Contact Center Outsourcers Must Take Strategic View for BPO Success

Contact center outsourcing providers are suffering thinning margins and lower contract volumes as the downturn bites, leading to an increasing appetite for diversification into adjacent business processes - claims a report from Datamonitor. The report assesses the ways in which these vendors could move into higher value business process outsourcing (BPO) areas, and warns that without a more long-term strategic approach, they are unlikely to succeed.

According to Datamonitor forecasts, BPO globally is likely to grow by a compound annual growth rate of 7.8% over the next six years to $411bn in 2013. In the short and medium terms, it is one of the most robust markets in the global economy due to the fact that demand for outsourced services is likely to increase in relation to the ongoing challenging business conditions due to a focus on cost cutting, especially in relation to non-core operations.

Contact center volumes and margins are under threat necessitating diversification

A number of contact center companies have admitted to suffering lower volumes on some of their key contracts, something that is likely to continue through the current economic downturn worsen. At the same time, margins at contact center companies are shrinking.

Diversification into related areas of outsourcing is an excellent opportunity to counter the threats to both top and bottom lines. Contact center outsourcersÃ' (CCOS) customers are actively looking to outsource business processes. They are also looking to consolidate vendors, which need to develop bundled contact center and broader BPO services.

Many vendors provide some level of broader BPO services but have tended to approach the market on a reactive basis, responding to client requests for services rather than developing and offering a line of business.

The major strategic moves by contact center companies, mainly in the human resource outsourcing market (HRO), have not been judged successful by their peers. This has had a dampening effect on their ambitions. Vendors are very keen to identify BPO opportunities, but are not convinced investments will pay off.

Vendors have not fully exploited partnerships opportunities

CCOS vendors have only scratched the surface of the possibilities of partnering with major BPO vendors which take on multi-process deals but lack solid customer service capabilities. There are particular strong opportunities for partnering on facilities and administrative costs (F&A) and HRO deals for collections and employee care services respectively.

Patrick OÃ'Brien, Senior BPO Analyst at Datamonitor and author of the report comments "Contact center outsourcing is a mature industry which is currently threatened by narrowing margins, lower contract volumes and cannibalization of revenue by technological innovations. Vendors are naturally keen to develop new revenue streams, and offering BPO services is a logical step. However, there is a yawning credibility gap. Many vendors have failed to bridge it with short-term strategies which have concentrated on providing services on a very bespoke basis, operating the process in the way it was done in-house, duplicating inefficiencies. Vendors need to place more emphasis on partnering with other outsourcing providers and investing time and money on developing scalable best practices which can be offered on a multi-client basis."

Posted to the site on 1st December 2008