Future of the BPM industry looks bright

Increasing adoption of data analytics across business functions and demand for intelligent automation are seen as two key drivers of future growth

The global business process management (BPM) industry is on a roll.

The Covid-19 pandemic has accelerated the pace of digitalisation, or the process of using digital technology to collect data, find trends and make better business decisions. And, like information technology companies, BPM services firms are gaining significantly from clients spending more on digital transformation.

Some of these pandemic-induced changes are here to say, experts and industry veterans said.

Increasing adoption of data analytics across business functions and demand for intelligent automation is seen as two key drivers of future growth.

With new revenue streams and stable attrition, the BPM industry’s growth outlook looks strong.

“After the pandemic, the business models of enterprises are changing,” Global IT research firm ISG’s principal analyst Mrinal Rai told DH. “The way they used to connect with customers has changed. Many industries are taking a hybrid approach to customer connection - a mix of humans and machines.

That is the reason we believe that this is going to sustain and continue.”

Rai said he expected growth in three areas- industrial BPO, Engineering R&D services and digital customer experience within the BPM industry.

Spending on BPM services was more than that on managed IT services during the first half of 2022, with contracts worth $5.8 billion being signed in the business process outsourcing space, ISG highlighted.

That explains the bullish outlook made by most big BPM companies in recent times.

For instance, WNS raised its fiscal 2023 revenue guidance to 11 to 17% on a constant currency basis citing strong deal momentum.

Similarly, Genesys reported a strong fiscal 2022 performance. Another major player Teleperformance also stuck to its fiscal 2022 revenue guidance of more than 5% despite an uncertain macroeconomic environment. All these companies have a large Indian presence with the country being one of the biggest delivery centres for all.

Most home-grown companies are also optimistic.

“Both for revenue upside and cost savings, enterprises require more business process management work. So, demand for digital IT and BPM continues to be strong,” said Arjun Ramaraju, CEO of Conneqt Business Solution, which is a Quess group company.

Similarly, Hinduja Global Solutions has also forecast strong revenue growth in the current financial year due to its increased focus on robotic process automation (RPA), analytics and artificial intelligence. Importantly, industry sources said that the BPM arms of most IT companies including Infosys, Tata Consultancy Services, Wipro, HCL, Accenture, and IBM are also performing well.

Then v/s Now

While the growth outlook looks bullish now, the story was different in the pre-pandemic era.

The global BPM industry has gone through a lot of consolidation with firms exiting low-margin business segments. However, the transition to all things digital is changing the script.

“Consolidation is happening worldwide in the voice segment, where margins are low. The digitalisation wave has complemented the growth of BPM companies as they transform themselves into digital players. BPM firms are implementing automation and analytics solutions for businesses.

And if you look at the growth of RPA and analytics firms, it indicates that BPM firms are the major beneficiaries of this upside,” said Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting.

In recent years, data analytics firms including Fractal Analytics, Mu Sigma, Latent View Analytics, and RPA companies such as Automation Anywhere, UiPath, and Blue Prism have seen an exponential rise in their adoption rates.

BPM firms are collaborating with these kinds of firms to implement their solutions in enterprises.

“Omnichannel presence of companies needs BPM services. This is a high-value segment. Similarly, increasing penetration of e-commerce and other tech-enabled services is helping the growth of the domestic BPO industry that is mostly on native languages. So, several new revenue streams are adding up,” Jain said.

In addition to the revenue upside, stable employee attrition numbers are also helping in cashing in the new demand.

Unlike the IT behemoths, the BPM companies have not seen any unusual surge in employee churn.

“Attrition in the BPM industry has neither gone out of their hands nor the wage cost through salary increases. Despite the advent of new service areas, the bulk of BPM continues to be financial transformation projects, IT helpdesk, and tech support among others. Though attrition has gone up sharply in some segments like data engineering and tech support, it remains stable in most other areas,” said CIEL HR Services CEO Aditya Narayan Mishra.

He also said that the focus of BPM firms in tier-II cities is another reason to keep attrition under check.

To be sure, while the growth prospects of the Indian BPM industry look bright, macro factors such as economic uncertainty, recessionary fears and rapid technological change remain key risks.