Business Process Outsourcing Market to Reach $450 Billion by 2012

Myriad industry analysts can’t be wrong—can they? The business process outsourcing (BPO) segment of the overall market--in which contact center outsourcing predominately fits—continues to receive lavish praise for its growth potential from pundits, judging by the latest statistics from analyst firm NelsonHall. We’ve reported Gartner’s take on the future for BPO, and its forecasted growth to $235.2 billion by 2011. NelsonHall takes its prediction one step and one year further, claiming the market can reach $450 billion by 2012.

Thank the current economic slowdown for the increasing strength of BPO. According to a summary provided by NelsonHall, the current economy is "placing pressure on organizations across all sectors to review their efficiency in mature markets." Consequently, organizations will have to look globally in order to stay competitive and take advantage of emerging economies while at the same time use offshore outsourcing to reduce their cost base. NelsonHall expects Asia and Latin America to benefit most from this push, saying that "as organizations increasingly focus on establishing themselves…they will look to locate support functions such as finance and accounting services and procurement within these geographies, leading to opportunities in the outsourcing and relocation of existing shared services centers." 

With this in mind though, John Willmott, founder and CEO of NelsonHall, explains that the BPO industry does not solely rely on a poor economy to thrive. Simply a change in the economy—good or bad—helps the market. "[This industry] is a lot like financial services in that if there’s change going on, it’s quite good," he says. "Certainly one of the top three drivers for BPO at any time is actually changes in transaction volume." He explains that when the transaction volume is going down, companies are outsourcing because the costs are too high to maintain current labor levels in-house. However, if rates rise, organizations don’t have the capacity in place to handle the spike and consequently turn to outsourcing. 

Willmott adds that strong growth will be seen in individual human resource (HR) service lines, as opposed to a multi-process HR outsourcing strategy. "It’s reasonable to say there’s less of an appetite for projects that involve heavy investment up front," he says. "Companies are more likely to focus on singular services that are simple and provide a quick return [on investment]." The singular services standing to benefit include benefits administration, learning services, and occupational health.

Looking at key verticals, according to study results, the following areas will continue to see more BPO growth:

  • defense;
  • financial services;
  • healthcare;
  • local government; and
  • pharmaceuticals.

The increase in BPO activity should also hold true for North America, but Willmott says that there is an opportunity in which the opposite may occur, and BPO contract activity could drop off in the last quarter of this year, continuing through the first half of 2009. He maintains this is something to watch out for. "One thing we noticed in 2004—when the last presidential election took place--is that BPO contract activity took a real dive in the [last half of 2004 and first quarter of 2005]," he recalls. "The numbers were dreadful. There seems to be a reluctance to offshore when campaigning is at its peak—I think it’s dangerous to say [outsourcing] is unpatriotic, but people do think twice."

CRM Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues

Related Articles

Get Smart About Outsourcing

Forrester outlines 12 criteria necessary to address when assessing contact center outsourcers today.

eTelecare Global Solutions Merges with Stream Global Services

One industry analyst believes the move is the biggest business process outsourcing market shakeup in the last six to 12 months.

Outsourcing in ‘09: Onshore, Offshore, and At Home

Datamonitor examines the five key trends shaping the outsourcing market this year.

Growth Slows for Worldwide Services Market

According to research firm IDC, blame the current recession for the scaled-back spending forecast.

The Hidden Costs of Outsourcing

Hidden fees like government costs and severance pay are limiting the cost benefits of IT outsourcing, though the business practice isn't losing its popularity.

Virtualization Takes Hold, Says Gartner Magic Quadrant on Desktop Outsourcing

Out of a 12-company scrum assigned to the top quadrant, EDS leads the pack.

Re-shoring Contact Centers

A rise in customer dissatisfaction with offshore contact centers has many companies looking to relocate closer to home.

Worldwide Outsourcing Market to Grow 8.1% in '08

A new Gartner study reveals strong growth in the overall outsourcing market -- but even stronger growth in the business-process outsourcing most critical to CRM.

The 2008 CRM Service Awards: Outsourcing

Customer service outsourcing comes down to comfort; West retains the crown.