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2004 was a good year for BPO and BPO providers.

"The dramatic increase in BPO deals done last year shows the market is coming into its own," adds Dan Masur, a Partner with Mayer, Brown, Rowe & Maw. Currently he says clients who have only done ITO deals in the past are now putting several BPO deals together. Right now 100 percent of the deals he is working on have a BPO component.

Bill Matson, General Manager for IBM HR Business Transformation Outsourcing, believes "global" will become a more pervasive word in BPO in 2005. What started in the US is now touching all four corners of the globe. "We will see companies based in other lands deciding to outsource offshore," he predicts. The Japanese outsourcing to China is one example.

Alfred Binford, Vice President and General Manager of Unisys Global Outsourcing business for the Americas, predicts that offshoring growth in BPO will continue this year. But instead of "everyone jumping to India, like they did in 2003 and 2004," he predicts buyers will diversify into other areas that also offer high quality, lost cost labor. "We will see 'India-like' growth begin to develop in other parts of the globe," he says.

Joel Friedman, President of Accenture's BPO portfolio, sees BPO acceptance expanding beyond the United States. He sees a greater acceptance in western Europe. In Asia-Pacific he says companies are growing so rapidly "they decide to outsource from day one because they want to buy the required expertise."

Terry Jost, Vice President of Capgemini's Outsourcing Services business, says over 60 percent of America's BPO offshoring activities have come from companies in the financial services industry. This year he predicts new industries will discover the power of offshore, including manufacturing and life sciences.

The Year of Business Transformation

Last year buyers had a razor-sharp focus on their return on investment, says Greg O'Brien, Senior Director, Services Engineering, for Convergys. He believes this trend will continue in 2005. "With their huge focus on their core competencies, buyers will ask us to step up to the plate and take much greater responsibility for their processes," he predicts.

O'Brien says Convergys buyers tell him they want "fewer but more significant suppliers in place." A supplier can develop more value when it controls more of the process, according to Jim Boyce, Senior Vice President of Client Business Development for Convergys. He sees suppliers taking over a buyer's consumer business in its entirety, for example, or a brand group, or a specific geography like North America. "There's power and more potential when we can be held accountable for an entire domain," he explains.

While business transformation was the buzz last year, 2005 is the year BPO executives say it will really happen. "Looking over our pipeline, I see our prospects now have a different starting point," says Boyce of Convergys. "Instead of telling me they want to cut their budget for live labor, they start with their business objectives," he reports. Adds Arthur Mazor, Principal, Mellon Human Resources & Investor Solutions, "There's a growing recognition that BPO can deliver sustainable value. Buyers can get administrative or technological savings on their own. They outsource to get help becoming more strategic."

Binford says "it was not that long ago that suppliers could take over a process, offering a buyer double digit cost savings and they would be happy for a while." Today, he says, every sophisticated client "demands a transformational offering." This year he says the market is seeing that suppliers like Unisys have cracked the code and are able to deliver true transformational results.

Matson believes transformation will really be possible in 2005 because "the notion will become clearer." He says "the marketplace knows what it wants and is able to ask intelligent questions." He says buyers who just worry about reducing cost and ignore improving the process "will come up empty in the boardroom."

Publish Date: January 2005

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