Avendus has a report out on the domestic BPO sector. With the decline of the dollar and the expansion of the India domestic market in all spheres, could this be the next big opportunity?

Historically, the outsourcing market in India has been export focused and most participants have been focusing their energies in building businesses catering to US and European clients. However, with the emergence of India as one of the largest economies in the world, the Indian domestic outsourcing market is also emerging as an attractive target market.

To enable various participants of the outsourcing market to understand the Indian domestic BPO market better, we are publishing a report titled “Indian Domestic BPO Market – An Emerging Opportunity”.

While it is a US$1.8Bn market and expected to reach US$6Bn by FY2012 (CAGR of 35%+), we expect the third party segment of this market to grow much faster at 53%, taking the third party share from 18% in FY2008 to 30% in FY2012. Dominated today by call center activities from Banking, Telecom and Insurance, we expect this business to also show growing demand in the back office processing activities as the market and vendor sophistication grows.

Contrary to popular belief, the Indian domestic BPO business, despite its relatively lower pricing levels, has better (or at least equal) profitability margins as compared to the companies catering to global customers.

We believe the Indian domestic BPO market is a strong potential opportunity for both financial and strategic investors looking at making attractive investments in this space.

Last, but not the least, we also believe that the existing players in the Indian domestic BPO market will stand to gain from the years of credibility and referencibility they have built in this space, with the infusion of structured capital into this market.