European companies to splurge on BPO services

NEW DELHI: The spending by European firms on BPO services such as financial services back office, procurement, and customer care, is set to rise to E18.9bn by ’11, from E11bn in ’06, reflecting a five-year compounded annual growth rate of 11.5%.

According to a report by technology & market research firm Forrester, this spending will take place in six BPO services — financial services back office, customer care, finance and accounting, human resources and procurement, and other industry-specific and unique business processes — with HR BPO claiming the largest chunk of the total European BPO spending during ’06.

In fact, HR BPO will continue to command the biggest spending share leading right up to the year ’11, Forrester said. “UK firms lead, spending E1.4bn in ’06, followed by German and French firms at E587m and E500m,” it added. Financial services’ back office BPO was a close second in terms of opportunity. “Ongoing automation and standardisation within the financial services industry means firms here are likely to outsource the processing and administration that underpins financial services and insurance products. Spending will increase at a compound annual growth rate (CAGR) of 10.4% from ’06 to ’11,” it said.

The report projected that finance and accounting (F&A) BPO spending will display the highest CAGR amongst the BPO services at 16.4%. “From ’06-07 nearly all countries will raise their expenditures on F&A BPO, with the growth rates ranging from 8-10%. In most outsourcing-experienced countries like the Netherlands and the UK, F&A BPO spending will seize about 13% of the total BPO spending in ’11,” it said.

Forrester pointed out that overall, the uptake and spending in Europe was spread unevenly, with firms in IT advanced countries like the UK, Netherlands, and the Nordics and in the large economies of France and Germany spending relatively more on BPOs.

“Not only is the European market growing significantly, but the fact that the wage rates in Europe are currently pegged higher than the US market — in certain cases as much as 1.5 times — makes outsourcing an attractive proposition for companies,” RanjitNarasimhan, head, HCL BPO said.