IDC Affirms that Processing Services Will Be Bigger Than Business Process Outsourcing in Asia/Pacific Excluding Japan

September 28, 2006

Singapore and Hong Kong, September 28, 2006 – In its latest update on the business outsourcing market in the Asia/Pacific excluding Japan (APEJ) region, IDC affirms that processing services continues to be and will remain bigger than Business Process Outsourcing (BPO) in terms of market size, opportunities and contracts. IDC forecasts the Processing Services market to grow at a compound annual growth rate (CAGR) of approximately 8% from 2006-2010 and generate more than US$21 billion in revenues by 2010. Processing services amounted to about US$14 billion in 2005 and is forecast to reach almost US$16 billion by end of 2006. More findings can be found in the report, Asia/Pacific (Excluding Japan) Processing Services 2006-2010 Forecast and Analysis (Doc# AP22C41060612 ).

"Processing services will be bigger and dominate outsourcing in APEJ. However, processing services will not grow as fast as BPO which is much smaller in size," said Conrad Chang, IDC's Senior Market Analyst for Asia/Pacific BPO Services Research. "APEJ is still developing in terms of services and many companies are still at the early stages of business outsourcing, hence most would choose to go with processing services first. As they continue to mature, companies will then look to BPO for more strategic outsourcing needs."

The sub markets within Processing Services is varied and diverse, each with its unique characteristics and growth direction. For example, the finance processing market is very different from the procurement processing market, which, in turn, is different from the home loans processing market. Processing services providers have to adapt to the diversity and complexity of different cultures and attitudes toward outsourcing in APEJ and the nature of the industry. In mature services economies in the APEJ region, such as Australia and New Zealand, companies realize the cost advantages of processing services outsourcing. However, within the developing services economies like China and Malaysia, processing services outsourcing is used as a leverage towards improving process quality and helping fast-growing companies to flexibly ramp up or ramp down its services offerings.

In April 2006, IDC released its APEJ BPO report which showed BPO reaching approximately US$6 billion in 2005 and estimated to exceed US$14 billion by 2010. Even though BPO is two to three times smaller than processing services, IDC forecasts that BPO will grow at a CAGR of about 18% from 2006 to 2010, which is more than twice the rate of processing services. As companies start to mature in their uptake of business outsourcing, more will turn to BPO for their strategic needs; but that is still a few years away. Despite faster BPO growth, processing services will continue to be larger for the next five years. The following chart summarizes the total market size for Processing Services in the APEJ region by function:

Source: IDC, 2006

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