Business Process Outsourcing (BPO) is the process of contracting non-core responsibilities and operations, whether technical or non-technical, pertaining to specific business functions to a third party or an external service provider.
In other words, business process outsourcing involves hiring a third party to undertake non-core tasks rather than investing additional resources to perform those tasks. Such a practice allows companies to concentrate on core operations, such as business development, product development, among other functions in order to gain operational excellence.
The BPO industry can be bifurcated into two major service categories, namely front office, and back office. Front office services include tech support and marketing, among others, while back office services include tasks, such as purchasing and billing.
Organisations prefer outsourcing such non-core tasks to BPO companies around the world so that they can concentrate on their core competencies. Outsourcing non-core tasks can also help in saving employee time, which can be further devoted to other core tasks, thereby increasing productivity.
Business process outsourcing can also deliver additional benefits, including cost saving, availability of experienced professionals to handle the non-core tasks, enhanced employment opportunities, and access to advanced technologies.
Business process outsourcing also opens opportunities for professionals to apply their skills and deliver their services from remote locations and perform the tasks allocated to them remotely rather than having to relocate. Such benefits are expected to play a key role in driving the growth of the global business process outsourcing market.
Top Trends in the Business Process Outsourcing Market
According to Grand View Research, the global business process outsourcing market size is expected to reach USD 343.19 billion by 2025, growing at a CAGR of 7.6% from 2019 to 2025. Business process outsourcing is no more limited only to large enterprises.
Medium-sized enterprises have also started adopting the practice of business process outsourcing, and the trend is expected to gain traction over the forecast period as BPO service providers continue to introduce new and innovative services.
Moreover, intensifying competition between the BPO market players to gain a competitive edge and stay ahead in the competition is also anticipated to drive the BPO market growth.
The following chart illustrates the growth of the market size for the North America BPO market from 2015 to 2018 and the expected growth from 2019 to 2025.
North America business process market size, by country, 2014 – 2025 (USD Billion)
North America is expected to dominate the BPO market over the forecast period accounting for more than 30% of the total market share owing to the presence of key players, such as IBM, NCR Corporation, CBRE Group, Inc., and TTEC Holdings, Inc., among others. These key players are inclined towards outsourcing various services not only to focus on their core competencies but also to expand their customer base.
For instance, in January 2018, NCR Corporation sold its ATM outsourcing business to Electronic Payment and Services Pvt. Ltd. (EPS). EPS is engaged in offering payment systems and is based in Mumbai, India. By selling its ATM outsourcing business, NCR Corporation expects to focus more on its next-generation technologies and software driven & hardware enabled services in order to offer enhanced customer experience.
The Philippines is expected to emerge as one of the leading outsourcing destinations, particularly to outsource tasks, such as customer care, call centre, data entry, and human resources services, among others.
Most of the growth of the Philippines BPO market would be focused on major cities, including Manila, Davao, Cebu, Iloilo, Bacolod, and Santa Rosa, which rank higher in digital transformation, cost benefits, ease of doing business, and availability of skilled and talented professionals. Industry experts operating in the BPO market in the Philippines believe that 68% of the BPO companies serve major clients present in the U.S., Europe, New Zealand, and Australia.
Robotic process automation (RPA) is also expected to benefit the BPO market by opening potential opportunities for revenue growth. Implementation of social media management tools focused on real-time customer engagement and cloud technologies is also expected to play a pivotal role in driving the growth of the BPO market over the forecast period.
Driven by competition, innovation, and advances in technology, the BPO market is continuously gaining momentum. Furthermore, the trend is expected to continue over the forecast period as the need to reduce operating cost, harmonise processes, and get access to qualified professionals prompts more and more enterprises to outsource their business processes.
Top Two Trends Expected to Impact Industry Growth
#1 Adoption of Cloud Computing in Business Process Outsourcing Across Various Applications
Cloud computing envisages using a network of internet-connected, remote services to manage, store, and process data. Cloud computing helps BPO providers in increasing the speed of production, gaining greater quality control, and reducing costs. Adopting cloud computing in BPO also ensures universal access, flexible provisioning, and instant computing support and system access for business purposes whenever required.
Another benefit cloud computing can offer to the BPO market is the reduction in development costs, capital expenditure, the total cost of ownership, and costs aligned to business demands. Such benefits are anticipated to encourage the adoption of cloud computing in the business process outsourcing market over the forecast period.
BPO service providers can also leverage the benefits of cloud computing to reduce the time required for processing data-intensive business processes. As such, cloud computing in BPO can potentially enhance data processing workflow while reducing the turnaround time.
Moreover, owing to the continued roll-out of high-speed Internet networks and their growing reliability, hosting applications on the cloud is being preferred over on-premise hosting, which involves installing complex infrastructure that is more prone to downtime.
Initiatives being undertaken by various governments to promote the adoption of cloud technology is another factor driving the growth of the market.
For instance, digital transformation projects, such as Smart Dubai and Smart Abu Dhabi, launched by the Government of the United Arab Emirates (UAE) are funded by the government and are aimed at developing the national economy. Such initiatives to promote the adoption of cloud technology are expected to encourage more and more enterprises to outsource their business processes, thereby driving the growth of the BPO market in the UAE.
#2 Positive Impact of Business Process Outsourcing across Several Applications
BPO is turning out to be an integral part of the business models being pursued by the BFSI industry. Financial institutions are increasingly collaborating with BPO service providers to enhance cost efficiency and ease customer management.
The growing digitisation of services in the BFSI industry and the growing emphasis on offering personalised services has triggered the need to optimise data management, enhance the customer value, and pursue cross-selling opportunities. As a result, the adoption of BPO services among the incumbents of the BFSI industry is increasing and is anticipated to drive the market over the forecast period.
Global business process outsourcing market size, by application, 2018 (%)
Organisations are also outsourcing human resources activities, including recruitment, training, payroll, workforce administration, and on-boarding, among others, so that organisations can focus on managing their core business functions more efficiently.
Additionally, outsourcing human resource activities is helping organisations in acquiring resources with the required skill sets, meet the dynamic hiring requirements, and extending the reach to more potential candidates in line with their business requirements.
A major challenge involved in outsourcing business processes is ensuring the protection of vital business data. The need to reduce operational costs often prompts the outsourcer to approach BPO companies in countries that do not have an established legal framework capable of protecting the outsourcer from breach of confidentiality and violation of intellectual property rights.
Although the outsourcers and the outsourcees are bound by corporate contracts, any lack of stringent legal framework can considerably hinder the legal actions and erode the possibilities of compensation in case of any breaches or violations.
What Future Market Holds: Future Opportunities
Companies are increasingly deploying digital workforce owing to the various benefits it can offer, such as increased capacity, reduced operating cost, and improved operational agility. Digital workforce can potentially automate data validation and data entry processes.
In addition, the digital workforce can work on a 24×7 basis. At the same time, organisations are no longer relying only on outsourcing and have started moving towards RPA in order to streamline operations and reduce costs. RPA can also help in enhancing business capabilities and service delivery.
As RPA continues to evolve and make inroads into various industries, segments, and business processes, Grand View Research expects the BPO market to witness considerable growth over the next few years. As such, RPA is emerging as the latest trend in the BPO market, particularly in the management sector, by providing high-value creation and ensuring faster time-to-value and notable cost savings.
According to the report by Grand View Research the global BPO market size is expected to grow at a CAGR of 7.6% from 2019 to 2025. While North America accounted for the largest market share in 2018 owing to the presence of key players, Asia Pacific is expected to grow at the highest CAGR exceeding 7% over the forecast period. The growing demand, particularly from the BFSI and IT & telecommunications industries would lead the regional growth.
One Line Summary
The growing trend among organisations to focus on core competencies and avoiding any excessive expenditure on non-core competencies is anticipated to fuel the growth of the business process outsourcing market.
Ruda is a senior research associate at Grand View Research. She has more than 2 years’ experience in market research & consulting and has been working under the ICT & semiconductor domain. She holds a bachelor’s degree in information technology and a master’s degree in information/cyber security. Ruda’s primary focus is on how next-generation technologies, industrial automation, consumer electronics, industrial & power projects can benefit various industries and has also worked on diverse topics that are shaping the ICT industry.