BPO growing rapidly in India

Industry analyses and studies such as the Global Development Finance Report 2004, reportedly indicate that India attracted USD 1.0 Billion worth of Foreign Direct Investment ("FDI") in the BPO segment during the period 1996-2002 which constituted 5% of the total FDI inflows of USD 20 Billion into India during this period.

Another report by international consulting firm, Ernst & Young last year highlighted the emerging Indian third party vendor segment. This segment saw the entry of several IT services companies and large Indian business houses, through green-field ventures and acquisitions. These reports indicate that the offshore BPO wave has grown significantly in the recent past, with numerous global corporations outsourcing business processes to India. While some set up their own captive units in India, others have outsourced processes to Indian third party BPO vendors and some others adopted a hybrid model.

Functional areas in which BPO services are in demand reportedly include finance, marketing, sales, human resources, health care, legal and administration. These reports cite the example of Bank of America, which in a move to reallocate financial and human resources, outsourced some of its back-office jobs to India. The bank recently formed a BPO subsidiary in India to employ up to 1,000 people. Apollo Health Street Ltd, the medical BPO arm of India's well-known Apollo Hospitals Group, is also reportedly close to acquiring a medical insurance third party administrator company in the US. US telecom giant AT&T is also reportedly looking at acquiring Indian call centres in a bid to reduce costs. Private equity funds led by Temasek Holdings, the investment arm of the Singapore Government, and General Atlantic Partners are reportedly negotiating with the promoters of ICICI One Source (a BPO promoted by ICICI Bank & ICICI Venture Funds) for exploring the possibility of picking up a stake in the BPO firm. The recent acquisition of one of India's leading domestic third party BPO services provider Daksh e-Services by the USD 89 Billion global technology giant IBM is the biggest BPO acquisition deal thus far in India. MphasiS BFL, a leading banking and financial services Indian BPO, is also reportedly planning to set up two new centres for BPO and software services in India.