Can pure play BPOs or ITOs stand alone in the long run?

It is a billion dollar question, at least, that is frequently debated in the strategic planning workshops of providers and the industry. In this post I will offer my view, for what it’s worth, and would love to hear your differing arguments.

My short answer is YES, pure play BPOs or ITOs can stand alone. A few reasons that underpin my answer include:

1.    BPO and IT services industries are both large segments with opportunities in their own right based on the global spend numbers.

2.    While related to a degree, they are quite different industries with their own nuances, requirements, and success factors.

3.    The overlaps between the two industries are minimal, though an effective bundling or combination of services can provide innovation or a transformation advantage; a benefit still elusive in its realization.

4.    While several analysts predicted the growth of large bundled transactions in the industry, the statistics bode well for the “best of breed” trend.

The crux of the matter is not in the ability of service providers to offer both ITO and BPO services as a full service “one stop shop”, but in being the best at what they offer. Hence the question is not so much about whether pure play BPO or ITO providers can stand alone, but whether they want to stand alone and be the best in the segment they elect to offer as their core services. That said, the ability to holistically offer both IT and BPO services to a customer does fundamentally assume the promise of a higher degree of efficiency, enablement, productivity, and so on. The truth of the matter is that customers aren’t willing to put all their eggs in one basket and providers are currently unable to bring to bear their full capabilities for results.

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Dinesh Goel

About Dinesh Goel

A management consultant with over 22 years of experience across consulting and sourcing industry encompassing sourcing advisor, senior executive with a leading service provider and a global consulting firm. He is a well published and recognized thought leader in the global sourcing industry. In his current role of Partner & India Head with ISG, he heads the India business and operations for ISG. He can be contacted at dinesh.goel@isg-one.com or +91 98458 93787.

14 Responses to Can pure play BPOs or ITOs stand alone in the long run?

  1. Mohit Sharma May 28, 2010 at 4:40 pm #

    Dinesh
    I agree with some of your arguments around the need of pure play BPO and ITO players to stay separate. I think though that the industry will integrate over the longer run and overall will be beneficial to the clients. Here are my arguments for why IT/BPO pure play providers will not be able to make it on their own:
    1. Vendor consolidation on the customer side is driving companies to look at IT,BPO capabilities across their vendor to get better leverage, cost structures & simplified governance. Although I agree with your argument that integrated transformation solution to the client still remains elusive but an integrated offering does have benefits for clients in terms of better leverage, simpler governance.
    2. Most of the pure play IT/BPO players are mid size firms ( except a handful) which have reached a growth plateau. For them to dig deeper into existing relationships they need additional offerings. Cognizant is an example of an IT firm which did great by acquiring a BPO footprint by buying UBS offshore center and is now leveraging their IT footprint to sell BPO services. Recently announced partnership between Genpact and Mastek is another example of a joint offering ability of firms.
    3. A number of pure play BPO providers are PE backed and PE firms are looking at ways to exit some of these ventures. Their current valuation as pure play BPO providers gives them limited multiples on return.
    4. Although integration, transformation across IT/BPO is limited right now, for some of the customers on the bleeding edge, looking for innovation, a single vendor offers a more compelling argument to go that route.
    The challenge and onus of an integrated offering still remains with the vendors and they are still working on making that work across IT/BPO. For mid size pure play providers an integrated offering also may be the only path to growth or survival as the gap between them and larger vendors grows wider.
    Regards
    Mohit Sharma
    Corrystone Global Partners
    http://www.corrystone.com
    blog:http://www.coreadvisor.com/globalwise

  2. Dinesh Goel May 29, 2010 at 8:14 am #

    Hi Mohit, First off -thanks for your comments to the post. I don’t necessarily disagree with your thoughts here. My view was more around the future of pure play BPO or ITO providers as opposed to whether the integrated offerings/players can offer compelling value to their customers. Buyers of sourced services, in my view, will continue to focus on best of breed in times to come, notwithstanding the complexity of governance as most providers will be able to offer services which can easily be plugged into other components like an open source system. This will also help with diversity. Interesting times further ahead as several moving parts around cloud and hosted services play out over coming years…
    Dinesh

  3. Vijayanand Vadrevu June 10, 2010 at 6:41 am #

    Dinesh
    I agree with your comments.
    In my view, the two fields (ITO and BPO) had different start points, continue to have different sponsors in most cases, and synergies have not been fully proven. So, we continue to see customers choosing best fit player even when they are shopping for ITO and BPO at the same time.
    However, if the need is transformational or for greenfield, or if the need is a KPO or vertical business process, we can expect customers choosing single player offering platform solutions combining, IT and Process solution.

  4. Dinesh Goel June 10, 2010 at 10:01 am #

    Vijay, Absolutely! That’s exactly what I find happening in the industry at this point in time. It is the platform based solution where process and IT are getting combined but these are still point solutions instead of end-to-end solutions (which are in the works).
    Can’t agree with you more and thanks for visiting the blog and taking the time to write comments.
    Dinesh

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  7. virtual assistants August 28, 2010 at 1:09 am #

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  8. call center india October 30, 2010 at 6:54 am #

    BPO and IT services industries are both large segments with opportunities in their own right based on the global spend numbers. thats good and really BPO and IT sectors are both sectors on which economic conditions of any country depends.

  9. Bpo services February 1, 2011 at 1:14 am #

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  10. BPO Work February 3, 2011 at 1:56 am #

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  11. BPO Work February 4, 2011 at 12:36 am #

    Surface said – I’m totally with you on this matter. KPO is essentially an offshoot of BPO. It is the high-end manifestation of the BPO manufacture and is estimated to bang a magnificent growth in the next few years. It is estimated that the low-end operate of BPOs’ testament budge to destinations like Bangladesh and Land, time India moves over to KPO; which implies afoot over from standardized bit processes and accumulation message gracious of production in a BPO, to processes that obligation innovative knowledge, analytical version and field skills. Understandably, the figure KPO employee is predicted to person fitter qualifications, skills and noesis as compared to his/her BPO duplication.
    __________________
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  12. BPO Work February 12, 2011 at 1:25 am #

    In my message, the two comedian (ITO and BPO) had distinct start points, hold to tally divergent sponsors in most cases, and synergies human not been full proven. So, we talk to see customers choosing prizewinning fit contestant flatbottomed when they are shopping for ITO and BPO at the synoptical measure.
    Nevertheless, if the penury is transformational or for greenfield, or if the requirement is a KPO or plumb line process, we can judge customers choosing unary participant content structure solutions compounding, IT and Touch bleach.
    _____
    manas

  13. BPO Work March 29, 2011 at 2:15 pm #

    In my communication, the two performer (ITO and BPO) had crisp commence points, view to invoice divergent sponsors in most cases, and synergies imperfect not been engorged proven. So, we teach to see customers choosing prizewinning fit contestant even when they are shopping for ITO and BPO at the synoptical step.
    __________________
    satish

  14. Indraneel Biswas May 23, 2016 at 3:38 pm #

    Good article Dinesh !

    Best of Breed remains and don’t think it will be wiped out anytime soon; it is difficult to acquire a capability.

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