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THE Singapore BPO (business process outsourcing) market is expected to end 2009 at US$1.3 billion, showing a positive growth despite the current economic conditions.
IT research agency IDC's Suchitra Narayan told BizIT that the Singapore market is higher on the adoption curve for BPO services compared to other Asean countries, especially for services that address needs for productivity improvements such as outsourcing legal services.
Ms Narayan, who is IDC Asia-Pacific's research manager for services research, noted that last year the size of Singapore's BPO market was US$1.1 billion. IDC expects the market to grow at a compound annual growth rate (CAGR) of 13.3 per cent to US$2.1 billion by 2013.
'While the global economic downturn has caused a dip in the year-on- year growth rates from 22 per cent in 2008 for this year, IDC expects the BPO market to remain resilient with the growth stimulated by Platform BPO offerings and new business models,' Ms Narayan said.
Platform BPO refers to services like CRM (customer relationship management) which are offered by vendors using rich domain knowledge or platform.
On the Asia-Pacific excluding Japan (APEJ) market, IDC expects to see long-term market growth starting from 2010. 'Based on forecast and analysis of the market between 2009-2013, the market is predicted to grow at a CAGR of 11.2 per cent from US$17 billion in 2008 to US$29 billion in 2013, led by Platform BPO services,' Ms Narayan said.
She added that overall, BPO is still relatively low on the adoption life cycle in APEJ. 'There is definitely opportunity for growth for local, regional and global players, with the key differentiator being the niche specialisations, vertical expertise, existing relationships and value-add services offered,' she said.
The increased focus on organisational transparency, and regulatory and compliance requirements will also drive demand for BPO solutions.
Organisations offering niche BPO and knowledge process outsourcing (KPO) services are springing up, a clear sign that there is enough of the pie to go around, the IDC analyst added.
'While Singapore as a consumer of services is relatively mature on the BPO adoption curve, as a provider of BPO services, it ranks lower than some of its neighbouring countries because of its sheer cost differential and inability to drive economies of scale.
'Singapore has a relatively higher cost of labour that reduces its potential to compete and capitalise on the labour arbitrage opportunities,' she said.
Ms Narayan added that Singapore companies are looking to re-invent themselves in the new economy, create sustainable cost management strategies (including BPO) and positioning themselves for the recovery.
Organisations here are looking not just for pure cost arbitrage that vendors can provide them. Increasingly they are looking for vendors who can take them to the next level with business transformation solutions, as opposed to selecting the players by location, she said.
Ms Narayan gave the example of Singapore Airlines, which recently awarded Indian IT firm TCS a $100 million contract spread over five years for its cargo revenue back office processes.
'TCS has had a long- standing relationship with Singapore Airlines. Also SIA perceives TCS as having the right technology, processes and people with travel and transport industry knowledge.'
Another example, she said, would be the fact that telcos in Singapore are now buying into the value proposition offered by BPO service providers.
'Singapore Telecommunications (SingTel) has outsourced its sales and marketing to Comverse Technology Inc to deliver targeting advertising based on subscriber location. StarHub, on the other hand, has an outsourcing contract for its billing and customer care contracts.'
Ms Narayan noted that the economic downturn has changed the landscape of the BPO game both in Singapore and in APEJ. Companies are looking mainly at optimisation of infrastructure and processes and cost management.
She noted that the economy has significantly affected the revenue stream of companies. As a result, one of the key trends in markets across verticals are strategies centred around customer retention as opposed to customer acquisition to ensure a steady revenue stream.
She also noted that with the market showing slight upward trends, organisations are also positioning themselves for recovery.
'Transformation of business processes to create a sustainable competitive advantage and a sustainable cost management strategy are being actively sought after,' Ms Narayan said.
She said customers are seeking not just process standardisation, but also best practices from the BPO providers. 'As a result, there is an opportunity for Platform BPO solutions that may be across a horizontal process (such as HR or customer care) or vertical processes, such as insurance claims processing,'
BPO vendors are 'hearing the message loud and clear and aligning offerings to address some of the current market needs'.
Ms Narayan said the changes in the environment have also resulted in a drop in business for the BPO vendors. 'While they understand the pain of a drop in revenue, they are also using this as an opportunity to meet the needs of customers in the same boat, by offering alternative business models and new technologies.'
The IDC analyst also noted that vendors are willing to consider 'risk/reward' pricing models and increase their risk exposure if the organisations are willing to reward them for improving performance as well.
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