IDC Finds BPO Adoption of Finance & Accounting and Human Resources by Enterprises Set to Drive the APEJ Business Process Outsourcing Market
08 December, 2005
Singapore and Hong Kong, December 08, 2005 – In its first-ever study of business process outsourcing (BPO) services in Asia/Pacific Excluding Japan (APEJ), IDC forecasts the total market size for BPO to achieve a compound annual growth rate (CAGR) of 18.7% from 2005-2009 and generate more than US$12 billion in revenues by 2009. This growth will occur despite the challenges presented by the size and complexity of the region's BPO services market. IDC also found that in APEJ, BPO services are most commonly adopted in the Finance & Accounting (F&A) and Human Resources (HR) functions. More findings are published in the inaugural IDC’s report, Overview of End-User Demand for Business Process Outsourcing (BPO) in the Asia/Pacific (Excluding Japan) Region (Doc# AP224112M ).
"F&A and HR are amongst the most commonly outsourced functions for enterprises in APEJ today. Companies are also starting to realize the importance of having a proper governance structure in place before embarking on BPO engagements," said Conrad Chang, IDC's Asia/Pacific BPO Services Research Senior Market Analyst. "Top concerns amongst enterprises when it comes to BPO are vendor capabilities, security and cost effectiveness. It is also important for enterprises to do the proper due-diligence before choosing a BPO vendor."
The situation in Finance & Accounting BPO in APEJ is rather unique. In studying APEJ companies, IDC finds that many small-medium-businesses (SMBs) currently outsource part, if not all, of their finance related functions to a third party service provider. It is not uncommon in APEJ to find SMBs not having a finance department but instead hiring contract accountants/finance persons from a services company. Enterprise spending on F&A BPO is mainly concentrated in Accounting, Finance and Accounts Payable & Receivables, which contributed 30%, 27% and 43% to the total spending respectively in 2005.
Although HR BPO has a lot of potential for growth in the APEJ region, the biggest hurdle lies in the fact that HR is still seen as an administrative function by many companies. Few sees HR as a strategic business function that is able to contribute to a company's revenue objectives. IDC finds approximately 51% of HR spending on outsourcing is on payroll administration, followed by benefits administration and staffing, which accounts for the remaining 25% and 24% respectively. Although Training is commonly reflected as a HR cost amongst enterprises, IDC finds that full-scale, end-to-end outsourcing of Training is uncommon in APEJ. Companies prefer instead a more piece-meal approach through selective BPO, such as management modules.
The following chart summarizes the total market size for BPO in the APEJ region by function
Asia/Pacific Excluding Japan BPO Market Forecast for 2005 - 2009 by Functions
Source: IDC, 2005
IDC finds that it is essential to develop a proper governance structure in all BPO engagements to ensure that risks are mitigated and business continuity prevails. APEJ companies need to first ensure that internal governance and processes are in place even before embarking on BPO engagements. In continuous engagement of both vendors and enterprises, IDC also finds that both sides need to approach the BPO engagement in a collaborative manner. Vendors should not try to push enterprises beyond what their corporation is ready for. Subsequently, companies need to manage the BPO vendor accordingly instead of totally abdicating all responsibility to the vendor.
Contact
For more
information, contact:
Chee-Kian Chong
Events & Marketing Executive
Tel: +603-2169-7521
Fax: +603-2163-5098
Email:ckchong@idc.com
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