO service providers requires skilled employees for their businesses. Driven by cost efficiency and the necessity to focus on core operations, startups have started outsourcing non-core operations such as finance and recruitment to specialized agencies and companies. In 2022, 14000 new startups were recognized which was 20 times up in 5 years. The competition in the IT market is pretty high. So every business requires skilled professionals to run their businesses.

With the growth in the automation adoption rate in BPO, the demand for high skilled workforce is expected to increase exponentially. The services in the historic period mainly relied on entry-level jobs that did not require experience. For instance, according to a survey conducted by Infragistics, 53% of software and IT developers found it hard to find the right people with the right knowledge in 2022. The high-skilled workforce is mainly required for jobs in the accounting, human resources, web design, and coding fields.

The low availability of highly skilled workforce, i.e. the workforce with a specific background or of a managerial position with experience of five years and above, is expected to slow down the revenue generation by BPO service providers due to the inability to perform high-cost projects requiring experienced workforce, thereby, restraining the growth of the market during the forecast period.
Business Process Outsourcing Market Segment Analysis:
Based on End-User, the IT and Telecom segment dominated the global Business Process Outsourcing Market with the highest market share of 22% in 2021. The segment is expected to grow at a CAGR of 7.80% and maintain its dominance by 2029. IT and the Telecommunication sector has witnessed a total transformation throughout the world in the last two decades due to rapid technological advances. An advanced telecom system is a necessity for various countries manufacturing as well as service industries. The increased number of IT and telecom organizations and global industrialization are expected to be the major reasons driving up demand for business process services in the IT and telecommunications industries. IT and telecom BPO services meet the growing need for strong connectivity, handle security concerns, and develop new offers for cutting-edge gadgets and technological standards. Telecom firms outsource a variety of business tasks, including call center outsourcing, billing operations, finance, and accounting. Outsourcing allows telecom firms to save capital costs, gain access to specialist skills, maximize current expenditures, develop a flexible strategy for attracting and retaining more consumers, and manage cost constraints.

The BFSI segment held a market share of 18% in 2021 and is expected to grow at a CAGR of 8.19% during the forecast period. Companies are implementing outsourcing processes for the management of assets and investment to upgrade customer services. BPO is being used by financial organizations to increase their cost efficiency. Many BFSI organizations are opting for outsourcing procedures for various BFSI fields, such as investment management and asset management, to enhance BFSI client services. Business process outsourcing has long been a reliable tool for improving the quality of services, and the flexibility of business processes.

The banking sector has been a leading adopter of outsourcing and offshoring, and the major global banks had already achieved outsourcing scale and maturity before the advent of the financial crisis. Outsourcing demand shrank due to the global slowdown across all verticals, including banking. As the new post-economic crisis landscape begins to take shape, banks worldwide are traversing the difficult path back to sustainable business models and focusing on improving their profitability and trust among their constituents. MMR Research expects to witness an increase in the volume of outsourcing deals as banks come to terms with the following challenges:

 



Challenges
Impact on outsourcing demand


Changing regulatory frameworks: The financial crisis prompted governments around the world to reevaluate their financial regulatory frameworks. Key regulations include the Financial Market Stabilization Fund (as a continuation of the Troubled Assets Relief Program) in the US, the Special Liquidity Scheme in the UK, and proposed regulations by the Basel Committee on Banking Regulation. Implementation of these norms will increase complexity in banking operations and give regulators greater supervisory powers over the banking system.
The purpose of these new regulations is to stabilize the banking system and revive lending in key sectors of the economy. At the same time, these regulations will require a substantial increase in resources for implementation and monitoring purposes, which will in turn lead to an increase in outsourcing demand. Service providers are gearing up to comply with the new regulatory requirements by designing more efficient processes and building dedicated resources with expertise in compliance control and management.


Risk management and a need for more robust business models: The need of the hour is effective governance and fast decision-making. Banks are striving to establish clear lines of accountability and transparency to build a well-defined operating model. Information systems and data centers have to be effectively managed and the data within effectively processed in order to help predict or minimize the effect of future crises; this will help banks win back their market share and increase their revenues.
A need for better risk management has given rise to opportunities in automated, preventive, and real-time governance, risk, and compliance management solutions. Banks are evaluating partners with expertise in proactively preventing risk events and compliance violations while monitoring all business activities on a single platform.


Strategic cost reduction: Banks are looking to balance short-term cost reduction with longer-term efficiency measures to strengthen their position for future success. There is considerable pressure from stakeholders to implement strategic cost optimization methodologies that, ultimately, will integrate with broader efficiency efforts.
Strategic tactics to reduce costs are gaining popularity among banking clients. These include discretionary spending on high-value products and services, accurate forecasting processes, provision of variable pricing models, and moving low-risk operations to lower-cost locations. By employing these methods, banks are increasingly looking to offshoring partners to help them reduce costs strategically. Several banks with existing outsourcing relationships are renegotiating and consolidating to further reduce costs, an impact expects to last in the coming year.



Business Process Outsourcing Market Regional Insights:
The North American region dominated the global Business Process Outsourcing market with the highest market share of 49.5% in 2021. The region is expected to grow at a CAGR of 7.36% and maintain its dominance by 2029. The BPO market in North America is expected to be mature, highly fragmented, and robust. Rising demand for business process outsourcing services from many regional IT giants is expected to be the primary growth driver in the region. Customization of service offerings to better fit individual needs, along with rising demand for cloud computing, is expected to propel regional growth during the forecast period. The increased usage of cloud enablement and digital services, necessitates frequent help and maintenance for corporate operations, boosting the region's market growth.

The Asia-Pacific region is expected to grow at a significant CAGR during the forecast period and offer lucrative growth opportunities for the market players. Cross-border ICT-enabled services and business process outsourcing are expected to contribute to economic integration and growth in the Asia-Pacific region as the Asia-Pacific Economic Cooperation (APEC) attempts to promote free trade and economic cooperation in the region. ICT-enabled services have increased significantly in recent years and many countries around the world, including various emerging Asian countries. While there is no single standard way to build the ICT-BPO sector, emerging countries' successful experiences can give important insights and practical lessons for countries considering establishing their ICT-BPO service businesses.

China and the Indian market are expected to generate lucrative revenue share by 2029 and support regional market growth. Factors such as workforce availability, increased government expenditures in the BPO business, BPO-centric education, an emphasis on improving employees' communication skills, and enhanced infrastructure are expected to increase market growth in China and India. India has been a popular outsourcing market due to its favorable geographic location and investor-friendly tax structure. Additionally, various BPO businesses in India are increasing their presence in Tier 2 and Tier 3 cities and are moving away from merely offering contact centers or call center services and toward gathering high-end knowledge and providing a variety of additional financial, accounting, and IT services. Besides that, increased government support is expected to boost the Indian BPO industry during the forecast period.

 For instance, The Indian BPO Promotion Scheme (IBPS), which is part of the Digital India Programme, aims to create job opportunities for the development of a trained workforce in the BPO industry.

The South Africa region is also expected to provide lucrative growth opportunities for BPO market players during the forecast period. South Africa is expected to be the second most attractive Business Process Outsourcing location in the world, based on its reputation as a reliable, cost-effective, and high-quality destination for outsourced business services. And the country's standing as a key BPO player has been reinforced over the last six months. While lockdown measures to contain the coronavirus compromised business continuity across the world, South African contact centers were quick to migrate to remote working models and were able to remain operational with minimal disruption for clients.
Business Process Outsourcing Market Scope: Inquiry Before Buying
 



Business Process Outsourcing Market


Base Year
2021
Forecast Period
2022-2029


Historical Data
CAGR
Market Size in 2021
Market Size in 2029


2017 to 2021
7.09 %
USD 169.763 Billion.
USD 293.650 Billion.


Segments Covered


by Service
• Voice Processing
• Telemarketing Services
• Customer Care Services
by Outsourcing Type
• Offsource
• Nearshore
• Onshore
by Application
• Sales & Marketing
• Procurement & Supply Chain
• Facilities & Administrations
• Customer Care
• Training
by Organization Size
• Large Enterprises
• SMEs
by Ownership
• Captive
• Third-Party
by End-User
• BFSI
• IT & Telecom
• Healthcare
• Manufacturing
• Retail & E-Commerce
• Government & Defense
• Transportation & Logistics
• Travel & Hospitality
• Education
• Energy & Utilities
• Others


Regions Covered


North America
• United States
• Canada
• Mexico
Europe
• UK
• France
• Germany
• Italy
• Spain
• Sweden
• Austria
• Rest of Europe
Asia Pacific
• China
• S Korea
• Japan
• India
• Australia
• Indonesia
• Malaysia
• Vietnam
• Taiwan
• Bangladesh
• Pakistan
• Rest of APAC
Middle East and Africa
• South Africa
• GCC
• Egypt
• Nigeria
• Rest of ME&A
South America
• Brazil
• Argentina
• Rest of South America



Business Process Outsourcing Market, by Region
• North America
o United States
o Canada
o Mexico
• Europe
o UK
o France
o Germany
o Italy
o Spain
o Sweden
o Austria
o Rest Of Europe
• Asia Pacific
o China
o India
o Japan
o South Korea
o Australia
o ASEAN
o Rest Of APAC
• Middle East and Africa
o South Africa
o GCC
o Egypt
o Nigeria
o Rest Of ME&A
• South America
o Brazil
o Argentina
o Rest Of South America
Business Process Outsourcing Market Key Players
• ADP, LLC. (New Jersey)
• Conduent Inc., (New Jersey)
• Accenture PLC. (Ireland)
• WNS Global Services Ltd. (India)
• Capgemini (France)
• Infosys BPM Limited (India)
• IBM Corporation (New York)
• Tata Consultancy Services Limited (TCS) (India)
• TTEC Holdings, Inc., (Colorado)
• Conneqt Business Solution Limited (India)
• HCL Technologies (India)
• Wipro Ltd. (India)
• Amdocs (Missouri)
• NCR Corporation (Georgia)
• Sodexo (France)
• Genpact (India)
• Concentrix (California)
• Teleperformance (France)
• Plaxonic Technologies (India)
• EXL Service (New York)
• Skyes (Florida)
• OctopusTech Solutions (India)
• Aegis Limited (India)
• CBRE Group, Inc. (Texas)
• Anderson Group BPO Inc. (Philippines)
• Automatic Infotech (India)
• Avaloq (Switzerland)
• Nihon (Japan)
• Nomura Research Institute, Ltd. (Japan)
• NTT Data (India)
• ValueNotes Strategic Intelligence Pvt. Ltd. (India)
• Oracle (Texas)
• TriNet Group, Inc. (California)

FAQs:

1. What are the growth drivers for the Business Process Outsourcing market?
Ans. Cheaper labor costs, higher efficiency, and better quality are expected to be the major driver for the Business Process Outsourcing market.

2. What is the major restraint for the Business Process Outsourcing market growth?
Ans. The scarcity of skilled professionals is expected to be the major restraining factor for the Business Process Outsourcing market growth.

3. Which region is expected to lead the global Business Process Outsourcing market during the forecast period?
Ans. The North American market is expected to lead the global Business Process Outsourcing market during the forecast period due to rising demand for business process outsourcing services from many regional IT giants.

4. What is the projected market size & growth rate of the Business Process Outsourcing Market?
Ans. The Business Process Outsourcing Market size was valued at USD 169.763 Billion in 2021 and the total Business Process Outsourcing revenue is expected to grow at a CAGR of 7.09% from 2022 to 2029, reaching nearly USD 293.650 Billion.

5. What segments are covered in the Business Process Outsourcing Market report?
Ans. The segments covered in the Business Process Outsourcing market report are Service, Outsourcing Type, Application, Organization Size, Ownership, End-User, and Region.