Facts and figures: A case study of India’s BPO industry

By Prof Ndede Amadi

What is the potential contribution of business process outsourcing (BPO) to Kenya’s GDP? This is the question that potential public and private sector BPO players want answered.

It is an important one for every potential BPO sector player because we all get into business to make profits and to create wealth.

How well an industry sector is doing or is likely to do is an important determinant of whether people get involved with that sector or not.

Very young

In Kenya the BPO sector is a very young one, with only a handful companies settling in. As such, there are no statistics to guide the decision of whether to join the industry or not.

What is clear are efforts by both the public and private sectors to beef up requisite infrastructure to make BPO a reality, as it has been evidenced by landing of the broadband SEACOM and TEAMS fiber optic cables, and the coming of the EASSY cable in 2010.

In this article we take a look at selected BPO statistics from India using data from several online sources.

The objective is to observe the data and trends in the data and to infer the potential contribution of the BPO sector to Kenya’s GDP growth.

Although old (the most recent is 2006 data), the data still provides indicators of trends in the BPO sector for India and thus considered useful for our purpose.

Between 2003 and 2006, India’s share of world wide global outsourcing market grew from 0.5 per cent to 7 per cent. For the 2003-04 financial year, total revenue in the software industry amounted $15.9bn (Sh1.192.5 trillion).

Some 78 per cent of revenue in the software industry was from the export of goods and services of India’s IT and outsourcing industries. Outsourcing contributed 29 per cent of India’s total software export revenue.

For Fiscal year 2003-04, India realised total overseas outsourcing revenue of $14.3bn, 32 per cent of which was generated from Bangalore.

The state, which is home to 40 per cent of the whole of India’s IT sector, has more than 500 major international companies with IT operations.

The population of Bangalore has grown from 1.6 million in 1970, to 2.8 million in 1990, to 6.5 million in 2006; and is estimated to reach 10 million by 2015.

For the 2004-05 financial year, revenue from BPO and call centres topped $5.2 billion (Sh4.290 trillion). Revenue from export of software and services industry reached $17.2bn (Sh1.290 trillion).

Highly lucrative

In the 2006-07 financial year, export of software services and IT-BPO earned India approximately $31bn (Sh2.325 trillion).

In 2006, export of BPO services earned India $24.7bn (Sh1.852.5 trillion), compared $57.1bn or Sh4.282.5 trillion expected in 2010. In the 2007 financial year, the BPO sector contributed 5.4 per cent of India’s GDP, and increase of 10 per cent from the 4.8 per cent contribution the previous year.

Knowledge Process Outsourcing (KPO) is an emerging global market with an estimated annual revenue base of $32.2bn or Sh2.413.4 trillion. India is expected to capture 70 per cent of that market due to its readiness.

The BPO sector is touted as one that is going to create the jobs that Kenya direly needs.

employment data

We now look at the employment data from India in the BPO sector:

• By the end of 2006, the IT industry in India had employed 1.3 million people directly and 3 million people indirectly.

• In the 2003/04 financial year, 245,100 people were employed in IT-enabled BPO, compared to 171,100 in 2002/03, a growth rate of more than 30 per cent.

• In 2006, the staff turnover rate (annual employee attrition) in voice based BPO (outsourced call centres) was between 70-80 per cent;

• In 2003, annual salary hike in IT services was 14 per cent.

Next week we will look at Philippines’ BPO industry.

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