The ongoing M&A activity in contact center services took on a new scale with the announced acquisition of Convergys Corporation by Synnex, the parent firm of Concentrix. And while this announcement has been lauded, it also points to a new era of mega-vendor consolidation that may make enterprise buyers fearful of a tightening supplier market. This means opportunities for emerging and mid-sized players among prospective buyers that wish to avoid working with outsourcers they see as becoming too powerful. For providers in the mid-market, the key to seizing these opportunities will be well-rounded offerings that enable the ability to respond to client needs, and that build relationships which afford an enhanced level of intimacy with the buyers.
Without a doubt, the combined Concentrix / Convergys entity is impressive. When combined, the two firms’ 2017 turnovers are in excess of $4 billion, trailing only Teleperformance in global front-office BPO. Equally, the new entity reinforces a geographic footprint in important demand and delivery markets. This deal also adds a significant amount of supplier power to the combined Concentrix / Convergys, and is one of a number of consolidation deals among market leaders in contact center services in recent memory. While certainly a healthy sign for the sector, it is also cause for trepidation among existing and prospective clients.
Economics dictates that when consolidation occurs rapidly within an industry, suppliers gain considerable leverage when negotiating deals with buyers. In the case of front-office BPO, the Concentrix acquisition of Convergys follows a number of deals over the past two years in contact center services. These include the partnering announcement of Aegis and StarTek (which will form an entity of nearly $1bn after the dust settles), Alorica’s buy out of EGS, and Concentrix’s purchase of Minacs. On the face of it bigger, stronger contact center outsourcers means that buyers have less room to negotiate deals in their favor.
Or, do they?
This is where the mid-market opportunity becomes more apparent. Smaller providers of contact center services have a unique chance to take advantage of global outsourcer consolidation. Hidden in industry research is the reality that more enterprise executives are worried about being seen as just one of many clients in the roster of large-scale outsourcers. Boutique players need to jump on this sentiment. In so doing, they should emphasize their own capacity to manage complex contracts without the layers of process and bureaucracy that buyers may (rightly or wrongly) anticipate from players of a larger scale.
This may seem like a straightforward proposition for mid-market players, but the reality is very different. Enterprise buyers expect that providers in this category not only have an enhanced level of client / outsourcer intimacy, but they also want them to be in a position to deliver a sophisticated suite of solutions such as analytics, RPA, AI and customer experience strategy. Front-line work alone will not suffice for today’s buyers. The right investments need to be made, or at the very least firms must have appropriate partnerships established to manage value-add solution requirements. Acquiring complimentary skill sets will also go far in this regard. In the current market, having all advantages at the ready is something mid-market providers cannot be without in order to solidify their commercial presence.
Concentrix has thrown down the gauntlet with the acquisition of Convergys. Unlike some industries where the big players sit around wringing revenue from clients, in outsourcing they are out to compete. Small providers should be at the ready with a nimble set of solutions that smooth the customer experience.