Industry Commentary

BPOs Need to Prepare for Enterprise Merger & Acquisition Activity

By March 24, 2021February 14th, 2024No Comments

It makes sense that the outsourcing community has not been as focused on ‘business as usual’ preoccupations the past year.  However, BPO providers must understand that there are commercial pressures outside the pandemic, and these require attention too. One of these is ongoing merger & acquisition activity that has continued throughout COVID19.  Regardless of vertical, consolidation has the potential to impact outsourced customer experience management. Third-party operators should plan out strategies to manage this trend. If anything, merger & acquisition activity is likely to continue as the global economy stabilizes.  BPOs cannot afford to be caught out.

Merger & acquisition activity even during the pandemic has been substantial.  Among the most significant consolidation initiatives include the decision by Uber to acquire food delivery service Postmates, Morgan Stanley’s desire to buy E*Trade, and the Salesforce buy-out of Slack.  Just in the past month, the announcement that Bank of Queensland plans to buy Members Equity Bank in Australia, alongside the proposed merger of Canadian telco giants Shaw and Rogers rounded out consolidation activity in key demand markets.  And, while some lawmakers are questioning the effect of specific merger & acquisition deals on consumers, savvy BPO observers should also be considering what it will mean on current and future outsourcing engagements.

The impact of consolidation should not be underestimated when it comes to client/outsourcer relationships.  When there are fewer but larger clients of business services in any sector, these enterprises will flex their negotiating muscles.  With a smaller number prospects available in a vertical, outsourcers will naturally feel obliged to acquiesce to the expanded enterprise’s demands. This could mean lower price points for front-line delivery or additional value-add services thrown into a deal at a discounted rate. When carried out over an extended period, such tactics reduce the BPO’s commercial viability.

Equally, changes in the make-up of existing clients that have been acquired can also have a confusing effect on how outsourcers manage relationships. Upon being bought up, an enterprise CX leader with whom a BPO has been working for years could be redeployed or moved out of the organization. For the outsourcer, establishing fresh relations with a new CX head from an acquiring firm will be time-consuming and highly likely to yield new expectations.  This could result in more challenging KPIs or a shift in which customer management business models are used.  It may also lead to a struggle for renewal if the acquiring firm already works with different outsourcing operators or if they prefer to run their own captive customer experience delivery.

What can outsourcing executives do to prepare for continued enterprise consolidation across industries?  Clearly, this trend is not ending anytime soon, and being ready to react to merger & acquisition activity is paramount.  A good plan of attack would be to designate individuals within the BPO (preferably vertical subject-matter experts) to monitor potential consolidations to plan for eventualities.  Equally, ensuring even casual relationships exist with CX leaders across enterprises (clients and non-clients) in a particular industry will help smooth out potentially awkward discussions in the event of a buy-out.

But, more than anything, quality BPOs should be prepared to negotiate hard in their own right, even in an era of market consolidation. They do hold leverage.  The reality is that many enterprises, even large ones, run outdated CX divisions and need the expertise, technology and process excellence that an outsourcer can bring to the table.  This does not mean that the BPO will not need to make concessions. Rather, negotiations should only be done in a commercially viable manner.