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A quarter of BPOs will not last beyond 2012: Gartner

A quarter of BPOs will not last beyond 2012: Gartner

Mumbai: One-quarter of the today’s top business process outsourcing will not last beyond 2012 as separate entities as market exits, acquisitions and the ascent of new vendors will re-arrange the landscape, said a research firm, Gartner said.

Gartner is a leading information technology research and advisory company.

“As providers are exposed to the economic crisis, with loss-making contracts and inability to adapt to standardised delivery models, many will struggle to survive in their current form," Gartner vice-president (research) Robert H. Brown said.

Gartner has identified six key signposts to watch out for what might herald the predicted market shakeout and has identified the BPO vendors that might be acquired or exit the market outrightly.

Some BPO providers are carrying unprofitable contract portfolios, largely stemming from too-much, too-soon pursuit of deals and are without much thought as to how to transition them to a standardised, profitable state of ongoing operations, it said.

Vendor selection teams of enterprises should gain insight into prospective BPO providers’ deals to understand how profitable the vendor is. While most vendors will be reluctant to share this information, those that stand the best chance of longevity will realise that BPO is a partnership and being open about profitability can limit long-term risk to both parties, Gartner said.

All the same, handling multiple deals at once is a necessity in outsourcing and buyers need to know that a vendor can successfully cater to the needs of more than one customer. A lack of recent new business activity can indicate that a vendor is choking on a backlog of business, it said.

The financial services sector accounts for about one-third of the total BPO market globally and providers with more revenues from the banking sector were first exposed to the credit crunch and ensuing the financial meltdown, Gartner said.

While exposure to the banking sector is by no means an absolute harbinger of doom, sourcing executives should be aware of the potential impact if their provider has a significant amount of revenue (more than 85%) as a financial services pure-play BPO vendor, it said.

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