Opportunities for CCOS Vendors in Business Process Outsourcing (Strategic Focus)

Through the course of the last 12 to 18 months, many clients of BPO services have expressed the desire to amalgamate providers, in order to reduce contract overhead. At the same time the slowing economy makes diversification an imperative for vendors. This report will identify the challenges for contact center players, as well as strategies to market.

Report Highlights
The BPO market is strong and is proving to be relatively safe in economic downturn, but contact center volumes and margins are under threat necessitating diversification.

COS vendors have struggled to make headway in the broader BPO market, due in part to a lack of visible peer group success which has put vendors off making investments.

Vendors are targeting processes within the customer transaction lifecycle, but there is a shift in culture and higher level of investments required to make an major impact in the BPO market.
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Overview 1
Catalyst 1
Summary 1
Key Messages 2
The BPO market is strong and is proving to be relatively safe in the economic slowdown 2
Contact center volumes and margins are under threat necessitating diversification 2
CCOS vendors have struggled to move into the broader BPO market 2
The lack of visible peer group success has put vendors off making investments 2
Vendors are targeting processes within the customer transaction lifecycle 2
Vendors have not fully exploited partnerships opportunities 3
Most BPO success has come through collections work 3
Table of Contents 4
Table of figures 5
Table of tables 5
MARKET OPPORTUNITY 6
Business process outsourcing is a $264bn market with steady growth forecast to 2013 6
Contact center outsourcing vendors are well placed to enter a number of BPO markets 7
Contact center vendors need to diversify 7
Threat to margins 7
Lower volumes forecast 8
Convergys 9
Sykes Enterprises 9
Teletech 9
ICT Group 10
Increased focus on technology may cannibalize revenues 10
Benefits of diversification 10
Increased margins 10
Increased revenues 10
Protect existing business 11
Diversification challenges 11
Lack of credibility outside CCOS 11
Difficult to hire skills 12
Retention of skilled workers 12
Required investment 13
Integrated customer lifecycle services diversification 13
Integrated customer transaction lifecycle 13
Bundling versus 'Best of Breed' 16
The evolution of 'Best of Breed' 16
The bundling option 17
CCOS players as BPO providers 17
Customer Impact 19
Opportunities 19
Challenges 20
Go to Market 21
BPO areas of opportunity 21
Finance and accounting outsourcing 21
Collections 21
Human resources outsourcing 22
Procurement / supply chain outsourcing 22
Knowledge Process Outsourcing 22
Financial transaction processing 23
Recommendations 23
CCOS companies need to act more strategically for long term BPO success 23
CCOS companies should consider acquisitions to bridge the credibility gap 23
CCOS companies should consider forming partnerships with BPO vendors 23
CCOS companies need to focus on process expertise 24
APPENDIX 25
Definitions 25
Methodology 25
Further reading 25
Ask the analyst 25
Datamonitor consulting 25
Disclaimer 25
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Table 1: Forecast of business process outsourcing market, 2007-2013 ($bn) 6
Table 2: Average operating margin for selected contact center companies, 2006-2008 8
Table 3: Forecast of business process outsourcing market, 2007-2013 ($bn) 12
Figure 1: Forecast of business process outsourcing market, 2007-2013 6
Figure 2: Average operating margin for selected contact center companies, 2006-2008 8
Figure 3: Importance of various criteria in choosing an outsourcing provider 11
Figure 4: BPO opportunities in the customer transaction lifecycle 14
Figure 5: Call center companies offering wider BPO services 18
Figure 6: Companies which already outsource some contact center work were asked: How will you seek to reduce cost in your operations functions in 2008? 19
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