customer management bpo services analyst(s): tj singh · the 10 largest customer management...

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G00273202

Competitive Landscape: Building DifferentiatedCustomer Management BPO ServicesPublished: 19 May 2016

Analyst(s): TJ Singh

Providers with differentiated, scalable CM BPO services that deliverenhanced CX-leveraging automation, analytics and business modelinnovation will gain market share in this market. Strategy and marketingleaders can use this report to assess their competitiveness against otherproviders.

Key Findings■ The 10 largest customer management business process outsourcing (CM BPO) providers, by

revenue, made more than $18.1 billion in 2015. The top five providers had revenues of morethan $1.5 billion, while the top three providers each have revenue of more than $2.1 billion.

■ Though they grew their revenue, the top 10 providers lost market share by nearly 0.9% whencompared with 2013, during which the total combined revenue for the top 10 providers was$16.7 billion.

■ These top 10 providers had revenues of more than $3.48 billion in 2015; 19% of total revenue(by Gartner estimates) came from BPaaS, digital, multichannel, automated, social and analyticsservices. However, this percentage is lower that the industry average, estimated at 27% in2015.

Recommendations■ Select a key attribute that can be associated with your brand; for example, being known for

thought leadership, operational excellence, client or market responsiveness, customerexperience (CX) or high service quality.

■ Differentiate services by function and industry; demonstrating the differentiation through deepprocess, business and industry consulting, design and service delivery capabilities that exhibitimprovements in ROI, cost optimization and customer experience.

■ Develop a network of resources to serve onshore (including work-at-home), nearshore oroffshore services coupled with consultative selling capabilities, automation, advanced analyticsand digital services to address client needs and remain competitive.



■ Leverage strong cash positions through partnerships and M&A activities to grow revenue,enhance access to technology, and extend portfolio offerings and geographic reach.

Table of Contents

Strategic Planning Assumptions............................................................................................................. 2

Analysis..................................................................................................................................................3

Competitive Situation and Trends..................................................................................................... 4

Market Players..................................................................................................................................6

The Future of Competition................................................................................................................ 8

The Future of M&A......................................................................................................................9

Competitive Profiles........................................................................................................................10

Atento...................................................................................................................................... 10

Convergys................................................................................................................................ 12

Sitel.......................................................................................................................................... 14

Teleperformance....................................................................................................................... 16

Xerox........................................................................................................................................18

References and Methodology......................................................................................................... 19

Definitions.......................................................................................................................................20

CM Contact Center BPO Defined............................................................................................. 20

Gartner Recommended Reading.......................................................................................................... 21

List of Tables

Table 1. Highly Visible Mergers and Acquisitions in CM BPO Since 2014................................................5

Table 2. Top 10 Global CM BPO Service Providers by Revenue (Gartner Estimates), 2015..................... 8

List of Figures

Figure 1. CM BPO Revenue for Leading Providers..................................................................................6

Strategic Planning AssumptionsBy 2020, digital, automated and advanced analytics services will account for 45% of the total CMBPO market revenue — an estimated $22 billion.

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By 2019, three of the top 10 CM BPO providers will cease to exist due to M&A and industryconsolidation.

By 2018, a new digital services CM BPO provider with only BPaaS and RPA capabilities will breakinto the top 10 list.

Analysis

By 2020, digital, automated and advanced analytics services will account for 45% of the totalCM BPO market revenue — an estimated $22 billion.

The worldwide customer management business process outsourcing (CM BPO) market is forecastto grow steadily at 5.1% (compound annual growth rate [CAGR] for 2015 through 2020). By the endof 2020, Gartner estimates the CM BPO industry to achieve a market size of nearly $44.4 billion (see"Forecast: IT Services, Worldwide, 2014-2020, 1Q16 Update"). The CM BPO market is made up ofthree key business functions or disciplines: marketing, sales and customer service. The market sizementioned above excludes technical support or collection (accounts receivable) services.

The current CM BPO revenue base for most service providers is primarily made up of live-agent-delivered, voice-based services — approximately between 70% to 75% of the total market revenue,depending on region and function. The adoption of multichannel, automated, digital and analyticsservices — such as web chat, email, SMS, self-service and social CRM services — continues togrow significantly.

Historically, vertical/industries that have traditionally consumed CM BPO services — such astelecommunications, banking, insurance, financial services, technology/consumer electronics,travel, consumer packaged goods and retail — are key consumers of these emerging new serviceofferings as they look to expand their channel options. More recently, newer adopters that haverecently adopted BPO as a sourcing strategy, such as healthcare, utilities and government/publicsector, are looking to leverage digital technologies and services to enhance their CM BPO service tothe end consumer.

Marketing, another core segment within CM BPO, continues to gain traction as buyers look tooutsource some of their marketing functions — such as market segmentation, web marketing andsocial-CRM-based marketing — to third-party providers. Gartner expects the following key markettrends will have an impact on service providers and the competitive landscape:

■ Further growth in digital services, smart machines, automation and advanced analyticsservices — Growth here will continue to further take the labor equation out of the sales,marketing and customer care process while improving service efficacy, channel preference andCX.

■ Consultative selling, CX labs and centers of excellence (COEs) — These resources andcenters are developing into key differentiators for CM BPO service providers. This go-to-marketstrategy is fast creating opportunities in new buying centers, such as the marketing and sales

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departments and back-office operations (for example, reverse logistics), within existing clientbase and prospects.

■ New wave of M&As focused on digital services, automation and advanced analyticsassets — This wave of mergers and acquisitions (M&As) will drive further consolidation in theCM BPO market as niche providers are acquired and integrated into larger organizations.

Use this research to understand the evolving competitive landscape to support internal strategicplanning initiatives (see "Market Trends: Customer Management BPO Comes of Age With DigitalServices, Automation, Advanced Analytics and Business Innovation").

Competitive Situation and Trends

By 2019, three of the top 10 CM BPO providers will cease to exist due to M&A and industryconsolidation.

By 2018, a new digital services CM BPO provider with only BPaaS and RPA capabilities willbreak into the top 10 list.

In 2007, just eight years ago, only five CM BPO service providers had revenue of more than $1billion. When we take into account the level of global economic constraints the market had toweather from 2008 to today, it clearly shows that the CM BPO market is resilient and has embracedcost optimization more holistically. CM providers have also done the same in their own operationsthrough offshore/nearshore activities and process-enhancement technologies and services. Assuch, CM providers have done well increasing available cash on hand.

Armed with strong balance sheets, good cash flow and a healthy cash position, at least eight of thetop 10 companies continue to scout for acquisition opportunities — specifically for digital services,advanced analytics and/or customer management consulting capabilities. In summary, there are stillsignificant opportunities for M&A in the CM BPO industry, but providers must look beyond thetraditional business and delivery models and service offerings to continue innovating.

The M&A trend continues to gain momentum, especially over the last 24 months. Some of the manycauses continue to be the current economic climate and lower interest rates, which continue to fuelleveraged acquisitions. Some of the more visible M&As in the CM BPO market announced in 2014through 2016 are provided in Table 1.




Table 1. Highly Visible Mergers and Acquisitions in CM BPO Since 2014

Acquirer Acquired BPO Service Area Acquired

Convergys Stream Global Services CM BPO

TeleTech Peppers & Rogers Group CX consulting

Convergys Datacom (contact center operations) CM BPO

Concentrix (A division of Synnex) IBM (Global Process Services for CustomerRelationship Management)

CM BPO

Teleperformance Aegis (North American business) CM BPO

Aegis Symphony BPO (CM BPO business) CM BPO

Alorica West Corp. (customer care business) CM BPO

Acticall Sitel CM BPO

Xerox RSA Medical Health assessment specialist

PwC Outbox (cloud-based CRM and salesautomation)

CM BPaaS

Wipro Viteos Group BPaaS

Sykes Qelp CM BPO (web self-service andmobile apps)

BPaaS = business process as a service; BPO = business process outsourcing; CM = customer management; CX = customerexperience

Source: Gartner (May 2016)

Gartner continues to track six distinct types of M&A in the CM BPO space:

■ BPO and, more specifically, CM BPO providers looking to acquire shared services or in-housecaptive centers that provide scale, industry and process expertise

■ CM BPO providers looking to acquire another provider

■ CM BPO providers looking to acquire core technologies or service capabilities to supportautomation, digital, multichannel and analytics services

■ An IT services or technology provider looking to acquire a CM BPO provider and newly enterthe market

■ Consulting companies looking for niche providers in digital marketing, social CRM or vertical/industry capabilities such as in healthcare




■ Internet-based companies such as Google, Amazon and Alibaba that are looking to enhancetheir internal service capabilities and develop new offerings at the same time

Gartner expects M&As to continue through 2020, as competition in this market heats up withnontraditional providers entering the market and current providers enhancing their competitivepositions (see "Market Trends: Customer Management BPO Comes of Age With Digital Services,Automation, Advanced Analytics and Business Innovation").

Market Players

The competitive landscape for CM BPO service providers can be divided into the following threecategories:

■ Mega providers — Providers with more than $1 billion in CM BPO revenue

■ Large providers — Providers with CM BPO revenue between $500 million and $1 billion

■ Midsize providers — Providers with CM BPO revenue of less than $500 million

Figure 1, which shows the CM BPO revenue for leading providers, is based on Gartner revenueestimates. Please note that the list of providers in Figure 1 is not exhaustive.

Figure 1. CM BPO Revenue for Leading Providers

Note: This figure is not a definitive list of providers.





Several midsize and large CM BPO providers are expanding their services portfolio andgeographical reach — either expanding existing offshore, nearshore and onshore facilities (includingwork at home [WAH]) or investing in new delivery locations and sales capacity in a more measuredapproach. Most are looking at productivity improvements, new business opportunities and the ROIfrom these strategic investments. Providers will not waver in their decision to rationalize or rightsizetheir delivery locations if and when necessary.

Most providers are also looking to develop and tap into opportunities in domestic markets wherethey operate from, with enhanced service offerings such as multichannel and analytics services, asthey look to mitigate or improve their geographical risk and business concentration whilerebalancing their exposure globally. Some providers are continuing their push to expand into agrowth market or regions, especially in emerging countries such as Latin America, the Middle Eastand Asia/Pacific.

Service providers may present their CM BPO offerings as discrete or comprehensive services;providers must note that not all buyers are looking to immediately consume comprehensive CMBPO services. First-time buyers are often more receptive to incremental or smaller engagementsthat will allow the capacity to grow with their business needs. This allows a risk-averse approach tothe buyers, which can sample the service before investing too heavily. This allows buyers to testtheir ability in managing an outsourced relationship, their customers' reaction to the outsourcedservice and the service provider's performance. If a provider demonstrates positive businessoutcome, buyers are more likely to seek more CM BPO services.

This research identifies, profiles and analyzes the top 10 global CM BPO service providers byrevenue. These providers differ in size and range of services they offer, as shown in Table 2. The top10 CM BPO providers offer sales and marketing, service and support, and multichannel servicecapabilities. Most of the top 10 service providers also have WAH as a service delivery option. Table2 includes Gartner's estimates of each provider's revenue for CM BPO services.




Table 2. Top 10 Global CM BPO Service Providers by Revenue (Gartner Estimates), 2015

Vendor Sales andMarketing

ServiceandSupport

WAHAgents

CM BPOAgents(FTE)*

Digital,Automatedand AnalyticsServicesRevenue(Millions ofDollars)

CM BPORevenue(Millions ofDollars)

Teleperformance X X X 190,000 629.0 3,700

Convergys X X X 130,000 510.0 2,950

Atento X X 163,000 620.0 1,965

Xerox X X X 51,000 540.0 1,800

Sitel X X X 75,000 410.0 1,700

Concentrix X X 70,000 300.0 1,400

TeleTech X X X 40,000 260.0 1,200

Expert GlobalSolutions (EGS)

X X X 40,000 180.0 1,100

Sykes X X X 51,000 210.0 1,150

Alorica X X X 48,000 230.0 1,200

* = 2015 Gartner estimate; FTE = full-time equivalent; WAH = work at home


For additional context of the large and midsize challengers and differentiated offerings and inorganicgrowth strategies through 2018, see Note 1.

The Future of Competition

In 2015, the market experienced a measured increase in revenue for most service providers,especially those in North America, Western Europe and key markets in Asia/Pacific because of anincreasing number of new contracts in multichannel and digital services. Traditional voice based CMBPO services have contributed to steady transaction volumes, albeit at a lower growth rate. Most ofthe top 10 service providers continue to experience relatively modest revenue growth of 1.0% to5.0%, while most midsize providers (with revenues of less than $500 million) continue to experiencegrowth rates between 3% to 20%. However, there are a handful of midsize providers that arestruggling to maintain their revenue position and, more importantly, profitability.




Continued economic, social and geopolitical challenges are driving buyers to consider costoptimization as their primary strategy in the near term, which bodes well for CM BPO providers.Gartner expects the current macrocondition to trigger another wave of captive carve-outs ascompanies look to monetize their assets as they manage their costs. Midsize and large CM BPOservice providers with relatively strong cash positions and enthusiastic sponsors will continue toconsider M&As as a way to grow their revenue, improve their portfolio of services (such as analytics,automation and digital services) and improve their geographical presence. Gartner expects the CMBPO vendor landscape to continue to change as the CM BPO market and buyer behavior evolves.This scenario includes:

■ More M&As through 2018, as providers look to increase market share and improve margins,driving providers to:

■ Expand and grow inorganically to achieve better economies of scale.

■ Grow demand from nontraditional markets, including emerging markets and service deliverymodels such as BPaaS.

■ Embrace new business models and acquire captives, addressing the growing appetite andneed for clients to monetize their assets and adopt outsourcing

■ Acquire digital technology assets to help mitigate the risk of being a consumer oftechnology versus a producer and user of technology that will impact margins.

■ Increasing use of technology to drive automation, algorithmic and new digital services, thusaccelerating the rate of technology acquisition and consumption.

■ Further consolidation in the small CM BPO vendor segment (less than $50 million per annumrevenue), as pricing, margin and staff attrition issues continue to plague the segment.

The Future of M&A

Gartner believes that by the end of 2018, the top 10 vendors in the CM BPO market will havecombined revenue of more than $21 billion, and approximately 40% of their revenue will be derivedfrom nonvoice analytics, automated and digital services. The need for consulting assets specific toCX or customer life cycle management, digital services and customer data security will alsoincrease.

Gartner expects M&A to continue through 2018 due to the following:

■ Continued growth in capacity (in some cases, excess capacity) in most developed markets,especially with the increasing levels of automation and the use of nonvoice multichannelservices and cloud-enabled services, such as BPaaS.

■ New entrants to the market, such as India-based providers, looking to penetrate further into theNorth American market. Also, marketing service providers (MSPs) and web service aggregators(such as Amazon and Google) will look to acquire capabilities and capacity in key growthsegments in the CM BPO market.




■ Clients looking to monetize their assets and outsource their customer management services.Some captive centers (providing customer management service functions) that have notachieved the desired results or maturity and are faced with continued cost pressure and long-term viability issues will eventually look to exit the market or cash out, becoming potentialacquisition candidates.

Providers with a clear and consistent strategy in the areas mentioned above will emerge asdominant players in the CM BPO market. This could very well be the inflection point that mostmidsize companies have been waiting for as they look to aggressively grow their market share.

Competitive Profiles

This competitive landscape profiles the five top performing CM BPO service providers by marketshare. Table 2 includes Gartner's estimates of each provider's revenue for CM BPO services. Foradditional context of the large and midsize challengers' differentiated offerings and inorganic growthstrategies through 2018, see Note 1.

Atento

Market Overview and Revenue

Atento is the third-largest provider globally by revenue and the largest CM BPO company in CentralAmerica and Latin America by head count (full-time equivalent [FTE] employees). Atento iscontinuing its strategy effectively. With a strong growth strategy, it continues to strengthen itsmarket dominance in Latin America. The company now employs more than 163,000 employeesacross 102 centers in 14 countries in Europe, Africa, Central America and Latin America.

The company has a highly experienced management team that unites long-term experience in thesector with local talent and know-how. During the transition to become an independent company,Atento has built a world-class management team. It has a mandate to focus on growth, including innontraditional markets, such as the U.S. nearshore market, and in new service and solutionofferings, such as multichannel and analytics services. This focused strategy and disciplinedexecution is driving consistent above-market growth, improved profitability and a stronger balancesheet. Atento has a large client base of more than 400 corporations and governments, most ofwhich are based in emerging markets.

CM BPO Service Strategy

Atento's CM BPO offerings are focused on sales, customer service, help desk, technical supportand back-office services and customized end-to-end solutions. The company employs more than163,000 people, with an estimated 30% supporting its single largest client Telefonica, its formerparent company. The company continues to invest heavily in nonvoice multichannel and digitalservices, analytics and automation as well as infrastructure to better support both itself and itsclients' operational and business needs across Europe and Latin America. Atento also owns acompany called ASTC, which specializes in market studies, research and data mining/analytics.




Atento has made attempts to break into the North American market but has had mixed results;however, its latest attempt with bilingual (Spanish and English) has shown significant progress.

Functional and Vertical/Industry Focus

■ Communications

■ Banking and financial services

■ Utilities

■ Government

■ Retail

■ Travel and transportation

How Atento Competes

Atento focuses on Iberia and emerging markets in Latin America — typically Spanish andPortuguese markets. The company has a large client base of more than 400 corporations andgovernment clients, most of which are based in emerging markets — Latin America. The companycontinues to have high levels of concentration in its former parent Telefonica, but it has a clearstrategy to deleverage from this high concentration risk as it looks for new opportunities in CMBPO. Atento continues to be a top performer in Latin America for CM BPO services, and thecompany has aspirations to replicate its success in the lucrative North American market.

Challenges

The company has high levels of geographical concentration in Latin America (the Spanish andPortuguese speaking markets) — contributing more than 80% of its revenue (Gartner estimate) —and it has only a small presence in North America — at less than 3% (Gartner estimate) of its totalrevenue.

Atento's high levels of vertical/industry concentration in the communications and banking andfinancial services sectors in the Spanish-/Portuguese-speaking markets limit its ability to support amore diverse customer base. Atento also has high client concentration — the company generates82.1% of its revenue from its top 15 customers, with 46.5% from Telefónica Group alone.

Other areas of concern highlighted by clients include high attrition and absenteeism, limitedinnovation and sharing of new capabilities, response time, speed to adopt changes and limitedcapability in complex technology integration.




Convergys


Convergys is one of the largest CM BPO companies, with revenue of nearly $3 billion and with125,000 employees working in more than 150 service centers and 31 countries. The company hasclients in all the key countries in the Americas, Europe, the Middle East and Africa (EMEA) and Asia/Pacific. Its recent acquisition of Stream Global Services (Stream) has expanded the company'sgeographic footprint and service capabilities, and has added approximately 40,000 employees in 22countries.

Convergys operates in four business segments: communications, technology, financial services and"others." The company is expanding its already sizable business in the financial services, healthcareand retail sectors with the signing of several new customer contracts in 2015. Convergys isdelivering quality customer experiences with the help of its 128 contact centers in the U.S., thePhilippines, India, Costa Rica, Colombia, Canada, the U.K. and other international markets. With theacquisition of Datacom's southeast Asia contact center operations in April 2013, and the acquisitionof Stream in early 2014, Convergys has diversified its client base, extended its geographic footprint,and enhanced its already broad set of BPO capabilities.


The largest CM BPO provider in North America by revenue, Convergys, serves many of the topglobal companies. Convergys' solution offers consist of services (including analytics) andtechnology that support services such as customer care, sales, technical support and collections.The company's strategy includes investing in a combination of globally consistent andcomprehensive services and solutions, and close client engagement in order to capitalize onindustry trends such as increasing voice complexity, multichannel services, full life cycle services,vendor consolidation and offshore delivery. Convergys continues to enhance its project-basedconsulting services for captive contact centers, as well as talent management and agent training forthe CM business process segment.

The company continues to have a good presence across the Americas. Convergys grew itspresence in Europe and EMEA (with its acquisition of Stream). Asia/Pacific is seen as a growthregion with the recent acquisition of the Datacom business in Asia.

From a talent supply perspective, the company keeps enhancing its presence in key emergingmarkets — it has more than 60,000 agents in the Philippines, and the company is investing incomplementary technologies to serve the growing needs for digital, automation and analyticsservices. Convergys is integrating analytics, with real-time guidance and personalization for bothagent-assisted customer service and self-service to enhance the customer experience.


■ Communications

■ Financial Services




■ Retail

■ Technology

■ Healthcare

■ Government

■ Travel and Hospitality

■ Utilities

How Convergys Competes

The company has high levels of brand awareness and strong brand affinity in North America. It alsohas strong operational capabilities, good geographical presence — onshore, WAH, nearshore andoffshore — and depth in key industries, such as communications, financial services and technology.The company has a good track record of working through its client relationships, with an emphasison quality, timeliness, execution excellence and results. With the acquisitions of Stream andDatacom, Convergys is positioned to deliver sustainable revenue growth by serving the entire lifecycle of customer contacts from all key geographies (including Asia/Pacific, Latin America andEurope) at the scale that clients require.

Challenges

The company has high levels of client concentration — its top three clients collectively representedover 31% of revenue (nearly $1 billion). The company also has relatively high vertical/industryconcentration in communications — approximately 55% of the company's revenue. Theacquisitions of Stream and Datacom have brought with them a broad client and industry base thatwill benefit the company.

Convergys has limited brand awareness outside North America; however, this is expected to changein the coming years with its push for higher brand awareness across EMEA and Asia/Pacific. Growthin key emerging markets and the level of complexity and size of the business may pose a challengefor smaller buyers that are planning to engage the company, which could also be a concern.

Convergys has a strong legacy in interactive voice response (IVR) and analytics services, and thecompany has been ramping up investments in enhancing its digital and analytics capabilities in theareas of multichannel, automation, thought leadership and consulting capabilities (centers ofexcellence, CM BPaaS and advanced analytics services) to help deliver new and innovative servicesto clients. Other challenges cited by clients include agent attrition, sharing of best practices andhigher unit cost of service.




Sitel


Sitel, based in Nashville, Tennessee, is a $1.7 billion CM contact center BPO service provider thatemploys more than 75,000 FTE and WAH agents who support more than 400 clients in 48languages from more than 146 facilities across 22 countries. Sitel was recently acquired by Acticall,a France-based CM BPO company.

Sitel continues to have a strong multilingual strategy; one in every four programs that is currentlyrun is a multilingual program. Sitel-Acticall continues to invest in Sitel's Work@Home agents,analytics, cloud, mobile and marketing services across its key markets. Sitel has a defined vertical/industry focus, with clients across communications, healthcare, high-tech (internet, wireless andtechnology providers), financial services, media and entertainment, retail, transportation and utilities.

The company has been increasing its capabilities in handling complex client interactions andcustomer experience. The recent acquisition by Acticall places the company in a strong cashposition, enabling Sitel to continue to invest in complementary and new service offerings, includingnonvoice multichannel services, Sitel Premium Technical Support, Sitel's Work@Home solutions,and analytical services driven by clients' needs.


The company continues to explore new service delivery locations in Eastern Europe and NorthAfrica. Sitel has deep domain expertise in high-growth industries, such as technology, consumerelectronics and communications. The company has one of the most diversified revenueconcentrations in the industry. Sitel's top 10 client relationships represented approximately 36% ofits revenue in the period, with the largest client representing 6% of its annual revenue. The verticaland geography diversity as its diversified revenue concentration is strategically positioned to act asa buffer against the cyclicality of any specific industry, mitigating risk to its clients and sustaining thecompany's long term-growth. To address the issue of access to technology, the company hasinvested in an internal asset development strategy, which has produced key technology assets suchas Sitel Intelligent Desktop (on-demand and modular cloud services) and Sitel Premium TechnicalSupport. It also continues to explore and build on its extensive alliance and partnership programs.


■ Communications

■ Banking, financial services and insurance (BFSI)

■ Technology

■ Retail

■ Manufacturing





■ Media and entertainment

■ Healthcare

■ Utilities

■ Public sector

How Sitel Competes

The company has deep domain expertise in high-growth industries, such as technology, consumerelectronics and communications. Sitel-Acticall has a good and diverse client base — with more than400 clients and geographical concentration across North America, EMEA, Latin America and Asia/Pacific. The company is investing in retail-sector-based capabilities to develop similar depth in thetechnology and communications sectors.

Sitel-Acticall has been employing organic and inorganic means to sustain its competitive advantage.The recent acquisition illustrates Sitel's commitment to innovation, for example, innovation inBPaaS platforms as the capabilities that the acquisition offers — with subsidiaries such as TheSocial Client (digital services), Learn Tribes (live and digital training), Extens Consulting (customerrelationship consulting) and Novagile (IT solutions) — can be leveraged across geographies,verticals, clients and service offerings.

Challenges

Sitel has high levels of exposure to Europe — approximately 29% of its revenue (by Gartner'sestimate) comes from the region postacquisition by Acticall. The region, with its focus on costoptimization, continues to exude cautionary spending on services, which limits the potential forSitel.

The company also has high levels of industry concentration in the financial services, technology andcommunications industries. Sitel has over the years acquired only limited technology assets toenhance its multichannel and analytics capabilities — the company's focus has been on processand people. However, with the recent change in ownership, the company has acquired assets suchas The Social Client, Learn Tribes, Extens Consulting and Novagile. To deliver enhanced digital andanalytical services, the company continues to explore partnerships with technology providers andthe option of developing core technologies in-house.

Sitel also has a growing consulting capability, as well as thought leadership skills and technologyassets to help deliver innovative and business transformation for CM contact center BPO services.However, the company needs to keep investing in new technologies and capabilities — to close theagent skills gap by enhancing ongoing processes with talent suppliers, and reinvest in its existingcore capabilities — continuously develop skills within its middle management that will then helpclients with their unique CM contact center BPO service needs.

Sitel has limited CM contact center BPO services that address the needs of a growing small andmidsize market and of new hypergrowth digital companies with specific service offerings and




solutions. The company needs to further invest in offerings related to digital services, BPaaS,mobile customer management services, automation and advanced analytics. Other challengesidentified by clients include limited IT capabilities, middle and operational management staff, abilityto manage complexity, and service consistency across multigeography engagements.

Teleperformance


Teleperformance is the largest CM contact center BPO service provider in the world by revenue —estimated at $4 billion — and by geographical footprint. The company recently acquired the AegisU.S. CM contact center BPO business. The company has more than 190,000 FTE agents whosupport 75 languages and dialects from 311 centers in 65 countries. Teleperformance has balancedrevenue contributions from its key markets — namely, Europe, the English-speaking markets (NorthAmerica, the U.K. and Asia/Pacific), and Ibero-Latin America. Teleperformance continues to focuson the following vertical industries: financial services, communications, travel and transportation,technology, discrete manufacturing, healthcare and retail.

The company possesses a diversified vertical/industry and client base, with more than 850 clientsacross several industry segments. Due to its size and geographical footprint, Teleperformance, as isthe case with most large multinational corporations, focuses on bundled or value-added large-scaleservice engagements (that is, for very large global organizations).

The company continues to plan its growth and expansion through both organic and inorganic (M&A)strategies, as seen by its acquisition (announced in August 2014) of Aegis' U.S. business, as well asthe opening of new locations in South America (Guyana and Suriname), the Middle East (Dubai,United Arab Emirates) and the U.S. Teleperformance has strong corporate social responsibilityprograms (Citizen of the World and Citizen of the Planet) that are sponsored globally but are led anddelivered locally.


Teleperformance's service offerings include sales, marketing, customer care, technical supportservices and complete multichannel (omnichannel) solutions. Besides these services, the companyalso offers project-based consulting services for captive centers, contact center infrastructureservices, facilities management and debt collection. The company continues to invest inmultichannel hubs, advance customer research, innovation and analytics and digital services —which currently contribute just over 17% of its total revenue, based on Gartner estimates. Thecompany's European business shows recovery from slow growth, and its Latin American and NorthAmerican businesses continue to grow at between 5% and 10% year over year — at or abovemarket growth. In Asia/Pacific, China is also showing notable growth. In 2015, Gartner estimates thecompany generated 25% of its revenue from telecommunications and the internet, followed bytechnology, electronics and media at 14.5%, and pay TV contributing 11.5%.






■ Communications

■ Discrete manufacturing

■ Technology

■ Retail


■ Public sector

How Teleperformance Competes

Teleperformance works with many global brands across multiple geographies. In addition to majorglobal companies, it also partners with fast-growing emerging disruptive companies (for example,digital businesses) that require fast-scaling global solutions. Teleperformance has excellentmultilingual services. The company also has a strong financial position — a good cash position andcontinued M&A appetite (that is, acquisitions of technology and local/regional service providers). Ithas strong local leadership across most of its operating geographies with good business acumensupported by a global organization with highly stable executive management. The companycontinues focus on the Americas for its CM BPO business. Teleperformance positions itself as aflexible partner with a global geographical footprint and operational excellence. A key point ofdifferentiation is its people strategy; Teleperformance's culture focuses on its employees in setting anew standard in the industry for a better work environment and career development. The companycompetes on the basis of total value-ROI versus price.

Challenges

Gartner estimates the company has just over 17% revenue contribution from digital, multichannel,automated and analytics services. Though improving, this figure is still lower than the marketaverage of between 28% to 30%. Continued slow growth in France and southern Europe, coupledwith a slowing economic growth in Latin America, may see revenue and margin pressure over thenext 12 months. However, due to its global portfolio, North America and Asia/Pacific continue togrow at a healthy rate, helping to limit the company's exposure to slowing economic conditions.

Due to its size, geographical footprint and go-to-market strategy, the company is not seen to be agood fit for small volume, commodity-based services or programs. Other challenges identified byclients include agent attrition in key delivery locations and midlevel management, IT infrastructure,lengthy contract negotiations, recruitment of agents and training.




Xerox


Xerox employs nearly 51,000 FTE employees in the CM contact center BPO business unit.Approximately 4,000 of these employees are WAH agents serving companies across multipleindustries from more than 170 centers across 25 countries, with services in more than 30languages. Xerox has more than 25 years of customer care experience and processes more than2.5 million customer care interactions daily. Gartner estimates Xerox's CM contact center BPOservice revenue to be approximately $1.8 billion. With just over 30% of Xerox's CM contact centerBPO interactions are currently delivered through digital, multichannel and analytics service andautomated channels (the industry average is approximately 28% of total revenue), Xerox isproactively driving a next-generation care strategy aiming at developing self-service channels andautomation for care.

The divestiture of the ITO business signals a strong commitment to the document outsourcing andBPO segments within services, and it will allow Xerox to continue making investments in advancingservice delivery capabilities in the BPO market, which is facing significant disruption due totechnology and service delivery automation.

In Asia/Pacific, Xerox's associate company (25% owned by Xerox) — Fuji Xerox — recentlyacquired Salmat's BPO business, making Fuji Xerox one of the largest BPO service providers inAsia/Pacific. Xerox has more than 390 CM contact center BPO clients. The company maintainsmajor facilities in Canada, the U.S., Argentina, Jamaica, Philippines, Mexico, the Netherlands andChile.


The company's CM BPO service offerings include customer services, customer retention, sales andtechnical support. Gartner believes sales collaboration and cross-selling of BPO services will befurther enhanced — especially for global accounts and, over time, into nonglobal strategic accounts— in the coming months. The company continues its plans to increase its penetration of andpresence in low-cost delivery locations, especially in Latin America, Eastern Europe and Asia/Pacific, and complements this location strategy with a technology roadmap focused on automation.Xerox continues to invest in brand development, thought leadership, multichannel and digitalservices, vertical/industry-specific customer management solutions and services, and customerexperience management (including analytics) to address growing client demand.


■ High-tech

■ Communications


■ Public or government sector




■ Transportation

■ Consumer packaged goods (CPG) and retail

■ Higher education

■ Healthcare payer, provider and pharmaceutical and life sciences

How Xerox Competes

Xerox has a good presence geographically to support North American clients and is now well-positioned for European clients with its acquisitions. The company also has deep industrycapabilities, with a focus on providing industry-centric solutions across the entire customerexperience life cycle, for instance, in billing communications. Xerox has the potential to furtherleverage existing relationships — within the former ACS and the greater Xerox organization, toupsell and cross-sell services. The company has a strong focus on the delivery of services in areassuch as transaction-based pricing, activity-based compensation, deal engineering and learningmanagement.

Challenges

Xerox continues to demonstrate strong performance for digital and multichannel services and hasexpanded its capabilities with the acquisition of WDS. However, the company needs to furtherinvest and develop its fast-growing service offering around business process as a service (BPaaS)and cloud-enabled services, as well as its multilingual capabilities and marketing service.

Xerox is not known as a customer management BPO company, and the company is seen orperceived by most prospects to be a document technology company. With the upcomingseparation of its document and BPO business, the new service company needs to intensify itsmarketing initiatives to build brand awareness around its BPO business.

Xerox also has a high geographical concentration in North America and is not as visible as other CMBPO providers. Other challenges identified by clients include agent attrition, average customerexperience results, limited leverage of Xerox innovation, administrative bureaucracy, managementand performance consistency across locations, staffing model and recruitment process and agentcommunication skills.

References and Methodology

The research for this report was conducted using existing Gartner research, complemented by aprimary and secondary research survey with leading CM BPO providers carried out during the thirdand fourth quarter of 2015. Finally, a vendor fact review was conducted with the leading CM BPOproviders to validate the accuracy of the relevant data.




Definitions

Gartner's definition of business process outsourcing (BPO) is the delegation of one or more IT-intensive business activities. BPO contracts always include the outsourcing of the business processadministration to a third party and may include outsourcing the application maintenance andownership.

Customer management (CM) BPO, the processes linking an organization with its existing andpotential customers, can be categorized in the following four subsegments:

■ Customer selection

■ Customer acquisition

■ Customer retention

■ Customer extension

The four subsegments are consistently delivered or executed across the following four primarychannels:

■ Telephony inclusive of voice and IVR self-service

■ Email response management

■ Web chat

■ Knowledge management for web-based self-service

CM Contact Center BPO Defined

Customer Selection

■ Market segmentation and data analysis include the collection, management, augmentation,analysis and application of customer data in support of marketing and sales efforts.

■ Campaign design and communication planning include campaign planning, communicationplanning, design and printing/developing of marketing collateral.

■ Other customer selection includes testing, brand planning, account/territory planning, productintroduction and other customer selection functions not included in the above categories.

Customer Acquisition

■ Lead management/opportunity management includes administration of business-to-businessteam selling across field and inside sales channels, guiding sales executives through leadgeneration, and qualification and quantification of the opportunity to deal closing.

■ Telesales, telemarketing, web sales and marketing include telephone calls made (outbound) orreceived (inbound) by agents either attempting to generate sales leads or complete immediate




sales, as well as design, installation, operations and management of websites used to conductmarketing, sales and other commerce activities.

■ Other customer acquisition includes direct mail campaign management, channel management,proposal generation, solution design, negotiation, deal closing and other customer acquisitionfunctions that are not included in the above categories.

Customer Retention

■ Self-service includes leveraging an organizational knowledge base to provide unassistedcustomer support. Self-service is a component of customer service and support.

■ Inquiry handling and problem resolution include managing customer concerns, either throughoutbound or inbound communications, over the telephone or over the internet.

■ Field service automation includes managing personnel resource allocation, communication ofproblem tickets, diagnostics, spares inventory and preventive maintenance in the field serviceand repair organization.

■ Other customer retention includes order management, repair and returns handling, attritionmanagement and other customer retention functions that are not included in the abovecategories.

Customer Extension

■ Customer data analytics include analysis of customer data with the purpose of extendingservices to current and new customers.

■ Upsell/cross-sell include identifying existing products and services purchased by a customerand using that information to influence the purchase of associated products and services.

■ Other customer extension includes needs reassessment, campaign management and othercustomer extension functions that are not included in the above categories.

Gartner Recommended ReadingSome documents may not be available as part of your current Gartner subscription.

"Market Trends: Customer Management BPO Comes of Age With Digital Services, Automation,Advanced Analytics and Business Innovation"

"Magic Quadrant for Customer Management Contact Center BPO"

"Cool Vendors in Business Process Services, 2015"

"Hype Cycle for Business Process Services and Outsourcing, 2015"

"Hype Cycle for CRM Customer Service and Customer Engagement, 2015"




"Tech Go-to-Market: Process Enhancement Technologies and Services Energize CustomerManagement BPO Growth"

"Marketing Essentials: Strategic Options for MSP Growth in BPO and Application Services"

"Forecast: IT Services, Worldwide, 2014-2020, 1Q16 Update"

Evidence

The 10 largest CM BPO providers each had revenue of more than $960 million in 2013; the top threeproviders each had revenue of more than $2.1 billion. In 2015, the top 10 CM BPO providers hadrevenues of more than $1.1 billion, while the top three providers had revenue of more than $2.4billion. The top 10 providers widely leverage resources in offshore and nearshore locations, and atleast eight of the top 10 have WAH agents who supplemented their center-based assets to meetclient needs, primarily in North America, U.K. and Western Europe. Three of the top 10 providerswent through sizable M&A activities in 2015 — Alorica acquired West Corp.'s customer servicebusiness, Teleperformance acquired Aegis' CM BPO business in the U.S., and Acticall acquiredSitel.

Note 1 The Competitive Landscape Beyond the Top 10 Providers

The CM BPO competitive landscape continues to be fragmented with active participation frommany niche, small and midsize service providers. There are lingering signs that the market is startingto concentrate within the top 50 global providers, as consolidation over the past 4 years hasdeveloped megaproviders and as large providers look to pass the $1 billion revenue mark. Gartner'sestimates put the total number of CM BPO providers worldwide at between 3,500 and 4,000, withmost providers focused on either one market or process within CM BPO. To help put things intoperspective, the total worldwide CM BPO market size for 2016 is estimated at $36.9 billion —excluding help desk support, collections and other vertical business processes or functions.

The top 10 providers had a total combined revenue in 2015 was approximately $18.2 billion, or 53%of the total market share, but when compared with 2013, the combined revenues for the top 10providers was $16.7 billion, or 49% of the total market share. This clearly shows that even thoughthere is an aggregated revenue growth in the top 10 providers of $1.47 billion over the two years,some of these providers are actually losing market share to midsize providers with revenues ofgreater than $200 million. To stay ahead, providers must remain focused on growing their organicrevenue by twice the market growth — which currently stands at a CAGR of 5.1% (2015 through2020). Failing to do so means the provider is losing market share.

Several challengers are seen as serious competitors to the top 10 CM BPO service providers withregard to competitive bids and innovative service offerings — such as offerings for midsize buyersand competing in multivendor environments. Most of these service providers have significanttechnology and global delivery assets, industry knowledge and process skills. Buyers, investors andCM BPO service providers should continue to monitor these service providers, as they have thepotential to become a top 10 service provider (through M&As) or be acquired in the near-term tomidterm.




This competitive landscape also profiles other top performing CM BPO service providers. Accordingto the competitive landscape guidelines, these are the recommended categories of the profiles:

■ Rising stars: Fast-growing providers or those that are generating "buzz," or capturing businessfrom incumbents.

■ Disrupters: Those providers with innovative or disruptive products, methodologies or businessmodels that could redefine the market's competitive dynamics in the future.

■ Stalwarts: Those providers that may not be big, fast-growing or disruptive, but are consistentlyon client shortlists or mentioned on inquiries.

The following is a list of challengers. This list is for illustration only; most providers will fit into two ormore categories:

■ Stalwarts in emerging markets — Aegis, Firstsource, HGS, Sutherland Global Services, TechMahindra, Unisono, AlmavivA

■ Industry specialization — General Dynamics Information Technology (formerly Vangent), WNS(travel, and banking, financial services and insurance), Firstsource (BFSI), Tech Mahindra(telecommunications), Hewlett Packard Enterprise (HPE) and Expert Global Solutions (EGS —healthcare) and Intelenet (government sector)

■ Disrupters with BPaaS, advance analytics and automated services — Genpact, Acxiom,Fincons, Almawave, Sutherland Global Services, Aegis, [24]7, Alorica, Webhelp, Minacs,Accenture and Capgemini

■ Prominent India-based providers — Aegis, Tata Consultancy Services, Tech Mahindra,Firstsource, EXL, HGS, Tata Business Support Services (TBSS), Mphasis, Infosys, Wipro, HCLTechnologies, Intelenet and Ison BPO

■ WAH, multichannel and midmarket segment — LiveOps, [24]7, Working Solutions, AriseVirtual Solutions, Webhelp, buw, Almawave and Visiant Contact

■ Product and technical support services — CSS Corp, Sutherland Global Services, HGS, TechMahindra, HPE, Minacs and SPi Global

■ Rising Stars — AlmavivA/Almawave, Webhelp, buw, Unisono, CSS Corp, HGS, WorkingSolutions and Visiant.

This document is published in the following Market Insights:Business Process Outsourcing Worldwide




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