Legitimizing Pure Play Providers | Article

gavel on booksAccording to Trey Campbell, last year saw the arrival and the “legitimization” of the pure play BPO providers. Spherion Corporation, the leading human capital management company with 600,00 employees world-wide, has an Atlanta-based BPO† business unit that specialized in four BPO areas. The Spherion group vice president says 2000 saw a “significant transition” in the BPO marketplace as pure play providers attracted top talent and venture capital. These developments demonstrate the continuing maturity in the market and a legitimization of BPO as a viable, growing industry.”

Last year BPO providers signed some “highly visible” contracts that added to BPO’s momentum. Campbell cites Exult’s contract with BP Amoco, and PricewaterhouseCoopers’ (PwC) contracts with BP Amoco and Nortel, and Spherion’s contract with the American Association of Retired People (AARP) Spherion will handle all of AARP’s member care services.

Spherion has been an outsourcing provider since 1991 and has grown steadily since that time. Campbell says BPO was a rough sell until recently. “People didn’t know what it was. And executives hadn’t really wrestled with what was core to their businesses,” he explains. The traditional thinking included the idea that companies needed to manage as much of their supply chain as possible, which made it difficult for them to accept BPO. They felt the risk to hand control of significant functions over to a third party was too great, according to Campbell.

The Web Changes the Equation

And then there was the Web. The Internet, which created a global market, forced a new paradigm. “The world is changing so rapidly,” says Campbell. Companies are now realizing that they can not simultaneously optimize every facet of their businesses themselves without turning to a specialized service partner in key areas.

More corporations are concluding that they only have enough talent and capital to focus on the areas that distinguish them in the marketplace.

This realization has helped BPO gain strategic importance; Campbell says the growth of BPO suppliers underscores that point. New entrants in the BPO market include LeapSource and Exult as well as a host of traditional consultants and IT providers that see tremendous growth potential in BPO. Each is a separate enterprise dedicated solely to BPO.

These new pure play providers are attracting some top talent, reports Campbell. And these executives are leaving established jobs to join the upstarts. Campbell says they are attracted by the excitement of working in an emerging market.

This year Campbell is certain BPO specialization will continue. He says this is a market demand, since buyers believe they need specialists to deliver world class performance. “An outsourcing vendor is a specialist, one that is expected to bring state-of-the-art tools and expertise to the equation. As an example, one area Spherion specializes in is workforce selection, a unique outsourcing solution that provides world-class Web-enabled sourcing and hiring on a large scale.. Finally, Campbell is noticing a “commoditization of the more mature BPO functions,” particularly in payroll and some IT areas.

The Workforce Assessment

On the labor force front, Campbell says Spherion is adding strategic value to its clients with an enterprise-wide assessment of their workforces. He reports today’s tight labor market is forcing Fortune 100 companies to develop detailed workforce strategies.

The assessment provides the numbers to help these corporations determine if they should move certain areas of their business to another region where labor costs are lower, or labor is more plentiful, For example, Spherion is currently engaged in one of these assessments for a top New York financial services company. In that case, Spherion’s analysis identified an array of solutions that could generate savings of $980 million.

Campbell says these assessments “produce dramatic opportunities to drive efficiencies and better plan workforce strategy.” He’s seeing more clients taking “a macro approach toto the whole issue of resource deployment.”

Lessons from the Outsourcing Primer:

  • BPO was a hard sell until the Internet came along and globalized markets. Now companies can’t afford to do non-core processes.
  • BPO specialization will continue because of market demand.
  • Top executives are leaving established jobs to join pure play BPO firms. They are attracted by the excitement of an emerging market.

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