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Editorial – BPO Market Consolidation

This spring, there was a flurry of merger, acquisition and branding activity across the BPO sector globally, including TP acquiring Majorel. the Concentrix and Webhelp deal, and a Sitel rebrand

In this Editorial, we speak to key commentators in the sector and gather their views and opinions on the effect these deals and moves will have, both on the market, the competition, costs/pricing, and of course, the what this all means for the clients and their customers

 “Unless one has been involved in M&A’s at the scale of the current BPO mergers in play, its largely an exercise in self-aggrandisement to comment too vigorously on what they might mean for clients, colleagues, the industry and customers” Says William Carson, Director of Market Engagement at Ascensos


“And even if one has, all M&As are unique to the players involved and to the context of time and place in which they are to be conducted. For my own part then, having worked with several BPOs pre, post and during global mergers since 1999, I certainly have a view”

“Whether referring to the Sitel rebrand, the coming together of Concentrix and Webhelp, the acquisition of Majorel by Teleperformance, and the unfortunate demise of Woven and Go-Centric, the outsourcing market is certainly one industry to pay close attention to” says Dave Rumble, Co-founder and Chair of The Knowledge Group

“The movements in the market are a result of a number of factors including:

Consumer businesses are growing through increasing globalisation and suppliers must match this growth and geographical breadth.

Increasing competition in the contact centre industry – as more companies move to outsourced customer service and technical support, the demand for high-quality, cost-effective solutions has led to a crowded market. To maintain a competitive edge, BPO suppliers have turned to consolidation as a means of expanding their offerings and capabilities.

The desire to achieve economies of scale – with larger companies, there are opportunities to reduce costs and increase efficiency, particularly in areas such as technology and infrastructure. Additionally, companies are able to deepen their proposition capabilities in areas, such as digital transformation, logistics etc. “

 

Concentrix and Webhelp.

William “Having worked for one and observed the other at a distance, I was genuinely surprised by the announcement. With Concentrix only trading independently of its former parent company SYNNEX Corporation since 2020, and not that long after the acquisition (while still a subsidiary) of Minacs (2016), Tigerspike (2017), and more recently Convergys (2018), it appears a bold move designed to grow rapidly, to achieve meaningful scale, capabilities, and relevant leadership expertise.

It will build on the consultative element that Concentrix has inherited through previous acquisitions as well as opening up new geos and sectors. Webhelp for its part has always been acknowledged for its appetite to grow in the US market, and this merger will therefore tick a box for them too.”

 Teleperformance and Majorel

 “Some years back I mentioned to a particular global BPO chief that if they wished to be the world’s number one BPO ahead of TP, they had better be ready to fight for it” says William. “My experience of TP and its founder is simply this – there will never be a number one BPO that isn’t called Teleperformance!”

“It was not unexpected therefore when the announcement of the TP & Majorel M&A was made. Undoubtedly there are sound business reasons for the TP/Majorel merger beyond coveting the top spot – no founder or board would sanction an M&A just to stay ahead of the competition.

The timing of the announcement however may not have been what either TP or Majorel preferred, it’s very probable stakeholders in both businesses felt compelled by the Concentrix/Webhelp event to announce their intentions earlier than scheduled.

With Majorel having been through the M&A ringer with SITEL (now Foundever) as recently as 9 months ago, and TP a serial M&A practitioner and advocate for decades, this should be a fairly oven-ready deal.

And therein lies the rub. To the casual investor, these M&A deals appear to be focused on empire building to protect market share and/or shore up sizable investments in value-add services that have yet to deliver ROI. Through another lens, the reactionary in me says – this is panic buying.

In the light of  the hype around AI and its possible impacts on customer management not yet clear, is it better to join forces than compete, and at the same time benefit in the short term from values delivered to the bottom line for investors and shareholders? Moreover, when a publicly traded global titan’s biggest competitor is its own last quarter results announcement, the need for scale is perhaps the quickest and most effective route to reassure investors and the market going forward.”

 Clients and Customers

William continues “Where is the client and their customers in all of this? I often refer to the global BPOs as the ‘civil service of CX’ – lightyears away from their agile, entrepreneurial roots, with roles and functions vying for influence, creating fiefdoms and obfuscating progressive discourse and debate. However, the flip side of that is the business opportunity to service $BN dollar global enterprises across the world and to achieve that, scale, market position and demonstrable evidence of infrastructure, financial muscle and associated legal expertise really matter, and are necessary to operate in that club.”

For clients in the sectors that these titans support which aren’t in the ‘club’ the formation of even larger BPO entities will be met with a degree of anxiety. They may unlock new ways of doing business, but where might client (x) be in the queue to benefit versus client (y)?

Will the account management team be refreshed or will it wither? Is the primary contact on speed dial going to stay the same? How much of a distraction will these mergers be for the leadership teams of the BPOs involved when what many client stakeholders will really need is consistent investment in their customer-facing programmes aligned with their business strategy and objectives?

This is where credible, independent and agile BPOs that demonstrate clearly that their key focus is the value they add to their clients’ performance, growth and margins, specifically because of the improved experiences they deliver for their customers, will become increasingly attractive.

Certainly clients of Concentrix, Webhelp, Teleperformance and Majorel will be reviewing their position to ensure they are comfortable with any potential risks that these mergers may pose to the ongoing success of their customer management programmes.”

Dave “For those looking for new opportunities, this may be the time to act, but this will not come without its challenges. These are not likely to be the last changes we see and so all involved should ensure they remain innovative, digitally-savvy and prepare for potential future disruptions.

There has also been an interesting development in the sector around the collaboration of smaller suppliers providing an end-to-end client operation (referred to as an “eco-system”, “prime contractor” or “Managed Service Provider” model). This model proves particularly successful where buyers need to act quickly and at scale to establish outsourced contact centres to meet surges in demand. In cases where a sole supplier cannot meet a buyer’s requirements, an end-to-end eco-system model can enable the collaboration of multiple suppliers.”

Impact on the market

Dave “While it’s difficult to know what the long-term impacts of such significant changes could be, there are immediate concerns that such consolidation could lead to reduced competition. With the consolidation of larger players in particular, the visibility of smaller suppliers is also potentially at risk. In terms of effectively servicing customers, there may also be a shift of focus to internal matters, such as reorganisation or cultural integration.

It may also mean the resulting large BPO suppliers aim their services at larger clients, losing focus on the needs of smaller clients, however, there are certainly also opportunities. With the growth of supplier eco-systems, this could potentially allow for smaller suppliers to ensure that they remain relevant. The agility and flexibility of smaller suppliers may stand them in good stead, while the larger companies are more focused on ensuring regulatory or compliance matters.

Overall, the consolidation of the global BPO market represents a fundamental shift in the industry. While there are both pros and cons to this trend, it is clear that it could have a significant impact on companies and their stakeholders for years to come. To succeed, organisations must adapt to the changing demands of consumers and remain competitive in the face of digital disruption. Many opportunities exist for the BPO market, particularly for those who are able to differentiate themselves through personalised interactions and innovative service offerings, whilst also offering buyers the right balance of quality versus cost.”

 William concludes “Ultimately, the world of CX will move on as the BPO market continues to grow at a healthy rate. There are plenty of quality opportunities out there and a healthy respect and acknowledgement exists among friends and colleagues who have worked alongside and opposite one another in the wider, global BPO family for years.

Initiatives like the CXFO BPO Council have shown there are many areas of BPO that we can all discuss proactively, from impact sourcing to employee wellbeing and effective use of CX technology, and how a shared enthusiasm to address misperceptions of our industry and correctly enunciate its contribution to economies at home and abroad, is something we can all invest in. “

 

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