TechMarketView Predictions for 2012 - Business Process Services

In the fifth and final part of our series of Predictions for 2012, John O'Brien peers into the business process services (BPS) tea leaves.

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Changes ahead

The possibility of an ‘unprecedented downturn’ in 2012, could really impact the UK SITS sector as a whole. Despite this, we expect business process services (BPS) to remain pretty buoyant, because its messages of ‘cost-out’ and ‘efficiency’ remain relevant during even the toughest of times. BPS demand could accelerate faster still, if organisations, both in the public and private sector, speed up their BPS investments in response to further retrenching budgets and cut backs in 2012.

1. ‘BPS’ term will become mainstream

The term ‘business process services’ (BPS) will replace the outdated acronym ‘BPO’, very much associated with old era ‘lift and shift’ and delivering ‘your mess for less’. ‘BPS’ in our view, is BPO coming of age, using technology as an enabler, to help drive business process change, and delivering measurable service outcomes back to the customer.

2. Market leaders will cede share

Newer and more agile platform-based BPS players will see their market shares grow. Indian tier ones will continue to gain momentum through new platform innovations, and specialists such as Diligenta and The Innovation Group (TIG) in hot areas such as life and pensions and general insurance will gain further market share. However we expect a fight back by the ‘old guard’ as they embrace M&A in both vertical and platform capability, and flex their muscles on new business and renewals.

3. ‘Unusual suspects’ will disrupt the market

The construction sector is now looking to partner or acquire support service and BPS capability for ‘bundled’ BPS deals, notably in local government and the broader public sector. Costain and Interserve made moves on Mouchel during 2011, although in the end pulled out after spotting ‘something under the covers’. Nonetheless, there are plenty of other partner or M&A opportunities, so we expect one of these ‘unusual suspects’ to make their first big move in 2012.

4. ‘Big will eat small’

The big players will look to buy up platform-based BPS rivals as they attempt to close the gap. Insurance specialist TIG, and HR and public sector player Northgate will find themselves subject to M&A approaches. Weak players are also likely to be approached, albeit at far lower valuations. Embattled Mouchel for instance, is likely to sell off larger, more attractive chunks of its business in 2012 in an effort to stay afloat.

Perfect storm of disruption

These trends will create a perfect storm of disruption for the UK BPS market in 2012. The risks to large BPS incumbents like Capita, Xchanging and Serco will only increase as a result, making new business wins and retaining client relationships at renewal a far tougher prospect. ‘Staying relevant’ amidst all of this change has to be the number one priority in 2012.

Posted by: John O'Brien at 08:22

Tags: bpo   bpaas   bps  

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