Training and procurement are the business process outsourcing market's two fastest growing segments as companies begin to think more strategically.
Posted Oct 24, 2005
The BPO market is expected to experience double-digit growth over the next five years, according to an IDC study. "Worldwide and U.S. BPO 2005-2009 Forecast: Market Opportunities By Horizontal Business Functions," predicts that worldwide BPO spending will balloon from $382.5 billion in 2004 to $641.2 billion in 2009, which equates to a five-year compounded annual growth rate (CAGR) of 10.9 percent.
The growth is attributable to a cluster of buyer and vendor trends and dynamics, according to Romala Ravi, program director for BPO services research at IDC, including an overall shift in buyer thinking. "Companies today have moved fast beyond the 'salvage' mode associated with the early 2000s, and are now working hard to build long-term competitiveness, differentiation, and leadership," she says. "In line with this companies are reevaluating the way they manage their operations and business functions. Companies are looking to build the organizational agility and strategy associated with leadership. As client organizations seek new approaches to build the foundation for a sustainable, competitive, and differentiated future, BPO is increasingly being factored in and considered as a strategic move to achieve this positioning."
The report also examines and projects eight BPO markets--customer service, human resources, finance and accounting, logistics, procurement, product engineering, sales and marketing, and training. More relatively mature sects, including customer care and logistics, still are able to identify new growth opportunities, but training and procurement are the two fastest growing segments. Training is projected to experience a five-year CAGR of roughly 24 percent, which is trailed slightly by procurement, with a forecasted five-year CAGR of about 22 percent. These segments are starting off from a small base, according to Ravi, but she contends there is tremendous interest and exploration of BPO in these areas. "Companies today are taking a more rigorous approach in identifying what their core and noncore activities are," she says. "In the process, even areas that have not been outsourced in the past are now being considered viable candidates for outsourcing."
Human resources (five-year CAGR of 16.8 percent) and finance and accounting (five-year CAGR of 14.8 percent), segments deep-rooted with discrete, high-volume processing services, are gaining momentum in the evaluation and adoption of comprehensive BPO engagements, those that include multiple services within one engagement, according to Ravi. She notes, however, that outsourcing comprehensively does not equate to outsourcing the entire function. The driving force behind the trend toward an increasing number of comprehensive engagements coincides with that of the overall BPO market. It "has to do with the overarching trend that companies are thinking more strategically about BPO."
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