IT outsourcing firms looking to BPO for salvation

Stan Beer
Tuesday, 15 November 2005 10:00

IT Industry - Market

IT services companies are struggling to stay afloat using traditional outsourcing propositions and many are looking to reposition themseves in the higher margin BPO space, according to a new study.

A report from technology research firm IDC titled, "The BPO Competitive Analysis: Mapping Out Opportunities and Pitfalls", focuses specifically on  companies with an IT services legacy, namely IBMGSA, Accenture, EDS, CSC, Capgemini, HP, Unisys, Telstra-KAZ, Wipro and Infosys, all of which have made a strategic entrance into the Business Process Outsourcing (BPO) market over the past 24 months.

IDC has found that the Australian IT outsourcing market is showing a steady but modest growth, but IT service suppliers are struggling as they discover that their old sales value propositions have less impact than they used to. According to IDC, BPO offers traditional IT outsourcing suppliers an elegant way to reposition themselves so they can deliver potentially higher-margin opportunities. IDC says BPO also enables them to re-energise their business development activities and target a new buying audience that is less accustomed to the propositions of IT solution providers.

"By entering the BPO marketplace, the IT service providers have introduced entirely new BPO engagement models, redefining the very nature of BPO services, and altering the competitive dynamics both within specific BPO markets and across the broader IT services marketplace. The 'success parameters' for these IT service providers are higher than the traditional function-specific specialised BPO providers due to their process reengineering and consulting expertise and also the ability to enable the integration of technology from a cross-functional perspective. These vendors with an IT services and IT outsourcing legacy have a competitive advantage based on a kind of 'first right of refusal' over traditional function-specific BPO providers " said Aprajita Sharma, IDC senior analyst for outsourcing and BPO.

"Potential future leadership within the BPO service provider category currently sits with IBM Global Services, though is closely followed by Accenture. As these two firms have sought to expand their existing revenue streams, they have also been instrumental in creating new client engagement models and defining what the next generation of BPO services will be about" added Ms Sharma.