The Standard Financial Journal Tuesday, January 5 2010
What is the potential contribution of business process outsourcing (BPO) to Kenya’s GDP? This is the question that potential public and private sector BPO players want and need answered. It is an important one for every potential BPO sector player because we all get into business to make profits and to create wealth. How well an industry sector is doing or is likely to do is an important determinant of whether people get involved with that sector or not.
In Kenya the BPO sector is a very young one with only a handful companies settling in, having learnt the ropes. As such, there are no statistics to guide the decision of whether to join the industry or not. What is clear are efforts by both the public and private sectors to beef up requisite infrastructure to make BPO happen as has been evidenced by landing of the broadband SEACOM and TEAMS fiber optic cables and the coming of the EASSY cable in 2010.
In this article we take a look at selected BPO statistics from India using data from several online sources. The objective is to observe the data and trends in the data and to infer the potential contribution of the BPO sector to Kenya’s GDP growth. Although old (the most recent is 2006 data), the data still provides indicators of trends in the BPO sector for India and thus considered useful for our purpose.
In the 2006 Financial Year, the BPO sector contributed 4.8% of India’s GDP compared to 5.4% in the 2007 Financial Year, a growth rate of more than 10%;
- In 2006 export of BPO services earned India 13bn GBP (24.7bn USD or 1,852.5bn KES) compared to 30bn GBP (57.1bn USD or 4,282.5bn KES) expected in 2010;
- In the 2006-07 Fiscal Year, export of software services and IT-BPO earned India approximately 16.3bn GBP (31bn USD or 2,325bn KES);
- Between the years 2003 and 2006 (4 years), India’s share of world wide global outsourcing market grew from 0.5% to 7%;
- For Fiscal Year 2004-05, revenue from BPO & call centers amounted to 2.7bn GBP (5.2bn USD or 4,290bn KES);
- For Fiscal Year 2004-05, revenue from export of software and services industry amounted to 9bn GBP (17.2bn USD or 1,290bn KES);
- For Fiscal Year 2003-04, total revenue in the software industry amounted to 8.4bn (15.9bn USD or 1,192.5bn KES);
- For Fiscal Year 2003-04, export of goods and services of India's IT and outsourcing industries amounted to 7 billion GBP (13.3bn USD or 997.5bn KES);
- For Fiscal Year 2003-04, 78% of revenue in the software industry was from export sales;
- For Fiscal Year 2003-04, outsourcing contributed 29% of India’s total software export revenue;
- For Fiscal year 2003-04, India realized total overseas outsourcing revenue of 10bn Euro, 32% of which was generated from Bangalore (the state capital of Karnataka):
- There are more than 500 major international companies with IT operations in Bangalore;
- 40% of the whole of India’s IT industry is located in Bangalore;
- The population of Bangalore has grown from 1.6 million in 1970; to 2.8 million in 1990; to 6.5 million in 2006; and is estimated to grow to 10 million by 2015;
- Knowledge Process Outsourcing (KPO) is an emerging global market with an estimated 17bn GBP (32.2bn USD or 2,413.4bn KES) a year revenue base. India is expected to capture 70% of that market due to its readiness.
- The BPO sector is being sold as one that is going to create the jobs that Kenya direly needs. We now look at the employment data from India in the BPO sector:
- By the end of 2006, the IT industry in India had employed 1.3 million people directly and 3 million people indirectly;
- In the Fiscal Year 2003/04, 245,100 people were employed in IT-enabled BPO (ITES-BPO) compared to 171,100 in Fiscal Year 2002/03, a growth rate of more than 30%;
- In Fiscal Year 2003/04, 95,000 people were employed in outsourced customer service compared to 65,000 in Fiscal Year 2002/03, a growth rate of greater than 30%;
- In Financial Year 2006, the staff turnover rate (annual employee attrition) in voice based BPO (i.e. outsourced call centers) was between 70-80%;
- In the Financial Year 2003, annual salary hike in IT services was 14%.
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