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Gartner: Offshore BPO market to grow 38% in 2003

Gartner analysts say the BPO offshore push will pull in nearly 40% more revenue in 2003. The market should surpass the $1 billion mark with India the primary destination.

Offshore is headed off the charts.

According to a report this week from Gartner, Inc., offshore business process outsourcing (BPO) will swell to a $1.8 billion market this year. That figure represents a nearly 40% increase over 2002's total.

By the end of 2003, offshore BPO will stake a 1.5% claim in the entire BPO market, analysts said.

The numbers should bear out if pilot projects currently in the works pan out, according to Rebecca Scholl, a principal analyst with the Stamford, Conn.-based firm's sourcing group.

"The growth in offshore BPO during the next couple of years will be significant, as a result of contract expansions and new adopters," she said in a news release obtained by

Scholl added that firms have been circumspect when it comes to taking up overseas BPO services, a fact which will make for a steady but more temperate market compared to 2002.

India should reap the rewards of this trend. Gartner analysts predict that India will rake in about $1.2 billion from BPO in 2003, up a few notches from the roughly $1 billion in 2002 revenue.

India was also the top outsourcing choice in a recent poll.

The figures, along with added revenue from internal company operations, and U.S. firms that set up their own delivery centers there, will give India two-thirds of the offshore BPO market.

But India still has some work to do and some revenues to realize.

According to Gartner research vice president Sujay Chohan, India might have the transaction processing skills, but service providers there need to prove their process skills and industry acumen in order to offer process transformation capability and get a piece of the more lucrative BPO pie.

"Most of today's offshore BPO opportunity remains at the level of out-tasking a component of a business process rather than outsourcing an entire business process, and is mostly relegated to contact centers and back office transaction processing," he said.

Gartner says of 250 U.S. clients surveyed last spring, 1% are outsourcing BPO services offshore, and 19% are thinking about doing it within the next two years. "The use of outsourcing is expected to grow as the supply base matures and companies are more comfortable working with external providers based in offshore locations," said Debashish Sinha, principal analyst for Gartner's IT services group.

While India seems to be the place to be for offshore BPO right now, it's not the only place. Chohan said that other areas are champing at the BPO bit as well.

He said that Indian service providers need to keep in mind that competition will spring up from other English-speaking nations across the globe and are baiting the hook with policies amenable to investors.

"BPO is truly a global delivery opportunity," he said.


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