• January 15, 2004
  • By David Myron, Editorial Director, CRM and Speech Technology magazines and SmartCustomerService.com

Is BPO Going Vertical?

The need for vertical specialization within BPO is quickly becoming apparent, IDC states. In a study released by IDC this week, the research firm aims to help BPO service providers identify BPO trends for companies within five vertical industries. The report, "Vertical Views of BPO Demand: A Study of Five U.S. Industries," shows the results of 105 U.S. corporate managers and executives and their current and expected buying behavior and preferences for BPO services. The five verticals measured are financial services, manufacturing, utilities/energy, retail/wholesale, and healthcare. "This study highlights the need for BPO service providers to have a sound understanding of the business issues facing clients across different industry segments," said Katrina Menzigian, vice president of business solutions and BPO services research at IDC, in a statement. The numbers vary greatly across the verticals. For example, 61.5 percent of manufacturers indicated they have no plans of utilizing BPO services compared to 15 percent of retailers. Additionally, 55 percent of retailers indicated that their company currently makes use of BPO services at some level. For retailers that level is heavily concentrated in sales and marketing, HR, and logistics. Surprisingly customer service was one of the less popular choices, Menzigian told CRM magazine. IDC maintains business process outsourcers will likely see the biggest investment from financial services companies over the next 12 months. IDC asked the following: In the next 12 months, what percentage of total customer care spending at your company will be for outsourced customer care components? Financial services had the highest score, 22.3 percent, whereas manufacturing had the lowest, at 3 percent, Menzigian says. Yet, retail is the exception. For those companies that expect to invest in BPO services over the next 12 months, 58 percent expect to invest in customer service to some degree. Customer and employee services (presales and HR) came in second and business intelligence (data management and analysis) came in third with a "low score," Menzigian says. The success of BPO service providers, according to IDC, is closely tied to their ability to present a value proposition that provides cost savings while enhancing the client's need to focus on its core business and competencies. BPO service providers should also develop service capabilities that balance vertical industry expertise with sound and proven BPO management skills and methodologies. Finally, service providers should develop BPO case studies, business cases, and decision-making tools aligned with the specific concerns and objects of each vertical industry. "The resulting picture is a differentiated time line in terms of BPO adoption and, more importantly to service providers, the need to closely map business development strategies to the BPO adoption maturity of individual clients along vertical industry considerations," Menzigian said in the statement.
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