Despite the hype, the number of deals remains small.
Will it serve for any model to build mischief on? What is he for a fool that betroths himself to unquietness?—Don John, “Much Ado About Nothing,” Shakespeare.
There has been growing attention paid to multi-process BPO of late, at least in the press if not among buyers. Alternately called multi-tower BPO or GAO (as it addresses much of the general and administrative spend of an organization), multi-process BPO bundles administrative services for several processes under a single master agreement. A few deals thus far have encompassed the delivery of technology and process execution for HR, F&A, IT, and procurement.
At the risk of sounding like we’re dismissing the concept of multi-process BPO, it’s not clear what the fuss is about. As of this writing, there have been just nine deals tracked by Everest (see Fig. 1). This compares with a whopping 135 HRO deals in the same time period. Further, there doesn’t appear to be any rapid growth over time. Whereas with HRO, the number of deals grew 22 percent last year (39 in 2005 vs. 32 in 2004), multi-process BPO deals have numbered two for each of the past five years other than in 2003, when there was just one. Multi-process deals appear to be largely contained to the energy and utility sector, which represents 56 percent of deals.
Much of the apparent interest seems to be among the supplier community, where such large and complex engagements play to their strengths. Few organizations boast the expertise and infrastructure to successfully manage and deliver multi-domain services around the globe. The short list of providers reflects the same list as the winners of multi-process deals thus far.
The big winner thus far has been IBM. While it and Capgemini claim three multi-process contracts, IBM is capturing 44 percent of the annual contract value (ACV) of $246 million spent each year across multi-process BPO engagements. And if $246 million sounds like a large number, one should keep in mind that this is just 12 percent of the more than $2 billion HRO ACV.
So what are the advantages and disadvantages for buyers? There is a compelling benefit to organizations that have elected this as their sourcing strategy. Current buyers have cited the CEO-/CFO-driven nature of multi-process BPO deals as creating a strong environment for change within their organizations.
Regarding disadvantages, a concern cited was whether a single provider truly could deliver consistently excellent execution across so many complex processes and functions, or would the buyer need to make compromises? Another concern is that the motivational factors for HRO are not the same for FAO or ITO and that getting alignment in the sought-after value was difficult. There also were concerns over “putting all your eggs into one basket” and the accompanying fear that reduced competition might not lead to the lowest price over time.
