Technology

BPO: Is Wider Better?

Business process outsourcing providers are expanding their offerings; customers are still farming out bits and pieces, but they're selecting provid...
John EdwardsFebruary 21, 2006

Financial and accounting business process outsourcing “is becoming the territory of a handful of large global services providers,” says Shruti Yadav, an analyst at International Data Corp. in Framingham, Massachusetts. F&A BPO — though an awkward abbreviation — has made a name for itself as it settles comfortably into the business mainstream.

The largest providers continue to tap their technology and consulting assets, extensive offshore capabilities, and worldwide presence, says Yadav, leveraging “their C-level executive relationships to strike multimillion- and multibillion-dollar deals.”

The industry’s top ten global providers, according to Stamford, Connecticut-based research firm Gartner, are NCO Group, Accenture, Affiliated Computer Services, IBM, Convergys (which last year acquired Deloitte Consulting Outsourcing), Capgemini, Xansa, Hewlett-Packard, Electronic Data Systems, and Outsource Partners International.

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The list mixes big names with smaller companies that are working hard to become one-stop shops, says Gartner analyst Robert Brown, who observes a trend toward “providers that can handle the full, comprehensive scope of F&A out of a single portfolio.” Brown adds that the industry’s growing consolidation is “a definite advantage” for outsourcing customers that are looking to cut costs.

Another advantage to working with the giants (and the would-be giants) is access to capabilities in adjacent business process areas, such as human resources and procurement. According to Yadav, many outsourcing providers are further widening their offerings for just this reason. Brown agrees that “it’s easier for a company to deal with a single, trusted provider in several areas than with several providers.”

But finance executives, take note: As of yet, service diversity has not been a customer magnet for most of your colleagues. According to Gartner, relatively few major customers have signed up to outsource more than one business process; the majority still focus on selected activities, such as accounts payable. Brown believes that the tide will turn as businesses become increasingly comfortable with outsourcing an array of processes; many customers, he maintains, are now selecting their outsourcing providers with this thought in mind.

While customers may be the eventual winners in the migration from selective outsourcing to one-stop shopping, the biggest losers may be the field’s niche players. Outsourcers that offer custom services to regulated industries or that compete in specialized vertical markets, says Brown, “face the option of expanding their horizons or potentially losing share to larger competitors.” Yadav concurs. “Nothing is set in stone,” he says, “but the market is being claimed by a handful of providers.”

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