business process outsourcing market
Sizing Up The Business Process Outsourcing Market
“To market, to market to buy a fat pig; Home again, home again, jiggety-jig…”
You may or may not be familiar with this nursery rhyme, but the market, or marketplace, has long held an important place in human civilization, perhaps from the time human beings became capable of interacting with each other and operating together for the benefit of the larger group.
Investopedia defines a market as “a place where parties can gather to facilitate the exchange of goods and services.
The parties involved are usually buyers and sellers.
The market may be physical like a retail outlet, where people meet face-to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.”
A market might be a physical location, such as the collection of outlets on a high street, where we go, browse and buy.
It could also be a virtual location, such as the many e-commerce sites that have mushroomed in the last few years, where we can virtually browse and buy.
A market is also a place where virtual goods, such as ownership rights in companies, commonly called shares, can be bought and sold, such as a stock exchange.
As is the case with the business process outsourcing market. Business Process Outsourcing, or BPO, is the business of engaging external providers for carrying out defined business processes, for an agreed consideration.
It is not a product that can be touched and felt, but a service that does not have a physical form.
There is also no specific location in the world where the service is carried out from.
BPO services are sought from, as well as carried out in, thousands of locations across the world.
Hence the use of the term ‘virtual’ in reference to the market.
The leadership team of oWorkers, with hands-on experience of over 20 years in the industry, are integrated with market forces in the industry and are well equipped to guide the company through the constantly transforming business environment of the industry.
In its eight years of operation, oWorkers has built a formidable reputation for itself.
Size of the market
Is the size of the market relevant?
Absolutely. In the context of business, the size of the market is an important consideration.
It is an estimate of the total number of potential customers for a product or service, and generally expressed in dollar terms in terms of revenue it would translate to for providers.
For example, if we say that the market size for toothbrushes in Germany is $2 billion annually, it means that the revenue generated by sellers of toothbrushes amounts to $2 billion per year.
While this measure, like other measures, has meaning only when viewed in context of other measures, an understanding of the market size enables a business to evaluate the opportunity and how it could operate profitably in it.
Other measures like competitors, its own share of the market, underserved or unserved sections in the market will keep on adding to the information relevant for a business to determine its strategy and estimate the profitability of any investment that might be made in it.
In a competitive market, no single provider can hope to serve the entire market, though occasionally, based on innovation, some can come close.
Google search could be an example of being a dominant player in a particular space.
However, most companies will be serving a small, defined section of the market.
Hence, they will probably break it down into finer definitions of the market, based on their value proposition, and seek to operate profitably in that space.
Being generic or wide while defining your business can create challenges in estimating the market.
Having clarity about the problem your company is solving for customers, or the value you are adding, is an important step in estimation of the market.
The sharper a company is able to define its value proposition, the better the identification of the target customer and the more accurate the market size estimate.
Even in the case of a toothbrush, the product could be defined as widely as a toothbrush.
But, guess what, there are finer classifications possible.
You could define your business based on the age of the consumers; as one that makes toothbrushes for, say children.
You could define your business based on the type of bristles; as one that specializes in making toothbrushes with, say, soft bristles, as opposed to hard ones.
To reiterate, the finer the definition of your business/ product, the better the estimates on market size and competition.
As a pure player in data services, oWorkers has defined its market carefully.
This enables it to reach out to target clients and offer its services in an effective manner.
This is the reason it has been identified as one of the three best providers of data related BPO services in the world.
The business process outsourcing market
The BPO industry faces similar challenges with regard to the market and its size, as other industries.
Business process outsourcing is a vast ocean where the constituents can get classified in different ways depending on the context as well as who is doing the estimation.
It is anyway a constituent of the larger outsourcing world.
It may be possible to identify an outsourced activity as one when a company engages a provider for handling a business process on a regular basis, say providing security services to its offices.
It may not be as easy when another company does not engage a provider on an ongoing basis, but buys the support as and when needed, say for a few days when senior functionaries of the company come calling.
It is no wonder then, that the estimation of the business process outsourcing market varies from one consultant to another.
But that is the nature of the beast and perhaps cannot be helped.
What is encouraging, however, for all industry players, is that most analysts agree that the market is in the hundreds of billions of dollars globally, and growing at least at a CAGR (compounded annual growth rate) of between 5% and 8.5%.
Regardless of the size, people remain one of the most critical resources for the industry.
With its status as a preferred employer, oWorkers has the ability to attract and retain the best talent. It is also able to deploy people to different assignments based on suitability and fitment.
Staff, both present and past, rate the company well on external platforms such as Glassdoor, with 4.6 out of 5 being the average.
Perhaps the care for employees, as that is the model oWorkers has chosen, instead of the freelancing or contractual model favored by some of its competitors, is the reason.
Analyst estimates of the market
Here are views from some analysts about the BPO market size and projected growth:
Grand View Research Inc. (published April 2021)
“The global business process outsourcing market size is projected to reach USD 435.89 billion by 2028, registering a CAGR of 8.5% during the forecast period.
The demand to reduce operational expenditures associated with non-core activities and increasing focus on core competencies across several end-use verticals are factors contributing to the market growth.
Moreover, the increased preference of new-age organizations for handling core business functions in-house and outsourcing support functions to third-party vendors for better growth prospects are expected to drive the market.
To grow and remain relevant, businesses are required to constantly evolve to fully orchestrated and intelligent processes that consider employees, customers, business partners, and suppliers alike.”
Global Industry Analysts Inc. (published August 2021)
“Amid the COVID-19 crisis, the global market for Business Process Outsourcing (BPO) estimated at US$161.9 Billion in the year 2020, is projected to reach a revised size of US$215.9 Billion by 2026, growing at a CAGR of 5.2% over the analysis period.
Customer Services, one of the segments analyzed in the report, is projected to record a 4.2% CAGR and reach US$69.4 Billion by the end of the analysis period.
After a thorough analysis of the business implications of the pandemic and its induced economic crisis, growth in the Human Resources segment is readjusted to a revised 4.5% CAGR for the next 7-year period.
Customer services BPO includes outsourcing services aimed at offering support for client’s customer care operations as well as business processes pertaining to the customer contact center.
This segment has now emerged as a major approach to deal with advanced, value-added functions that include customer care and analytics, consulting and implementation, and training and support.
Human Resources (HR) BPO or HRO refers to the integrated operation and delivery of several HR processes, which are performed by a service provider on a contract basis.
Common services covered as part of HRO contracts include employee benefits, payroll, recruitment, compliance, and training and development.”
Gartner (published August 2019)
“The $154.5 billion business process outsourcing market is forecast to grow at a five-year CAGR of 3.5% in U.S. dollars (3.9% in constant currency) through 2023.
The market will be driven by robotic process automation, digital services and artificial intelligence.”
Brand Essence Research (published June 2021)
“Business Process Outsourcing (BPO) Market is valued at USD 187.91 Billion in 2018 and expected to reach USD 314.81 Billion by 2025 with a CAGR of 7.65% over the forecast period.
Rise in corporate profit, availability of a low-cost talent pool in emerging economies and technological transformations in the retail and e-commerce verticals are some factors driving the growth of the market.
The growing need to increase operational efficiency in order to remain competitive in the market is one of the key factors that enterprises are turning to third-party BPO service providers.”
Fact.MR (published March 2020)
“Global business process outsourcing market will grow at an impressive 7.5% CAGR during the forecast period.
Cut-throat competition coupled with rise in demand for convenient consumer complaint redressal is set to propel the business process outsourcing (BPO) market.
Organizations are increasingly looking for specialized companies that provide the much-needed support services to business processes without direct investment of dedicated time and human resources.
From banking, financial services, healthcare, to manufacturing, every industry employs business process outsourcing in some capacity.
Resultant benefits such as reduced operational costs, improved efficiency of support functions such as customer services is driving growth within this industry.
Facilitated by enhanced inter-connectivity of businesses, BPO has amassed C-suite confidence to deliver relevant, reliable, and 24/7 support to essential business processes.
The shift of focus from monopolistic business strategies to shared workload business culture is spurring demand for business process outsourcing for improved results and continued success.”
oWorkers is geared for active participation in the growth of the industry.
Thanks to its partnership with leading technology companies, it can access the latest technologies, even for deployment on client projects.
Your business is secure with the ISO (27001:2013 & 9001:2015) certifications obtained by oWorkers. It is also GDPR compliant.
Already operating 24×7 for clients, oWorkers is geared to meeting processing requirements in 22 languages.
Shape shifting business process outsourcing market
What constitutes BPO?
This has been a debated question, as highlighted earlier.
What further confounds analysts to some extent is the work profile of the business that is undergoing change almost continuously.
When, in the nineties, riding on the back of an explosion in telecommunications technologies and the internet, is started expanding to the far corners of the world, High volume activities such as Contact Centers were the mainstay of the business, taking care of large volumes and generating substantial savings for outsourcers and revenues for providers.
As confidence in outsourcing grew, internal processes such as Finance and Accounting (F&A) and Human Resources Outsourcing (HRO), even though they required resources with more technical knowledge and had lower volumes, started gaining traction.
Providers even started to differentiate themselves by specializing in one or more of these areas of outsourcing.
The business processes that have been gaining market share in the last decade are entirely different, and it is a reasonable assumption that when the business started going global, nobody would have predicted the changes to the business composition that were going to take place and that volumes would be driven by activities such as: Content moderation – the activity of monitoring and regulating the content posted and shared by users on an internet platform that could violate platform rules or those of civil society.
Data annotation – the process of creating markers that can be recognized by computers so that a database can be built based on which Artificial Intelligence (AI) models can be trained to act on their own in future.
E-commerce product maintenance – the business of ensuring that e-commerce portals stay updated and are able to present the ‘best face’ of the brand to browsing customers.
Were you able to predict these trends?
What do you think the industry will look like in 2040?
Whether you can or not, oWorkers remains committed to creating substantial savings opportunities for its clients who advise savings of almost 80% when they outsource to oWorkers.
This is particularly true for clients from the US and Western Europe.