See our Outsourcing Provider Directory here

The Major Event of 2002

The Rise of Credible Service Providers

When 2002 dawned, the growth of business process outsourcing had one major constraint: the lack of credible service providers. During the course of the year, a plethora of firms stepped into the breach in an attempt to fill this market void.

First, venture capital firms opened their pocketbooks and funded ventures that hoped to establish their competence in a particular niche. Next, the consulting arms of the Big Four accounting firms developed solid and well-articulated BPO product offerings. Accenture, Cap Gemini Ernst & Young, Deloitte & Touche, and Outsource Partners International or OPI (formerly KPMG) moved to become serious players.

Finally, the established BPO service providers, especially ACS and EDS, also stepped up to the plate and enriched their market offerings. ACS, in particular, marshaled its forces to become a serious BPO player. BPO contributed $2 billion to the company’s $3 billion annual revenue. Even IBM entered the fray by purchasing PricewaterhouseCooopers’ (PwC) consulting group, known for its BPO expertise.

In Canada, CGI made big strides.

Buyers Skeptical of Working with Venture-Funded Firms

The influx of new providers created a new psychology in the BPO market. During the dotcom boom, buyers were willing to sign up with a new service provider flush with venture capital funds. The then-rosy view was that the huge sums of money available would help the youngsters develop into mature, capable BPO service providers. Unfortunately, that was not how history played out. Today, buyers are much more skeptical about doing business with a new firm backed by an equity partner.

However, firms funded by venture capital that survived the dotcom crash are doing well, thank you. One prime example is Exult, which has clearly proved it is a viable and effective player in the human resources (HR) space. Exult’s success is important to the BPO supplier marketplace because it proves capable new providers can create a sustainable market niche.

Buyer insistence on past performance and future viability clearly benefited the old guard, however.

Transaction Engines Give BPO a Boost

This year buyers understood more clearly why BPO made sense for them. The emergence of transaction engines defined BPO’s benefits clearly. Service providers could explain in a more understandable way the value of economies of scale, best practices and access to labor arbitrage using a transaction engine. This was an important step forward for BPO.

2003 Predictions

Going into 2002, there was a dearth of credible BPO suppliers. As the year ended, BPO buyers had a much broader spectrum of options. But that’s just the first step in a still nascent market. With so many new providers in the market, I predict consolidation will become the hallmark of 2003. This will be good for buyers as the new configurations will make the offerings even better for them.

Transaction engines will continue to drive BPO. New and/or better transaction engines will emerge in HR, supply chain management, and finance and accounting. Like IT outsourcing before it, I predict BPO will break into silos. A corollary is service providers will aggressively take advantage of labor arbitrage. This will allow them to measure their success by the end result.

I see substantial gains for BPO buyers thanks to the combination of labor arbitrage and transaction engines. Together, they can increase quality and cut costs — exactly what a buyer wants when it outsources.

2003 will be a building year for BPO. As the year goes by, we will see more significant transactions. They will further validate the marketplace and expand the power of BPO.

BPO Outsourcing Trends for 2003:

  • Venture capital funded firms, accounting firms’ consulting divisions and the major players themselves reworked their offerings to better fit the needs of clients.
  • Buyers today want to feel comfortable that their service provider will still be there when it’s time to renew the contract. They are now more wary of new companies, a change from the dotcom days.
  • The rise of transaction engines is making power of BPO more understandable to buyers.
  • Labor arbitrage, combined with transaction engines, can lower costs and improve quality.

Get 3 Free Quotes Logo

  • Save 70%
  • Unrivaled expertise
  • Verified leading firms
  • Transparent, safe, secure

Get Started

Small Teams Call Logo

Start your Outsourcing Journey in 15 seconds.

Get Started

Enterprise & Large
Teams Call
Logo

Explore with an Enterprise Expert

  • Independent
  • Trusted
  • Transparent
Outsourcing

Dive into “Outsourcing”

A Guide to … Selecting the Correct Business Unit … Negotiating the Contract … Maintaining Control of the Process

Order now

Outsourcing Articles

Start your
outsourcing
journey here

"*" indicates required fields

Start your outsourcing journey.

Book a call with an outsourcing expert now

This field is for validation purposes and should be left unchanged.

"*" indicates required fields

This guide will walk you through some areas most important when outsourcing, such as
  • Identifying Your Outsourcing Needs Intelligently
  • Research & Selection
  • The Bidding Process
  • Contracts & Agreements
  • Implementation & Onboarding
  • Ongoing Management
  • Evaluating Success
  • Additional Resources

Book a call with an outsourcing expert now

This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Become an OC Partner
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Media Inquiries for OC
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Subscribe to our Newsletter
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Submit Press Release
Accepted file types: pdf, doc, docx, Max. file size: 8 MB.
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Submit an Article
Accepted file types: pdf, doc, docx, Max. file size: 8 MB.
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Request Ben Trowbridge as a Keynote Speaker
This field is for validation purposes and should be left unchanged.

Go to standard quote

Exclusive Enterprise Assistance

  • Independent
  • Trusted
  • Transparent

Offshore staffing solutions for enterprise. Independent expertise, advice & implementation

  • 200+ Firms, Global Reach
  • Offshore, Nearshore, Onshore, Rightshore
  • Managed Request for Proposal (RFP)
  • Assisted Procurement Processes
  • Vendor Management
  • Unique Build Operate Transfer model
  • Captive & Shared Services
  • Champion-Challenger
  • Multi-site, multi-vendor, multi-source
  • Managed Solutions

For Enterprise and large teams only

  • Book 20-minute consult, obligation free

You will get:

  • Needs Analysis & Report
  • Salary Guidance & Indicative Pricing
  • Process Map

Only takes 1 minute to complete the form

Get Started

Not an enterprise?

Go to standard quote