[INDUSTRY SPECIFIC] Industry-specific BPO Will Continue to EvolveSruthi Ramakrishnan
BPO driven by industry-specific knowledge helps achieve measurable business outcomes.
BPO services present a larger and more diverse market opportunity as compared to horizontal BPO services. The US Healthcare Reform bill has been the biggest newsmaker in this regard, with many already terming it the “biggest bonanza yet” for the industry. Service providers with expertise in the healthcare area, both from industry leaders like India, Philippines and nearshore locations like Canada, Mexico are queuing up to grab a share of the approximately $2.5 trillion US healthcare pie.
Experts say that opportunities will be widespread in those industry domains where BPO and IT services can be bundled together under a single vendor's provision. This will help to generate more efficient business outcomes and to secure future IT work with existing clients. So the providers who can bring in industry domain expertise are set to emerge as significant players in the coming year.
A trend that is indicative of this growth potential is that newer vendor entrants are entering the BPO industry through the industry-specific (vertical) process domains. Most of the strong IT services vendors have also been developing BPO niches in specific verticals where they have developed some strong process acumen and client credibility.
According to a survey by Horses for Sources, one-in-ten financial services firms, and one-in-five from life sciences, are looking to move into some form of domain-specific BPO this year for the first time. These are typically areas where there is some immediate labor arbitrage opportunity, like trade settlement transactions and mortgage processing in financial services, and data storage and management processes in life sciences.
At the outset, process outsourcing had been primarily a cost-control strategy driven mainly by labor arbitrage. Cost-control is still relevant. But in today’s environment, especially keeping the slow economic recovery in view, organizations are searching for value--for ways to do things better, faster, and cheaper--and for the ability to truly transform their businesses. To do that, they need BPO that is based on industry-specific knowledge and that is driven to achieve measurable business outcomes.
On the buyer side, several industries- financial services, life sciences, healthcare, retail, manufacturing, media, etc. - are undergoing fundamental changes, right from their infrastructure to business model to customer expectations. In such a situation, outsourcing processes is no longer seen as abhorrent or unusual.
Another reason is the success of existing domain-specific BPO engagements. Over half of all the financial services and life sciences firms recently surveyed by Horses for Sources are looking to expand existing BPO engagements this year, and very few intend to pull work back onshore. However, this doesn't necessarily entail massive increased spending overnight, but more a gradual incremental increase in engagement scope.
Suppliers also find the marketplace increasingly crowded, and industry-centric capabilities enable competitive differentiation. Moreover, the move to greater domain-specificity is intrinsically tied to the business utility model of the future, where there are signs of the convergence of SaaS, Cloud and BPO/ITO models within an engagement structure. The need for clients and vendors to define, develop and implement holistic end-to-end process solutions is slowly coming to the forefront.
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