Thursday, November 18, 2004

Outsourcing Consolidation Wave

Forbes.com reports the business-process outsourcing sector is in the midst of a consolidation wave.

"The most important factor in a BPO acquisition is scale," says Brad Smith, vice president of research at Kennedy Information. Because BPO is a low-margin, process-driven business, transaction volume is a crucial determinant of profitability--particularly in the finance, accounting and human resource spaces, which Smith says are likely to see the most consolidation activity.

"Unless you're a fantastic niche player, you're going to have a tough time surviving in today's BPO market," says Atul Vashistha, chief executive of NeoIT, an offshore advisory firm. "Customers have a lot of choices so they can say they won't trust a small startup company."

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