BPO adoption in Asia to grow modestly

Demand for business process outsourcing services still comes mainly from the United States and Europe, IDC says.
Written by Vivian Yeo, Contributor

Demand for business process outsourcing (BPO) services from within the Asia-Pacific region is unlikely to grow significantly in the next four years.

According to a new study by IDC, the BPO market in the region, excluding Japan, will grow at a compound annual growth rate (CAGR) of about 18 percent to reach US$14 billion by 2010. The research analyst said in a statement that growth in this market segment will be "moderate" over the next several years as adoption remains at a developmental stage.

IT services vendors such as Accenture, EDS, Hewlett-Packard and IBM, have opened BPO centers in China, India and the Philippines, IDC said. However, it noted, these facilities mainly service demand from outside the region.

"Even though [the Asia-Pacific region] is a main center for BPO, [the] majority of the contracts will still be derived outside of the region, mainly from the United States and Western Europe," said Conrad Chang, IDC's Asia-Pacific senior market analyst for BPO services research.

In a phone interview with ZDNet Asia, Chang noted that adoption in the local markets will be "more opportunistic", where vendors seek to fulfill small BPO contracts instead of mega outsourcing deals that cover the entire spectrum of the IT infrastructure. The service providers view this move as a stepping step, for example, to specific industries they are interested in, he explained.

According to the IDC statement, finance and accounting as well as human resources and training will continue to drive the BPO industry over the next few years.

Chang noted that more pilot projects, particularly in the banking and finance industry, are in the pipeline. These short-term projects would allow both clients and vendors to assess the viability of service deals and areas to fine-tune, as BPO deals typically stretch over five to 10 years, he said.

According to IDC, the region's BPO market was worth US$6 billion last year, compared to US$5.4 billion in 2004. The market was previously reported to grow at a five-year CAGR of 15 percent to reach US$12 billion in 2009.

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