Despite political waves, business process outsourcing on the upswing, but companies expecting more from providers
Framingham, MA — May 7, 2004 — Despite becoming a political hot potato in the midst of the current U.S. elections cycle, worldwide spending on business process outsourcing (BPO) services is on the upswing and will hit nearly $700 billion by 2008, but companies are becoming more demanding of their BPO providers, according to a new report from technology research firm IDC.
In its report, "Worldwide and U.S. Business Process Outsourcing (BPO) 2004-2008 Forecast and Analysis," IDC covers the market for nine business functions, including human resources, procurement, finance and accounting, customer care, logistics, engineering/research and development, sales and marketing, facilities operations and management, and training.
Spending for BPO services for these functions totaled approximately $405 billion in 2003, an increase of about 8 percent over 2002, IDC said. The research firm sees this market increasing to $682.5 billion in 2008, with a compound annual growth rate (CAGR) of 11 percent.
In a statement, IDC said its research points to a BPO market that is "exciting, brimming with opportunities, and yet, complex and challenging."
"There is a definite surge in interest for BPO in today's economic climate," said Romala Ravi, program manager for BPO services at IDC. "At the same time, companies' expectations and demands of BPO providers have escalated, and the lens through which BPO engagements are being evaluated has become much more sharply focused."
Though BPO holds the promise of substantial rewards, Ravi said, "the path to success in the BPO market will be fraught with challenges, necessitating focus and long-term commitment on the part of BPO providers."
The BPO market is really made up of many individual markets, each with its own nuances, unique opportunities and challenges, according to IDC. For service providers looking to play in BPO, IDC believes it is imperative to examine each function independently, analyze its characteristics, match the buyer needs and expectations within each function with their own strengths and capabilities, and make strategic decisions on where to focus. Making a play as a BPO provider entails risks and takes time, resources and patience. There is no fast track or silver bullet to this market, and focus is critical, IDC warns.
The IDC study presents an update to the five-year forecast for the worldwide market for BPO services, analyzing the trends and events influencing opportunities in the BPO market, quantifying their impact on the five-year forecast and identifying future growth areas within each BPO functional segment.