As larger BPO organizations continue to swallow up small and medium-sized BPO providers, the need for agile midmarket BPOs becomes ever more vital. In just four years, there has been a significant turn towards industry consolidation – and it is not always for the best. Large players in the market such as Teleperformance have acquired smaller but well-established companies such as Intelenet; Synnex bought Concentrix and Convergys; Startek merged with Aegis, and these are just a few recent examples.
For these larger companies, acquisitions and mergers have been a vehicle to delivering end-to-end services across sectors. The byproduct of this industry consolidation, firstly, is scale. The size of the companies that come out of the mergers and acquisitions are creating a new breed of BPO giants, companies with global footprints and massive scale with the ability to flex their muscle in the arena. This gives them the ability to service clients in different ways.
But on the other hand, this emergence of the massive BPO has entangled their existing client base in the inner challenges that arise from the M&A. Clients immersed in the belly of these behemoths are feeling the strain of having their business tied to their providers’ efforts to integrate platforms, processes, and cultures, thus resulting in a steady decline in the relationship.
An Opportunity for Smaller BPOs
As a result, this has created a growing opportunity for smaller, more flexible and innovative new entrants in the BPO market, who can address the gaps left by the swallowing up of legacy small and midmarket BPOs.
Born of the start-up culture and fully invested in new technologies and processes, these new entrants to the industry have employed several strategies, from specialization on a service to dominating a niche market, or even pricing schemes that are based on CX value rather than the typical industry view on headcount; their focus is to seize market share from big players by betting on their nimbleness, flexibility and unencumbered service whilst the goliaths are busy integrating.
Bigger isn’t always better, because smaller organizations tend to be quicker to adapt to change. When clients buy from a big provider they are looking for stability and scalability. But for many of these clients, they are still using the mindsets of ten years ago and those needs can now be met just as easily from smaller players.
Sophisticated buyers of these services are clients that understand that no matter how big the provider is, you will be dependent on the leader the portion of the company that provides you the services. From experience, for example, clients would buy from the company because it is a larger player, but they would essentially be dealing with the part of the business for delivering results out of Latin America. So, in the end, you can think globally, but you end up buying locally.
Smaller and mid-sized players now can offer the same service as a big provider, but can also offer a better price because they have no layers and overhead to account for. Also, they can pay their employees more so there is better quality.
Now there are not as many medium-sized and small BPOs anymore because they have all acquired each other and it is challenging for buyers, particularly unsophisticated buyers that have products that are not yet mature. They need a provider that gets their feet wet with them and can really help them push the product forward with the right support based on experience. This is where new entrants in the BPO market, that are smaller, more agile and built on a start-up culture that understands the new demands of technologies, people and culture can add value.