Adding account control may lower the outsourcer's customer acquisition costs.
Posted Jun 17, 2005
Convergys will acquire the finance and accounting (F&A) business process outsourcing (BPO) business of Deloitte Consulting Outsourcing, a subsidiary of Deloitte Consulting, the company announced this week. By doing so Convergys says it is addressing a growing market trend to outsource finance and accounting functions so that companies can focus on their products and services. Both sides expect to close the transaction as soon as possible. Financial terms are not being disclosed and the acquisition will be neutral to Convergys' 2005 earnings per share.
Convergys focuses on customer care, human resources, and billing services, and provides clients with outsourcing solutions, consulting services, and software support. Deloitte Consulting Outsourcing's F&A BPO business provides finance and accounting outsourcing services to clients in multiple industry verticals, including communications, retail, and professional services. It provides business processing and technology services supporting financial reporting, reconciliations, budgeting, and treasury management functions, among other services.
"The finance and accounting BPO market is a fast-growing area of business process outsourcing," says Steve Rolls, executive vice president of global customer management and employee care for Convergys. "This acquisition was about us acquiring proven F&A BPO expertise by one of the leading financial services organizations. It's going to position us to expand our footprint to a whole new horizontal market."
Sheila McGee-Smith, president and principal analyst of McGee-Smith Analytics, says this a strong move for Convergys. By purchasing an F&A outsourcing business, Convergys is "taking it up a level," she says. "BPO is a broader category under which contact center outsourcing falls. That broader category includes F&A outsourcing, software development, etc. This is Convergys making a broader play."
In terms of competition from companies like TeleTech, EDS, and ClientLogic, McGee-Smith says the move expands Convergys' portfolio, and could allow it to increase its customer revenue growth. "If Convergys is already doing a good job in customer relationships, and now you add account control, it increases the possibility of getting business at a lower customer acquisition cost," she says. As for Deloitte, being a high-end, top-dollar consulting firm, McGee-Smith says the F&A BPO business "wasn't a key piece of their business," characterizing the loss as "minor."
Other industry experts say the move makes sense for Convergys because of the company's history of successful acquisitions and mergers. Donna Fluss, principal analyst at DMG Consulting, maintains that being able to merge the F&A BPO outsourcing business into the company smoothly will be critical for success within its customer base. "Making that smooth transition will be important to retaining customers," she says. "This is also another example of consolidation playing a big part in this market space right now."
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