While many sectors are yet to recover from the global financial crisis, FDI into business process outsourcing (BPO) remains stable, according to greenfield investment monitor fDi Markets.

Investments into the BPO sector globally peaked in 2012 with 458 projects recorded, but the following years still brought in healthy numbers – 400 projects were recorded in 2013 and 379 in 2014. The number of jobs created by the sector has also remained stable, averaging between 80,000 and 85,000 a year.

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The profile of new BPO ventures has stayed the same, according to fDi Markets. In 2014, as was the case between 2003 and 2013, the majority of BPO operations launched were customer contact centres, ahead of shared services centres (SSCs) and technical support centres.

Between 2003 and 2013, the majority of these centres specialised in business support services, custom computer programming, software publishing and retail banking. In 2014, the list of the most popular activities for BPO projects was similar, with the exception of data processing and hosting, now one of the most popular subsectors. Between 2003 and 2013 there was barely a mention of this subsector in the top 20 most popular activities.

There are also significant changes in the sources of investment, with 2014 bringing increased activity of Spanish and Canadian investors. While in 2013 there were only four BPO investments that originated in Canada and three in Spain, a year later the numbers rose to 14 and 13, respectively.

Changes are even more striking when comparing the past two years with the period from 2003 to 2012. Developed countries dominated as sources of BPO investment in both periods, but the past two years also brought the emergence of developing countries. Apart from India, an established source of BPO FDI, countries such as Kenya and the Philippines made it into the list of top 20 BPO investors between 2013 and 2014.

Romania’s potential

The destination markets for BPO investments are also changing. Romania had a successful year in 2014, recording 13 projects, more than double the number recorded in 2013. Among investors that either entered or expanded in the country in 2014 were Computer Generated Solutions, the US-headquartered IT firm that launched three projects in the country, and Stefanini, a Brazilian IT solutions company that started two ventures.

“Despite a large range of SSC/BPO entities active in Romania, there is still tremendous potential for growth in this sector,” wrote researchers from KPMG in their report on the BPO sector in Romania, published in mid-2014. “As SSCs and BPO are continuously evolving, companies are constantly expanding their scope of services in Romania, opening new centres and taking on additional tasks,” the report added.

Another country that recorded a very good 2014 is Brazil, receiving 11 BPO projects and jumping into the top 20 BPO destinations worldwide. Brazil’s growth as a BPO destination is connected with one major investor – Atento, a Spanish outsourcing solutions provider, which announced plans to expand its call-centre operations in 10 different locations across the country, creating more than 3700 jobs.

Brazil’s BPO sector is expected to receive more growth catalysts in the coming years, according to Frost & Sullivan, a Texas-headquartered international consultancy. In 2013, the BPO and contact centre market in Brazil was valued at $5.2bn, but Frost & Sullivan expects it to grow to $7.3bn by 2018.

Losing investment

Among the countries that are losing the race for BPO investments are the Czech Republic and Singapore. Both countries were among the leading destinations for BPO investments between 2003 and 2012, but have dropped out of the top 20 in the past two years.

Both countries have recorded an increase in labour price costs in the past two years, according to data aggregator Trading Economics. Additionally, the Czech Republic’s unemployment rate of 5.7% in 2014 and Singapore’s at 1.9% kept BPO investors at bay, as they usually seek to recruit many people right after entering the new market.

According to fDi Benchmark, a site selection matrix, labour costs for shared services projects in the Czech Republic are currently the most expensive in central and eastern Europe. Similarly, Singapore is the most expensive country for BPO operations in south-east Asia, with the cost of labour there three times that of Malaysia, the second most expensive location.

New investors

The past two years have seen an explosion of investment into BPO. The top BPO investors between 2013 and 2014 are three US outsourcing firms – APAC Customer Services, Convergys and Sitel – followed by Spain’s Atento and Aegis, a subsidiary of Mumbai-based Essar Group. Of that top five for 2013 to 2014, only Convergys and Sitel were in the top five BPO investors between 2003 and 2012.

APAC, part of Expert Global Solutions, a Texas-based BPO firm, grew by expanding its contact centres across the US and Canada. The company launched 13 projects in 2013 and 17 in 2014 in cities such as Sarasota, Tucson and Montreal, creating more than 5000 jobs.

Convergys, the second largest investor between 2013 and 2014, also bet mostly on growth in the West. The company invested heavily in the US in 2013 by expanding 10 of its customers contact centres. It has also created jobs in Costa Rica, El Salvador, Honduras and the Dominican Republic.

In Europe, Convergys opened a customer service centre in Derry-Londonderry, Northern Ireland, and announced plans to set up a facility in the Polish city of Lublin. Similar to its competitors, Sitel focused its developments in the US, but also invested in Canada, Germany, Morocco and Bulgaria.

Atento, apart from its big expansion in Brazil, announced projects in El Salvador, Guatemala, Colombia and Argentina, while in 2013 Aegis focused on US expansion and in 2014 on Asia-Pacific, investing in Australia, Sri Lanka and Malaysia.