Global BPaaS Market 2012- Future Outlook: Growth driver for Indian IT vendors

Everest Group defines Business-Process-as-a-Service (BPaaS) as a model in which buyers receive standardized business processes on a pay-as-you-go basis by accessing a shared set of resources – people, application, and infrastructure – from a single provider. Advantages of BPaaS model includes potential cost reductions, efficiency in operations, access to best expertise, processes and technologies, and also allows the businesses to focus on the core processes by outsourcing the support functions and this is particularly benefit for SMBs and also Large organizations. According to Everest Group research, BPaaS delivers 35-40% cost savings for small businesses, 25-30% cost savings for medium size businesses and 10% cost savings for large enterprises over the traditional IT+BPO model. Many times there is confusion between SaaS and BPaaS, Gartner clarifies SaaS is an offering that enables a business process and it delivers a fully managed application that client uses to deliver a business outcome whereas BPaaS is a cloud service that delivers a business process and it delivers the business outcome for the client. Forrester is predicting BPaaS will grow from $0.53 B in 2011 to $10.02 B in 2020.

According to Gartner report “Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update (ID:G00234814)”, Gartner predicted that BPaaS will grow from $84.1B in 2012 to $144.7B in 2016, generating a global CAGR of 15%. Of the eight subsegments Gartner is tracking in the BPaaS forecast, Cloud Payments (17.8%) Cloud Advertising (17.1%) and Industry Operations (15.1%) are expected to have the greatest CAGR in revenues generated by 2016. In terms of revenue generated, Cloud Advertising is projected to grow from $43.1B in 2011 to $95B in 2016, generating 17.1% CAGR in revenue growth through 2016. Cloud Payments are forecast to grow from $4.7B in 2011 to $10.6B in 2016, generating a CAGR of 17.8% worldwide. E-Commerce Enablement using BPaaS-based platforms is expected to grow from $4.7B in 2011 to $9B in 2016, generating a 13.6% CAGR in revenue globally. Gartner 2011 Annual Survey of 610 Organizations highlights the fact that organizations are currently using or planning to use business process utility (BPU) or BPaaS for BPO exceed 60%.

Most of the Indian IT Vendors including BPO Vendors have developed their own BPaaS offerings and are actively offering them to their clients as these offerings fall under the nonlinear revenue model category that will allow vendors to charge premium pricing leading to higher margins and also fueled by economic slowdown, manpower issues and changing client needs wherein they are looking at outsourcing vendors as business partners who will help them improve both Topline and bottom line. TCS, Infosys, Cognizant Technology, Wipro, HCL Technologies, Genpact, WNS, etc. are all offering BPaaS services or Platform BPO offerings. These services have been developed for the past ten years and Indian IT Vendors are branding these offerings and successfully offering them to their clients. Platform BPO is a win-win offering for both the clients and vendors as they improve their process and service delivery and they will earn more from their clients on outcome basis. There has been significant demand from the Small & Medium Business segment but slowly the large business organizations too are significantly increasing their adoption of the BPaaS.

Global SaaS, PaaS, IaaS and BPaaS Market 2011 and Forecast

Cloud computing includes Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Business Process as a Service (BPaaS). SaaS is the highest level of the cloud and includes actual cloud applications. SaaS segment is the largest segment in the overall Cloud Computing Market. Customer relationship management (CRM), Content, communications and collaboration (CCC) market and Enterprise resource planning (ERP) revenue are the key sub segments respectively. North America, followed by Europe is the key markets for SaaS. Asia Pacific and Latin America are key growth markets too. Adoption is being driven by availability of on demand software, understanding of the model, increasing interest and pressure on IT managers to reduce costs. Data security concerns, outages, lack of understanding of the cloud and infrastructure, and integration with existing infrastructure are concerns. According to Gartner SaaS market is expected to reach $ 21.5 billion in 2015 from $12.1 billion in 2011. IDC estimates it to reach $ 40.5billion in 2014 from $ 21.8 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011. Google, Citrix, Salesforce.com, NetSuite are key players.

PaaS is the middle level and builds upon the IaaS layer and provides an application development platform for the cloud. Gartner says, PaaS products primarily supported application server capability, but the market has expanded to other middleware capabilities as a service, such as integration, process management, and portal and managed file transfers (MFTs). Gartner analysts said PaaS offerings are likely to expand the application integration and middleware (AIM) market by bringing in a new range of organizations that otherwise would have been packaged application and office software users. Vendors in this space include Windows Azure, Heroku and SalesForce’s Force.com. Salesforce.com has the most mature PaaS. According to Gartner PaaS market is expected to reach $ 1.8 billion in 2015 from $707.4 million in 2011. Forester estimates it to reach $9.8 billion in 2015 from $820 million in 2011.

IaaS is the lowest level of the cloud technology stack. It provides operating system support, storage and processing. Vendors in this sector include Google App Engine and of course Amazon’s (news,site) latest whipping boy AWS EC2. Infrastructure-as-a-service (IaaS) will shift from public clouds to virtual private clouds, Forrester Research projects. While adoption remains high, the size of the market will shrink and public cloud services will cost less in the future because the cost of inputs will continue to decline. According to Gartner IaaS market is expected to reach $ 22 billion in 2015 from $5.6 billion in 2011. IDC estimates it to reach $ 15 billion in 2014 from $ 3.4 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011.

BPaaS is even higher up than SaaS and it includes technology, people, process and smart analytics wrapped in a simple "pay-as-you-go" commercial model. It allows companies to minimize or eliminate substantial upfront costs.  BPO outsourcing providers such as India, China and Latin America will likely make a play in this area. Traditional BPO providers are setting up data centers to offer cloud computing services to their clients and Cloud computing inclusive of BPaaS provides a big opportunity for service providers. According to Gartner BPaaS market is expected to reach $ 133.5 billion in 2015 from $71.7 billion in 2011. Forester estimates it to reach $3 billion in 2015 from $530 million in 2011.