The global business process outsourcing market size was valued at USD 246 billion in 2021 and is expected to reach USD 513 billion by 2030, growing at a CAGR of 8.5% during the forecast period (2022-2030).
Business Process Outsourcing is an essential part of the global outsourcing business. The outsourcing industry is categorized into Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO). However, Business Process Outsourcing is rapidly gaining momentum across various verticals such as Banking, Financial Services and Insurance (BFSI), healthcare, manufacturing, IT and Telecommunications, retail, and others.
A surge in need for low operational expenditures of non-core activities and increasing focus on the core competencies across several end-use verticals is driving the market growth. Also, increasing adoption of SaaS-based solutions coupled with enhancement in cloud-based infrastructure and rapid adoption of process automation in business functions are contributing factors to the market growth.
The global business process outsourcing market share is divided by service, end-user, and region.
Cloud computing uses a network of internet-connected, remote services to manage, store, and process data. Cloud computing assists BPO providers in increasing the speed of production, gaining greater quality control, and reducing costs. Additionally, cloud computing in BPO ensures universal access, flexible provisioning, and instant computing support and system access whenever needed for the required business purposes. The other benefits offered by cloud computing in the BPO market are decreased development costs, reduced capital expenditure, decreased total cost of ownership, and costs aligned to business demands, among others. These benefits are anticipated to positively impact the adoption of cloud computing in the business process outsourcing market over the forecast period.
Furthermore, BPO service providers leverage the benefits of cloud computing to reduce the time required for processing data-intensive business processes. Cloud computing in BPO results in enhanced data processing workflow at a reduced turnaround time. Additionally, the pervasive nature of the Internet and its high reliability have paved the way for hosting applications on the cloud rather than in complex infrastructure prone to downtime.
An organization's business activities are categorized into core activities, critical activities, and non-core activities. Core activities are an organization's primary competencies that provide the company with a strategic advantage. Necessary activities require a specialized skill-set. Similarly, non-core activities are the supporting activities that primarily involve relationship management between consumers and products. Categorizing the above activities is essential to allocate resources appropriately to ensure timely service deliveries. Furthermore, nowadays, companies have begun to emphasize core activities to maintain their market presence and expand their customer base, resulting in outsourcing resources for non-core activities.
The key players in the BPO market are engaged in providing reliable and cost-effective services across various industries and sectors such as manufacturing, BFSI, IT & Telecommunications, retail, and healthcare, among others. The sectors mentioned above comprise a few of the major application areas of business process outsourcing. The companies operating in these areas prefer to incorporate BPO as part of their business strategy, focus on their core competencies, and ultimately increase profitability.
Companies engaging in business process outsourcing can outsource specific services or business functions based on their individualistic requirements. These services include payroll, IT, logistics, and legal services. Reducing labor costs and eliminating overheads arising from human resources and equipment are some of the potential benefits of outsourcing, thereby resulting in market growth.
Moreover, various players in the market are engaged in integrating cloud computing in their business process outsourcing service portfolio to enhance the outsourcing process. Similarly, rising initiatives from government organizations to promote the adoption of cloud technology are also one of the factors driving the market growth. The surging investment by the government in areas of cloud computing is expected to boost the overall market growth, thereby spurring the demand for business process outsourcing.
Business process outsourcing involves sharing information that includes methods, procedures, designs, and other critical business data necessary to ensure optimum quality of product/service delivered by the outsourcing partner. Such information often comprises patented and copyright procedures and methods that the company depends upon to maintain its market position. Moreover, outsourcing processes related to verticals such as healthcare and banking involve sharing critical details such as customer name, account number, contact details, social security number, and history of diseases, among others, with the outsourcer to ensure proper execution business process.
Firms outsource business procedures to third-party vendors to focus operations entirely on core competencies and reduce costs to establish and maintain the infrastructure necessary to execute that process. The outsourcer primarily focuses on hiring the most competent company to perform the process at the lowest possible rates. Owing to this, it is observed that the outsourcer often prefers off-shore outsourcing to countries that provide cheap labor and other infrastructure resulting in reduced operational costs.
The need to reduce operational costs often lands the outsourcer in countries with no established legal framework protecting the outsourcer from breach of confidentiality and violation of intellectual property rights. Although corporate contracts bind both outsourcer and the outsource, the absence of a legal framework in the outsourcer's operational country can considerably affect any legal action or the possibility of compensation in case of any breach. Thus, reluctance to outsource business processes on the part of outsourcers is anticipated to hamper the market's growth significantly.
Innovation, global competition, and new technologies are the key driving factors behind the expansion and growth of the business process outsourcing (BPO) industry. BPO has provided businesses with the means to increase profits and cut costs effectively. Companies are also encouraged by the advantages obtained through innovative technologies such as process automation, cloud computing, social media, etc. With the increased influence of these technologies, BPOs can boost the efficiency of their services even further. Global outsourcing service providers are also anticipated to use new technological innovations to efficiently manage talent shortages, enhance products and services, and address market challenges while keeping the operating costs low.
The ever-increasing sophistication and ensuring application of process automation in the BPO domain result in an increasingly virtual workforce. The robotic process automation is anticipated to enhance the capacity to do work cost-effectively and with increased accuracy. Ascribed to this, labor-intensive back-office operations are expected to be picked up by rapidly advancing robotic process automation technologies. Additionally, RPA does not require costly and complex integration and has no threat of unintended technology consequences ascribed. Its adoption in BPO is anticipated to increase over the forecast period.
Companies are increasingly investing in real-time customer engagement instead of call center software programs that will enable them to procure first-hand product insights and turn issues into new solutions or products that will address the upcoming challenges. This change in customer management is considered a huge opportunity by the BPO service providers. BPOs have invested in the tools and capabilities to provide an extensive range of social media management services, including business intelligence, social media monitoring, and auctioning customer response. Several BPO service providers also invest in dedicated social media service teams as customer representatives and social media groups can handle customer grievances much faster.
The services segment has been categorized into Finance and Accounting, Knowledge Process Outsourcing (KPO), Human Resources, Customer Services, Procurement, Supply Chain, etc.
The customer service segment holds the largest share in the global business process outsourcing market. It is estimated to reach an expected value of USD 178 billion by 2030 at a CAGR of 9.5%. Growing establishment of service centers that necessitate online and offline technical support has fueled the segment growth.
The finance and accounting segment is expected to hold the second-largest share. It is estimated to reach an expected value of USD 110.5 billion by 2030 at a CAGR of 8.5%. This can be ascribed to the rising presence of banking facilities and stringent regulatory requirements in the banking sector, resulting in the need for outsourcing services as outsourcing significantly reduces operating costs.
Human resource service is the fastest-growing segment over the forecast period. It is estimated to reach an expected value of USD 91,590 million by 2030 at a CAGR of 8.9%, ascribed to the rising need for resources across different sub-segments, including payment processing, recruitment and relocation, administration, and other employee benefits services.
By end-user, the global business process outsourcing market is divided into Banking and Financial Services Insurance (BFSI), Healthcare, Manufacturing, IT and Telecommunications, and Retail.
IT and Telecommunications hold the largest share in the market. It is estimated to reach an expected USD 181 billion by 2030 at a CAGR of 8.8%. It includes various software development companies and telecommunication service providers. Telecom companies across the globe are adopting telecommunications outsourcing to reduce the overall capital expenditure (CAPEX). The telcos outsource various business functions, from call center outsourcing to billing operations to finance and accounting outsourcing.
Outsourcing solutions help telecom companies to establish a flexible strategy to acquire and retain more customers, access specialized resources, optimize current investments, and manage cost pressures. Furthermore, infrastructure and service delivery costs are anticipated to increase; thus, outsourcing non-core and critical business functions remain essentially vital. This permits telecom firms to focus on innovation, improve business efficiency, and offer enhanced customer experiences. Telecom companies are increasingly focusing on strategic partnerships with outsourcing service providers to cater to such needs.
For instance, in July 2020, Telefonaktiebolaget LM Ericsson, one of the leading networking and telecommunication companies, signed five years agreement with HCL Technologies Ltd. The deal is valued at USD 600 million, under which the latter will provide cloud and application and infrastructure management services to the former. In September 2020, AT&T signed an agreement with Tech Mahindra Limited to support the former's network and shared systems. The collaboration allows the latter to accelerate the former's IT network application and modernize the shared systems and cloud applications.
Banking and Financial Services Insurance (BFSI) is the fastest-growing segment in the market. It is estimated to reach an expected value of USD 158.5 billion by 2030 at a CAGR of 9.6%. The BFSI industry comprises organizations that are into banking services such as core banking, corporate, retail, investment, private, and cards; financial services such as payment gateways, stockbroking, and mutual funds; and insurance services covering both life and general risks.
Financial institutions have long considered BPO as an instrument for improving cost efficiency. Several domains of the BFSI industry, including asset management and investment management, are opting for specific outsourcing processes and are including it as a part of their business models. BPO offers greater cost efficiency, increased flexibility, enhanced service quality, and new adapted solutions to solve the challenges faced by the industry.
By region, the global business process outsourcing market share is divided into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
North America holds the most dominant position in the market. It is estimated to reach an expected value of USD 178 billion by 2030 at a CAGR of 7.9%. The growth is ascribed to the increasing adoption of cloud enablement and digital-related services requiring frequent business operations assistance and maintenance. Additionally, tech giants that generate significant energy for product development coupled with legislative and regulatory pressures are propelling enterprises to contract their non-core activities to BPO providers.
Asia-Pacific is the fastest-growing region in the market. It is estimated to reach an expected USD 148 billion by 2030 at a CAGR of 10.3%. Increasing demand for talented professionals, reduced labor costs, and significant digital investment by leading vendors such as HCL Technologies Ltd, Infosys Ltd, Accenture, and Wipro are driving the market growth in the region. Moreover, significant infrastructure investments from government bodies are expected to provide growth opportunities for enhancing the existing BPO ecosystems in the Asia Pacific region.
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