The outlook for BPO is mixed in developed economies, and this has resulted in a tempering of growth expectations, analysts said.
“While growth remains strong in developing economies, the United States, the world’s largest BPO market, presents a mixed picture for the global market,” said Cathy Tornbohm, research VP at Gartner. “Emerging markets are faring far better and, generally, multinational companies continue to look to BPO as a means both to reduce costs and to buoy their business operations during the protracted return to a growth environment. We also see an increase in transaction volume, especially in payroll, recruiting, accounts payable, and customer data analytics and knowledge process outsourcing (KPO) activities.”
Gartner estimates that North America’s BPO market will grow 3.8% in 2011. Following strong growth in the third and fourth quarters of 2010, the U.S. economy presented a mixed picture in the second quarter of 2011, and yet CEOs’ confidence increased for global businesses. The U.S. is the largest and most established market for BPO. Canada has also seen major BPO initiatives throughout the decade in the energy sector, as well as an active domestic BPO service provider market.
According to the report, key vertical markets poised for industry-specific BPO growth through 2014 in North America are retail, healthcare, transportation and utilities. Within horizontal sectors, dynamic growth is expected for customer selection in the customer relationship management (CRM) and human resources (HR) domains.
Gartner analysts estimate that Western Europe’s BPO market will grow 8.9% in 2011 in terms of U.S. dollars, as demand for services relating to customer management (CM), finance and accounting (F&A) and HR BPO continues.
In Europe, Gartner does not see a major wave of deals being brought back in-house. For newer services, such as KPO, there is demand for legal process outsourcing, particularly in the U.K. Continental Europe has seen demand primarily for payroll services, increasingly with a multicountry service requirement, contact centre BPO, and industry-specific processes such as banking and road tolling. In continental Europe, the challenges of overcoming language requirements, labor laws and trade unions, and a lack of labor arbitrage benefits, still limit adoption of many types of BPO.
The outlook for Asia/Pacific’s BPO market remains positive, with growth in 2011 expected to be 17.9% in terms of U.S. dollars. Gartner expects higher demand for services related to CM BPO, HR outsourcing, F&A outsourcing, banking and financial BPO services, billing BPO services and supply management BPO through 2015. Most growth will centre on the key regional economies of India, Australia and China, the report states.
Key drivers for outsourcing business processes in emerging economies within Asia/Pacific are scalability, the infusion of best-of-breed processes and technology, faster time-to-market and improved quality of service.
Gartner estimates that Japan’s BPO market (expressed in yen) will decrease 0.9% in 2011. The impact of the March 2011 earthquake is expected to be prolonged, and analysts expect this will impair growth in the BPO market. In 2011, demand for CM and supply chain BPO will decline due to lower business activity as a result of the slowdown in production and consumption.
Although IT services growth rates in Latin America slowed slightly in 2009, Gartner has said that overall Latin American adoption of BPO will grow through 2015. BPO in this region continues to be adopted by the domestic and Latin American subsidiaries of global corporations. Latin America’s BPO market is expected to grow 14.7% in 2011 in terms of U.S. dollars. Labor costs remain relatively low, compared with other regions. Latin America has received major investments from BPO service providers as a location for global delivery sites, in addition to Asia/Pacific and Eastern Europe.