BPO spending rises as Companies return to growth mode: Gartner

The return of growth has been accompanied by a strong appetite to increase spending on BPO projects, according to IT research firm Gartner.

A survey of 600 mid-to-large companies in 14 countries found 54% of the respondents looking to increase their BPO spending this year by 5% or more.

Out of this, 20% (of the total surveyed companies) were planning to increase their BPO budgets by 10% or more this year, reflecting at the return of growth. Most companies had put big projects, whether in BPO or IT outsourcing, on hold during the recession.

“Many of these budget increases are driven by the fact that BPM is focused on improving business outcomes and explicitly meets the objectives of many organisations’ return-to-growth strategies,” Teresa Jones, principal research analyst at Gartner said.

The results are good news for Indian and Filipino companies — the two strongest players in the international BPO market. BPO refers to the handing over of activities such as handing customer queries and even making sales calls to specialist companies.

India, which had what seemed like an unassailable lead in the segment, has been pushed down by Philippines which is now the hottest BPO destination. BPO is arguably one of the biggest sources of employment for India’s millions of graduates.

The “return to growth” trend was stronger in Asia Pacific, where 25 percent of respondents were planning to hike their BPO outlay by more than 10%, compared to the 20% for the World as a whole.

The numbers are more aggressive than corresponding figures for the IT outsourcing market, partly because companies see BPO as more crucial to their business expansion than IT.

“BPM project funding comes not from an IT budget but from the line of business budget in 66 percent of cases, and because BPM is focused on business outcomes, many business units are funding it more readily than they are IT-specific projects,” Gartner pointed out.