The Rise of India's BPO Industry: Key Factors Driving Success
In his bestselling and multiple award-winning book “The World Is Flat,” renowned author and columnist Thomas Friedman has dedicated an entire chapter to outsourcing.
In it, he has essayed the role of India’s Business Process Outsourcing (BPO) industry in not only enhancing the country’s economic growth but also helping the US’s economy. In many conferences and discussions, he asserted that the USA is a huge beneficiary of India’s BPO sector.
Mr Friedman is not alone. India became so popular as an outsourcing destination that, in the late 2000s, the Oxford Dictionary included the word ‘Bangalored’ to describe jobs outsourced to India, or more specifically to the country’s IT hub, Bangalore or Bengaluru, as it is called today.
Many industry experts and thought leaders have also lauded India’s BPO industry. Former Indian Prime Minister Manmohan Singh once said “Outsourcing, IT revolution, the access to India’s human resources, India’s pool of scientists. It will help American companies to become leaner, meaner, more efficient, and they’ve become more competitive, both in the United States and in dealing with the rest of the world.”
Man Booker Prize-winning author Aravind Adiga rightly said “India’s great economic boom, the arrival of the Internet and outsourcing, have broken the wall between provincial India and the world.” Noted Indian businessman and philanthropist Azim Premzi once remarked “The important thing about outsourcing is that it becomes a very powerful tool to leverage talent, improve productivity, and reduce work cycles.”
At HoduSoft, we recognize the contribution of our nation’s BPO industry in propelling economic growth. We salute BPO companies of all sizes for their valuable contribution and dedication, and we are proud to support them with our cutting-edge BPO contact center software and call center software to enhance their operations and customer experiences.
In this blog post, we have discussed every relevant thing you need to know about India’s BPO industry, starting from its evolution to the factors responsible for the sector’s success and the way forward. So, without further ado let’s dive right in.
A Brief Introduction to the BPO Industry in India
India’s BPO industry employs more than four million people in the country. It makes the sector one of the largest employers in the country. The industry has not just made a sizable contribution to the Indian economy but has also played a key role in global outsourcing.
As per data published on Rentech Digital’s website, as of July 12, 2024, a total of 5169 BPO companies are registered in India based on phone number, email, or both. The number would be much higher if unregistered BPO companies were taken into account.
Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8–10 percent for the next decade. As of 2021, the revenue of the Indian BPO industry was estimated at USD 38 billion.
Evolution of the Indian BPO Industry
The advancement in telecommunications made it possible for developed countries to outsource their non-core operations to third-party companies in developing countries. Since the 1980s, India’s BPO industry’s journey began and it evolved in three phases.
The Early Phase (Late 1980s and Entire 1990s)
The first BPO in India was started by American Express in the second half of the 1980s as it consolidated its Japan and Asia Pacific (JAPAC) back office operations in the Gurgaon region. In the 1990s, General Electric set up its arm GE Capital International Services at Gurgaon. Following that some more BPOs established during that period were Spectramind, Quatrro BPO, and more.
Growth Phase (2000s and 2010s)
Beginning from the early 2000s, the Indian BPO sector gained traction and it grew at a rate of 38 percent over 2005.
The penetration of the internet in major Indian cities as well as the evolution of Voice over Internet Protocol (VoIP) played a key role in the growth of the Indian BPO industry.
For the financial year 2006, the services provided by the industry were worth USD 7.2 billion. During this period, nearly 400,000 people were directly employed in this industry.
During the late 2000s, some popular social media platforms such as Facebook, Pinterest, Tumblr, and others gained popularity in India. Some BPO companies leveraged these platforms and that contributed to their growth as well.
Innovation Phase (2010s to Present)
The 2010s was a magical time for the industry. During the period, some transformative tech advancements took place in the industry.
The advent of new technology such as mobile apps, smartphones, penetration of 4G networks, and more such innovations revolutionized the Indian BPO sector.
The integration of cloud computing into BPO services also proved to be a game changer. After the 2020 pandemic, remote working became the new normal, and BPOs had to change accordingly.
After 2022, rapid advances in artificial intelligence (AI) and generative AI led to the development of chatbots and automated customer service tools. That improved user interaction and support on social media platforms.
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Services Offered by the Indian BPO Industry
The Indian BPO industry offers a wide range of services to global companies. Here are some services the industry provides:
1. Customer Service
This is one of the most common services Indian BPOs provide to international clients. BPO call centers deal with both inbound and outbound calls. Besides, BPOs provide customer service by handling queries and complaints through phone as well as several channels such as email, text message, chats, and various social media channels.
2. Data Entry
Some BPOs specialize in data entry work. They input, update, and manage data for businesses. The employees in these BPOs ensure the accuracy and completeness of data and analytics.
3. Technical Support
While BPOs providing customer support handle customer queries and complaints, BPOs that provide technical support troubleshoot and resolve technical issues related to products or services.
4. Marketing and Lead Generation
Such types of BPOs provide marketing and lead generation services. Many organizations outsource lead generation activities as it yields better results. As per a study, outsourced B2B lead generation gives 43 percent superior results compared to in-house lead generation.
5. Legal Support
These types of BPOs help in drafting legal documents, reviewing documents, and providing legal research and compliance services.
Factors Driving Indian BPO Sector's Growth and Success
Why is India one of the best destinations, if not the best one, to outsource various operations? What makes the country conducive for a booming BPO sector? There are several factors responsible for the above questions. Some of them are:
1. Huge English-Speaking, Skilled Youth Population
In terms of a human resource perspective for BPOs, India has a massive advantage over many other countries. First, it enjoys a huge demographic dividend. The country has almost 65 percent of the population under the age of 35, a report reveals. For the BPO industry, the younger the workforce, the better it is.
Second, India has the second-highest English-speaking population in the world. As per a report, 129 million people in the country speak English. Third, the intensive focus on STEM (science, technology, engineering, and mathematics) education and vocational training led to a huge pool of skilled workers. Access to high-quality talent and dedicated employees is extremely easy.
2. Cost Advantage
Be it the cost of hiring high-quality talent, renting out office space, buying the necessary hardware and software, and everything in between, setting up a BPO in India is extremely cost-effective.
Let alone developed countries, starting a BPO in India is much more cost-effective compared to many other developing countries in Asia and Europe. As per the opinion of some senior professionals in the industry, setting up a BPO in India can be done at a fraction of the cost of setting up a similar facility in America or Britain.
3. Technology Innovation
India is at the forefront of tech innovation for the BPO industry. Be it engineering cutting-edge call center software, sophisticated contact center software, advanced omnichannel CX suite, or multilingual or multi-tenant IP PBX systems, several Indian companies have carved a name for themselves in the highly competitive market.
Some of them have bagged a wide array of awards for innovation, functionalities, ease of use, and more. When such companies create innovative and high-quality software, they can cater to the needs of domestic BPO companies along with international brands. The growth of any sector is rapid when the ancillary sectors support it.
4. Good Infrastructure
India has built such cities that can give any IT capital of the world a run for their money. Bangalore is dubbed as ‘the Silicon Valley of the East.’ The infrastructure and working conditions it provides are no less than those of any world-class city.
Apart from that, India has several IT hubs such as Hyderabad, Chennai, Mumbai, Gurgaon, Noida, Ahmedabad, Kochi, and more. The affordable land prices and office rents are the icing on the cake.
5. Government Support
Since the 1990s, after economic reforms, liberalization, and privatization, the Indian Government has given more focus to the service sector, which is also called the tertiary sector, than the primary and secondary sectors. The service sector has been responsible for dragging millions of households from the clutches of poverty.
In the last three decades, the government has recognized the BPO sector’s role in enhancing the economy and uplifting the lives of millions of people. That’s the reason it has supported the sector and will continue to do so.
6. Presence of Major Brands
India is one of the top markets for almost all leading brands. Whether it is Apple or Zappos, when international brands sell their products to Indian customers they need to provide customer service whenever it is required. That is the reason international brands have outsourced customer service to certain BPO call centers in India that handle queries of domestic customers.
7. Advantage of Strategic Location and Time Zone
One of the biggest advantages the Indian BPO sector has is its strategic location and time zone. If on one side of the Atlantic, we have the UK and on the other, we have the US, India is in the middle. When the Western world sleeps, India is wide awake. To put things in perspective, the Indian Standard Time is 5 hours and 30 minutes ahead of Greenwich Mean Time, 9 hours and 30 minutes ahead of Eastern Time, and 12 hours and 30 minutes ahead of Pacific Time.
By outsourcing customer service operations and other processes to Indian BPO companies, organizations in Western countries can sleep tight as their backend work gets done in India. Also, the Indian BPO sector works round-the-clock to provide customer service to overseas companies.
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Predictions and Trends for India's BPO Industry
Here are some predictions and trends for India’s BPO industry.
1. Robust Revenue Growth
As per data published in Statista, the revenue in the BPO market is projected to grow at a compounded annual growth rate of 8.76 percent, from USD 7.19 billion in 2024 to USD 10.94 billion by 2029.
2. Preference for Remote and Hybrid Work
As per a study by Owl Labs, the number of agents preferring to work remotely increased by 24 percent and the number of agents preferring hybrid work increased by 16 percent. Many BPOs will continue to provide hybrid working models to provide a strong work-life balance.
3. Growth in the Use of AI
A study conducted by Gartner projects that the use of AI for BPO services will increase from six percent to 40 percent over the next two years.
4. Specialized, AI-Driven Insights
As per a recent stat, three out of every five BPO providers that took part in the survey said that they will offer specialized analytics and AI-driven insights by 2025-2026.
What Can Be Done to Enhance India's BPO Industry Further?
No doubt the Indian BPO sector is growing at an impressive rate. But still, there is a scope to do even better. Here are some areas BPO companies need to look after to grow at a much higher rate.
1. Training and Preparing Agents to Adopt and Leverage AI Tools
AI is going to play a huge role in the Indian BPO sector. Some believe that AI will slow down the BPO sector and will take away many jobs. However, a large number of industry experts are confident that AI will not replace jobs but make agents more productive and efficient. All BPO agents need to know the right way to leverage AI.
2. Leverage High-Quality Technology & Communication Systems
Apart from AI, BPO call centers need to leverage high-quality tools and communication systems. There are many tools for the BPO call center industry, such as call center software, contact center software, and multi-tenant IP PBX software, which BPO companies can leverage to deliver omnichannel support and enhance agents’ productivity and efficiency.
3. Foster Research and Development
If we compare the investment made as well as the efforts taken by the BPO industry of developed countries and the Indian BPO sector, the former surpasses the latter by a huge margin. But it should be the other way around, considering the contribution of India’s BPO sector to the nation’s GDP. It’s high time for the Indian BPO sector to invest the right amount of money, time, effort, and resources in research and development.
4. Build Strategic Alliances
Now that we have discussed research and development, one of the best ways to spur investments and know-how is by building strategic alliances and robust partnerships. India’s BPOs need to build strategic alliances and robust partnerships with overseas clients and institutional investors.
5. Management of Agent Attrition Rate
Many Indian BPO companies witness a high agent attrition rate. Management of the BPOs must implement the right steps and strategies to manage the agent attrition rate.
Taking Everything Into Consideration,
Many countries are famous for specific industries. For instance, Germany is famous for its automobile industry. France is famous for its fashion, cosmetics, and luxury goods industry. The United States is famous for its banking and finance industry. Likewise, India is famous for its BPO industry.
The growth of India’s BPO industry can be attributed to a combination of various factors such as its vast pool of skilled, English-speaking talent, competitive costs, robust infrastructure, advancements in technology, supportive government policies, presence of major brands, and location, making it a global hub for outsourcing excellence.
