The software industry likes the "oriented" word - as in object
oriented, machine oriented and now, services oriented architectures. But while software vendors debate SoA and SaaS, their services partners are not debating, just chasing after the other O - outsourcing as in the booming BPO market. Cap Gemini signed a $ 3.5 billion (yes, billion) deal with TXU last year. Accenture just reported its best quarter ever - helped quite a bit by BPO revenue. ACS has signed several $ 50 m plus finance and hr outsourcing deals in the last year. The still young Indian BPO market is exploding with Nasscom, the Indian trade body reporting 45% growth in what it terms "ITES" - IT enabled services (BPO services as against traditional IT services)
6 different groups of vendors are vying for the BPO market:
a) The "new Big 6"
IBM, EDS, ACS, CSC, HP, Accenture - traditional IT systems integration and outsourcing shops - are, for now, the mega vendors in the BPO market. Accenture, CSC and IBM (with PwC) were already pretty business process savvy through their ERP/CRM and vertical practices. The race is on to acquire or partner with others. EDS has a joint venture with Towers Perrin, and CSC with Aon to provide deeper HR capabilities. IBM acquired Daksh and Equitant in the last year to expand its customer care and order to cash offerings. ACS continues its phenomenal 15 year run by deftly making small vertical and application specific acquisitions.
b) The traditional BPO firms
The biggest. most mature BPO markets are around HR and customer care. Lead vendors from those markets like Convergys, Hewitt and others are expanding their foot print. Convergys recently picked up Deloitte's finance and accounting BPO business. Hewitt acquired Exult' HR outsourcing business last year.
c) Other Western IT firms
Big European players - Cap Gemini, Atos Origin, Siemens, and a number of mid-sized US players like Perot and Keane are positioning themselves for more BPO work. They are comfortable moving into BPO given their traditional ability to sign defined multi-year IT contracts at defined service levels.
d) Offshore IT firms
Each of the big Indian IT firms is in big and small ways into BPO. Wipro, HCL and MphasiS have the biggest BPO units. Differently from Western vendors they are more focused on smaller transactions - many in vertically important processing and analytical areas.
e) Offshore BPO firms.
A whole new set of Indian BPO players has grown rapidly in the last few years. Names like WNS, EXL and Intelenet are aiming to become the next Wipros and Cognizants. Not wanting to cede the offshore BPO to India, a number of Filipino, Chinese and other firms are also vying for this business.
f) An emerging breed
GECIS, a captive GE BPO operation staffed with a number of resources in India, E. Europe and China recently took money from US VCs and is aggressively seeking non-GE business. Shared -service subsidiaries of a number of other multi-national companies could similarly offer to support other customers or be acquired by some of the vendors in the categories above for even more competitive depth.
Of course, in any hot market, the hype leads to pricing beyond true value. Many of the vendors are talking about "transformational" and "dynamic" outsourcing. It is important to remember they are mostly offering to take over the "utility" not the" innovation" pieces of business processes - check processing, claims processing etc. As I wrote in The Giant Crunching Sound, CIOs are squeezing the utility portion of IT spend to free up dollars for innovative business use of IT. They can help ensure BPO services are fairly priced. They can also leverage their experiences with service level agreements and governance techniques they have learned after decades of mistakes around IT outsourcing.
The good news is for buyers willing to look, the vendor choices are significant. Soon, software vendors will become the seventh category for such BPO services. Once they evolve beyond "orienting" themselves towards services and actually start doing them...
