BPO Trends: Reeling in the Big Fish

Growing bigger by acting on a smaller scale.

Periods of rapid growth in new markets are often accompanied by contradictory trends. The growth of the offshore business process outsourcing services in the Philippines is no exception. Large, established offshore BPO service providers in the Philippines are integrating, merging, or partnering with other companies, presumably to attract more business. Yet, the facts also indicate that smaller BPOs are entering the Philippines market and capturing an increasing share of the contracts. Although the big fish is still getting bigger, the ocean is definitely getting more crowded.

Current offshore business process outsourcing services in the Philippines’ market trends compel PITON to hold two seemingly contradictory trends in mind at once.

By all accounts, 2010 was a record year for BPO. The number of offshore business process outsourcing services transactions in the Philippines grew 28 percent in 2010 compared with 2009. The BPO juggernaut rolls on, but so does the offshore BPO service vendors’ competition among those who are fighting for business in the Philippines.

The evolution towards strengthening already strong players is likely to continue, with much speculation about who may be next to have a consolidation or strategic partnership.

Contrary to conventional wisdom, we see some of these enhanced service providers slipping in BPO market share. Tracking of BPO activity on a quarterly basis through analysts, clients, offshore BPO service vendors in the Philippines, and the media suggests that some of the largest service providers are actually capturing a shrinking share of BPO transactions. The small fish appear to be nibbling at the spoils of the big fish, or bottom-fishing on their own merits.

In 2010, compared to 2009 for industry-wide BPO contracts, big firms lost a slight percentage of the global BPO market share. The share loss that they incurred in 2010 occurred mainly in Europe, not the Americas, and Asia. Strong indigenous offshore BPO service vendors in these regions, like the Philippines in Southeast Asia, grabbed market shares. The East may ultimately serve as the Rosetta Stone to help decipher the competitive landscape in offshore business process outsourcing service in the Philippines.

Multi-process offshore business process outsourcing services, those outsourcing transactions including two or more business process functions, was still most prominent in the Philippines in 2004.

If you examine the value of industry wide offshore business process outsourcing services deals in 2010, you will find that in the broader market, mega-deal sizes have driven the average offshore BPO service vendors in the Philippines deal size up. If offshore business process outsourcing services mega deals were removed from PITON ’s Philippines analysis, it would show that there was an average decline for big firms in 2010, indicating that BPO generates smaller transactions on average in the broader market. In other words, excluding mega deals, offshore business process outsourcing services transactions are generally getting smaller. More smaller BPO opportunities could actually create stronger market opportunities for the smaller BPO service vendors in the Philippines.

While growing bigger in some ways, the market is acting smaller in others. Effective and achievable solutions are not the sole domain of global giants. Delivery is now available globally, with a strong regionalization, especially in offshore business process outsourcing services in the Philippines. Companies are as comfortable with modular approaches to BPO and single-process transactions as they are familiar with BPO bundling, and Global Service Delivery is more commonplace for all segments of BPO service vendors. Think global, act local could become the mantra of the current international offshore business process outsourcing services market.

To learn more about our industry-specific BPO capabilities please contact us by calling +1-310-844-7805 or by filling out our inquiry form. We look forward to hearing from you.