BPO positioned for APAC & ANZ growth

Stan Beer
Sunday, 11 September 2005 10:56

IT Industry - Market

Australia and New Zealand are leading the way in a multi-billion dollar business process outsourcing (BPO) boom in the Asia Pacific region excluding Japan, according to a new study.

In its first-ever study of BPO services in Asia Pacific excluding Japan (APEJ), research group IDC found that the market for BPO services in the region was US$5.4 billion in 2004. IDC forecasts this market will achieve a compound annual growth rate of 15% from 2005-2009 and generate more than US$12 billion in revenues by 2009. This growth will occur despite the challenges presented by the size and complexity of the region's BPO services market.

"The APEJ region consists of both semi-mature and developing markets, each of which presents its own unique characteristics and challenges," said Conrad Chang, IDC's Asia Pacific BPO services research senior market analyst. "To succeed in the region, BPO service providers need to be able to clearly articulate the value proposition that is best-suited to each varied market."

Australia and New Zealand are the region's early adopters of BPO, followed by the rapidly industrializing economies of Korea, Singapore and Hong Kong due to their high consumption of services. For the semi-mature services markets in APEJ, the main concerns of companies are cost efficiencies, service continuity guarantees, and risk mitigation. IDC finds that companies in semi-mature APEJ economies do realize the cost efficiencies that can be obtained through BPO but at the same time want assurance of a smooth continuation of services. This is to enable them to be able to compete globally with a leaner structure. Issues of compliance are also of concern as companies grapple with complex and diverse labor and industrial laws.

For the developing services market economies in APEJ, BPO deals are just starting to happen. In these countries, cost arbitrage is not an advantage because the cost of labor is already low. IDC finds that what companies in these countries are looking for is business process excellence, speed to market, improvement in quality, and efficient processes, as well as benchmarking to world-class standards. Companies in these countries want to break out of the domestic market and compete globally; hence they need to be up to scratch on world-class standards of service. BPO is being leveraged to help these companies internationalize and acquire the necessary processes and tools to become a globally competitive player.

In engaging both vendors and end-users, IDC found that there is confusion on what BPO is, with both sides loosely labeling any sort of outsourcing activity as BPO. Many BPO service providers use the term BPO and Processing Services interchangeably when in fact there are key distinctions, according to IDC. BPO incorporates services that focus on better aligning the operational aspects of the business function with the overall business needs of the client. Processing services involve the transfer of management and execution of activities or single business processes that tend to be high volume and automated to an external provider.

BPO Market Share by APEJ Countries in 2004:

Australia and New Zealand - 44%
Greater China - 23%
South East Asia - 17%
Korea - 10%
India - 5%
Rest of APEJ - 1%