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Indian BPO services' export growth has outpaced that of IT services over consecutive years and is expected to maintain this momentum in the Financial Year 2026 (estimated), according to a report by Kotak Institutional Equities.
The report noted that the trend is being driven by a heightened focus on cost optimisation among global clients, leading to increased outsourcing of business processes and a shift toward offshore delivery models. The BPO (Business Process Outsourcing) sector involves a company hiring an external third-party service provider to perform specific business functions, such as customer service, technical support, accounting, or human resources The global BPO services market is likely to report a CAGR of 3.9 per cent over CY 2024-29E to USD 268 billion by CY2029E. Indian BPO services exports, at USD 45 billion, account for 20 per cent of overall outsourced spends and have increased at a CAGR of 7.8 per cent over FY2015-25, 250-300 bps higher than global outsourced spends during the period. Service providers contribute to about two-thirds of Indian BPO exports. The report added that pure-play Indian BPO service providers are well-positioned as challengers to global incumbents. Their leaner cost structures and a shift toward outcome-based engagement models have enabled more efficient service delivery, contributing to their growing market share. The report further highlighted that while the evolving technology landscape presents revenue deflation risks for larger incumbents, it also creates new opportunities for agile BPO firms. Enterprises have already automated many routine tasks, and the adoption of generative AI (Gen AI) is expected to unlock further productivity gains, as per the report. This shift offers incremental prospects for BPO providers in data annotation, collection, and curation services essential for large language models (LLMs). However, the report added that the Gen AI adoption may also lead to disruption in existing business models. Initial implementation is expected to focus on industry-agnostic support functions. In contrast, industry-specific BPO services that require contextual understanding are seen as more resilient due to higher complexity and regulatory requirements, especially where legacy tech systems pose integration challenges. According to the various reports, the Indian Information Technology (IT) sector is likely to see flat revenue growth. The slowdown is mainly due to continued macroeconomic uncertainties and cost pressures affecting client spending across sectors. (ANI)
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