Sourcing Insight

By Michael Rehkopf

The real deal on IT and business process outsourcing trends

Where is BPO in Asia-Pacific?

Posted in Sourcing Insight by Michael Rehkopf on 2008/07/20 12:55:05

Do you see lots of BPO happening in the Asia-Pacific region? Before we answer that, what do I mean by BPO?

I mean business process outsourcing, which therefore excludes captive centers and considers only the engagement of third-parties to provide business processing services, excluding IT-related services such as infrastructure and applications. In addition, we need a threshold level to consider, and for that I've used a total contract value (TCV) of US$25 million as the threshold.

If we look at this BPO market from a global perspective, we see that the main business process areas are HR-related, facilities management-related and financial services-related (not finance and accounting, but rather, specific financial services such as loans processing).

However, in the Asia-Pacific region, BPO in these areas is relatively non-existent and CRM-related BPO is the only significant contributing domain. What's intriguing is why would that be the case?

One could argue that the threshold level is masking a lot of activity at smaller dollar value levels or that the size of companies in Asia-Pacific necessitates smaller deal sizes. Somehow, that explanation doesn't seem overly satisfactory, especially given the number of large companies based in Asia-Pacific.

It may be that there are different reasons for each of the domains. For example, the widely differing HR rules and regulations across the region may make it difficult for service providers to offer a compelling value proposition resulting in less adoption by clients. For facilities management, it could be that without local presence for each facility, management is a challenge although there are some significant service providers starting to appear in this region that may change that balance.

I don't think the reasons are totally clear so if you've got some ideas as to what is holding back BPO in the Asia-Pacific region, please jump into this discussion.

Disclaimer:
Views and opinions expressed in this blog are the author's, and do not necessarily represent those of ZDNet Asia.

Talkback 4 comments

Where is BPO in Asia-Pacific?
Dear Mr. Michael Rehkopf,

I am not able to understand the context of your article - are you talking about the domestic BPO business in countries in Asia Pacific - then you may be right; but not in the case of export oriented market. In export oriented market, both philippines and India enjoy same share of masrket share in BFSI segment as in customer interaction segment. And more importantly, these two areas are the most growing ones. Domesic business is not matured and hence you see the lowest chain of services being outsourced to 3rd party - similar situations in US 20 years ago. However, India offhsoring phenomenon has changed the way corporations do business and most importantly has given them a strategic tool not just for cost but also for exploiting developing markets such as India and China.
Posted by Mohammad Shahabuddin on Monday, July 21 2008 05:22 PM

Where is BPO in Asia-Pacific?
Mohammad,

You draw out an important point. I always talk about the location of the buyers of services, not the location of the providers nor the location of where the service is delivered from.

Given the number of innovative companies in the Asia Pacific region, we have to be careful about maturity, especially when we see different domains being popular in AP compared to other regions. I wonder if there is something else involved?
Posted by Michael Rehkopf on Thursday, July 24 2008 06:56 AM

Where is BPO in Asia-Pacific?
Honestly, I don't know either. Case in point...

My wife had arranged a trip for us using her free miles on this huge Asia-Pacific based airline. She thought that she had ironed everything out, that was until she did the phone in check in. To her surprise, we weren't confirmed on the flight for the three day vacation we looked forward to for months. She was referred to the customer service and waited ages to get an answer from a representative - during office hours. The agent was polite, alright, but couldn't answer our questions quickly enough. I guess that work was overwhelming for this poor soul of an agent and she had to face the full ire of the dragon lady who was my wife. It didn't help that the person had the heavy accent so characteristic of the home country of this airline. After an hour and a half or so on the phone, things worked out and we were on our way to our dream vacation.

On the way to the airport, we couldn't but help ask each other if things would have been easier if the airline had taken on cheaper people with American accents based in neighboring countries (read: the Philippines), maybe we wouldn't have had such a frustrating experience. The airline may offer one a great way to fly, but they were such a bummer on the phone line.
Posted by Ari Halos on Thursday, July 24 2008 10:21 PM

Where is BPO in Asia-Pacific?
Let me tell you in my experience some of the best airlines in Asia which are even best in the world fail in having an efficient back office operation (call centers). I believe (can make out from their accent) most of these back office ops are internal and not outsourced. With airlines being hit the most due to rise in oil prices, services like online/ customer support are the first in the line to get hit. They reduce the number of people for customer support as bookings go down with the rise in ticket prices. It is a rippling effect.
Posted by Tony on Monday, August 11 2008 04:42 PM

Latest in Blog Central

Subscribe to BlogCentral

Click this link to view this blog as XML.
Add this feed to your online news reader

About the blogger

Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.