IT-BPO firms, looking at servicing the domestic BPO market, have one more reason to do so. Domestic BPO clients have a higher acceptance of integrated IT-BPO deals, meaning they are more likely to outsource both IT and BPO services to the same service provider, according to a Gartner survey. Indian BPO clients are also more inclined towards output-based pricing model. Indian buyers are more likely to outsource BPO and application outsourcing (AO) or IT infrastructure outsourcing (ITO) to the same BPO service provider.

Service providers should, therefore, consider bundled service offerings (BPO with AO/ITO) or business-process-unit-type arrangements, to improve 'client stickiness' in a BPO engagement, -Gartner. Another reason for BPO firms to go for integrated IT-BPO deals is the absence of the labour arbitrage opportunity in the Indian BPO market. North American market still has a component of labour arbitrage while outsourcing that is not present in India.

So, service providers catering to the domestic market have to offer greater efficiency at lower price points and convergence is one way to do it. Gartner said the Indian BPO market, which stood at $437 million in 2006, is growing at a CAGR of 29.3% and would reach $1.58-billion by 2011 and offers a huge opportunity for service providers to tap into. The IT research and advisory firm also found that in India, the preferred payment scheme is payment-per-transaction and shared-risk-and-reward model. Slightly more than three in five users in India prefer the per-transaction model, and one in five prefer the fixed-fee model, as against the preferred BPO contract payment scheme of fixed fee in Singapore and China.

Gartner also asked BPO service providers to keep contracts with buyers flexible. "Keep contracts with Indian buyers flexible. As most buyer companies grow rapidly, it will be difficult for them to plan two years ahead for key performance indicators (KPIs) in contracts, let alone three to five years out, which is the typical contract duration of most BPO deals in more-mature regional BPO markets," Mr Singh added. Indian BPOs prefer per-transaction and shared-risk-and-shared-reward pricing models in India.

This suggests buyers are willing to consider new service delivery models, including business process utility (BPU), which present a great opportunity for Indian players to establish greater value with existing and new clients in a large untapped market for deeper penetration, Mr Singh said. Source: Economics Times