The future for one quarter of the top business process outsourcing (BPO) operatives looks bleak according to analyst Gartner.
Earlier this week Xerox bid $6.4bn for Texan giant Affiliated Computer Services which operates in 100 countries from 500 locations but this is a small sign of the market consolidation the analyst expects.
“As providers are exposed to the economic crisis, loss-making contracts, and an inability to adapt to standardised delivery model, many will struggle to survive in their current form,” said Gartner research vice president Robert Brown.
“Some will be acquired and some will exit the market completely to be replaced by dynamic new players delivering BPO as automated utility services,” he added.
In some instances, BPO vendors have unprofitable contracts they chased aggressively to secure the business, “without much thought as to how to transition them to a standardised, rationalised profitable state of ongoing operations.”
Others were “choking” on the number of customers they had signed up, or were heavily leveraged and could not bid for new opportunities that require significant cash investments upfront.