The global business process outsourcing (BPO) was one of the few sectors that defied the financial crunch to record growth that is expected to rise further in coming years. Last year, the global market for BPO stood at about $36 billion, a 28 per cent increase from the previous year’s $28 billion. The local BPO sector has been flat of late but players are making positive projections.

“Since August, there has been an increase in interest from international firms seeking to outsource some of their services,” said Mr Nicholas Nesbitt, the CEO of KenCall, a dominant player in BPO. He added that in the next six to nine months, the company expects to sign up 10-15 local clients. At least 85 per cent of the local BPO business comes from external sources.

The local BPO market is estimated to have a potential annual revenue of Sh400 million. According to analysts, two factors will play a key role in the sector’s growth — improvement in the country’s ICT infrastructure, and the desire by organisations to reduce their cost of operation. “The fibre optic technology has resulted in better communication at reduced bandwidth cost and the international firms we have been talking to are partly drawn by this,” Mr Nesbitt said.

The United Nations Conference on Trade and Development (UNCTAD), in its latest ICT report, Information Economy Report 2009, says that the global financial crisis has added impetus to the need for organisations to outsource.

The trade body says that “as the recession adds pressure on companies across industries to reduce production costs, some will choose to source more services, and new services, from lower cost locations.

In the longer term, and as the global economy recovers, both the volume and scope of offshoring are likely to grow significantly.”

Despite the projected growth, competition in the BPO sector, currently having about 32 players, is bound to get stiffer while margins take a hit as clients renegotiate their billing agreements with BPO firms.

Telkom Kenya, for example, has had to renegotiate the rates it pays for customer service calls handled by KenCall, a call centre BPO.

This entry was posted on Friday, November 6th, 2009 at 2:37 am and is filed under BPO News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.