The State of BPO

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Celent have reviewed this profile and believe it to be accurate.
27 September 2013
Stephen Greer
It wasn’t too long ago that BPO was a simple exercise across a few very specific back-office processes. Labor arbitrage was the meat of any BPO contract. Celent’s upcoming report, BPO/ITO Provides in Banking: An Evolving Landscape of Service Complexity, shows that while this still holds true in many ways, the look and feel of BPO/ITO is changing. FTE-based deals are still the predominant form of outsourcing contracts, but what’s becoming abundantly clear is that the top global vendors are expanding capabilities and drastically enhancing their value proposition. One element of this change has been driven partly by demand. Earlier this year, RBC issued an apology to employees affected by a recent outsourcing deal. American Express and Bank of America have begun moving some of their previously outsourced work back to the US, amid growing overseas labor cost and increasingly staunch public opposition to offshoring. Large global vendors have moved to accommodate, serving many institutions through an onshore or nearshore model. Where providers have shown the largest strides is in the ability to leverage a broad set of capabilities to generate revenue and partner for transformational projects. Banks are increasingly relying on vendors and third parties for a broad range of services—more than ever before. Most of the providers in this report have a long history of developing new products and services, mostly with the aim of servicing a broader range of processes. Vendors want to prove to banks that they are process innovators. Banks want to optimize efficiency. Put together, a move toward IT-reliant innovation and onshore capabilities has changed the face of outsourcing as it has long since existed. Celent continues to see a growth in partnership, leading to a number of modern provider engagements that work around some of barriers to traditional outsourcing. Vendors know that not all operations can be outsourced successfully. Moreover, compliance issues, reticence on the management level, and/or risk appetite might effectively limit an institutions desire to take advantage of these services. Major global vendors have been building out Business Transformation Outsourcing (BTO) capabilities as way to service clients by acting as a transformation partner instead of a pure servicer. In this instance, the business unit will remain with the bank, while the provider acts as consultant, IT provider, and transformation partner. A recent Celent report tackles this subject further: Other deals have highlighted the importance of technology, especially Business Process as a Service (BPaaS). The new darling of the vendor community, BPaaS combines the benefits of cloud computing and business process services into an (typically) automated and multitenant solution that allows for flexibility, scalability, and a consumption-based model. For highly variable processes, such as mortgages and consumer loans, flexibility is what makes this delivery model enticing. BPO vendors have become a lot better at what they do, and this is evident in the capabilities of the top players. End-to-end is the new mantra by which vendors are selling their services, and no vendor in this report would discount the importance of strong IT capabilities. These are only a couple of the many trends currently affecting the market. Celent’s upcoming report on BPO/ITO is an effort to take a closer look at providers and how they have responded to these market dynamics and prevailing industry trends. BPO service providers will be ranked using Celent’s ABCD analysis, and the report will outline an extensive list of process capabilities by vendor support. Look for the report in Celent’s library soon!


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Geographic Focus
Asia-Pacific, EMEA, LATAM, North America