Role of dominant capitve BPO units changing, says D&B

Captive BPO units continue to dominate the total value of work outsourced to India. During 2004-05, captive units accounted for 65 per cent of the work offshored to India.

However, with some large players modifying their strategies to include third-party work, this is bound to change in the years to come.

These are some of the observations made by Dun & Bradstreet at the launch of its inaugural edition of 'India's Top ITeS and BPO Companies'.

Commenting on the drivers for outsourcing of processes, Manoj Vaish, CEO, Dun & Bradstreet India said, "The search for best practices is inherent in the capitalist model. For a company striving to ferret out cost savings and promote innovative management, large savings can be realised by outsourcing activities that don't contribute to shareholder value."

D&B has further added that the service sector in India continues to show healthy growth, touching 8.9 per cent in FY05. With the contribution of services to the country's GDP near the 50 per cent mark, this sector continues to look attractive.

Total services exports in FY05 were worth $51.3 billion. Of this, software exports accounted for $17.3 billion, a full 33.7 per cent of the total. Year on year, software exports have grown at the rate of 41.8 per cent. At this rate of growth, this segment alone will touch $50 billion by 2008, if not sooner, the company added.

The term 'software exports', however, does not immediately make apparent the role of Business Process Outsourcing (BPO) and IT-Enabled Services (ITeS) in the growth of this segment.

"BPO will play a vital role if India is to achieve the $50 billion target by 2008. In 2004-05, the ITeS-BPO segment accounted for nearly 30 per cent of the total software exports from India. The growth rate in this sector actually exceeds that of the software exports umbrella, at a healthy 44.5 per cent," D&B highlighted.

Vaish described the publication as "a comprehensive reference on the Indian BPO industry, with detailed listings of companies operating in this space, indexed by location, verticals serviced and employee size. It lists 155 outsourcing organisations servicing a gamut of industry verticals including manufacturing, legal, banking and finance, government and pharma. While the universe of outsourcing organisations in India is quite large, with small and medium players also finding a place, the publication is restricted to companies that employ over 150 employees in total."

Kiran Karnik, president, NASSCOM said: "ITeS contribution to the booming sector in terms of employment and wealth creation among the younger generation cannot be underestimated. The work being done in India might be of a high-volume-low-margin activity, but the country must not give up something, which is a huge employment generator. The base is important."

India's ITeS sector had already taken up high end and cutting edge work, particularly business analytics, modelling, forecasting and predictive analytics, all coming under knowledge process outsourcing.

Karnik stressed that countries which outsource work to India are beginning to realise the "special value" it offers. He added that the cost advantage that India has would remain for many years to come.