Industry Commentary

Mixed 2017 Results a Clarion Cry for Outsourcers to Diversify

By March 20, 2018July 25th, 2023No Comments

By now, the financial results of most publicly-traded BPO players have been published, exposing some interesting trends.  As with every reporting period, some outsourcers performed better than others, but what is certainly intriguing is how those over-achievers have managed to best the competition.  If there is one lesson learned from 2017, it will be that efforts to diversify are crucial to solidify both revenue growth and profitability levels. The days of winning via simple front-line delivery are history, and forward-looking outsourcers need to get creative in terms of their client-base and services to remain in the long-game.

To use a boxing analogy, the tale of the tape never lies, and this certainly applies in the context of 2017’s publicly-traded contact center outsourcer end-of-year financial results. Teleperformance clearly performed well, with its revenues climbing to nearly $5bn, roughly 9% growth over 2016. TTEC also had a successful 2017, with its revenues up nearly 16% relative to the previous year.  This was notably due to its customer management service line, which accounts for just over three-quarters of its total business.  Sykes also fared well, with year-on-year turnovers rising approximately 9%, while Atento reported similar percentage gains through the period (fuelled by solid performances in Brazil and the Americas).

For others, 2017 did not yield positive financial results.  While posting revenues of nearly $3bn, Convergys’ turnovers fell 4%, due largely to drop-offs in business from technology and communications verticals (which combined account for two-thirds of its revenues).  Meanwhile, on the cusp of their announcement of a strategic partnership with Aegis, Denver-based StarTek’s 2017 performance dropped 4.5% year-on-year, just shy of the $300m mark, down from $307m in 2016.

However, regardless of their respective 2017 performances, for all outsourcers the underlying need for diversification in their business is clear.

From the perspective of vertical markets, there has never been a better time for providers to get outside the comfort zone of servicing clients that have traditionally been large consumers of third-party workstations.  Simply put, this a race to the bottom, in terms of profitability that is eaten up by agent-related costs and by way of enterprises flexing their buying power.  Rather, outsourcers must aggressively pursue emerging sectors with consumers that require greater degrees of agent skills, helping to maintain (and hopefully improve) margins.

Equally, providers need to rethink their functional offerings.  Finding a way into higher margin, added-value services is the only way forward in maintaining a front-office BPO sector presence.  Obvious examples include all aspects of social media management, customer experience strategy and omnichannel analytical delivery. These just scratch the surface; there are many more avenues that can help cement a partnership with a client for the long term.

A final priority needs to be geographic diversity.  Any provider that continues to draw its revenues from a small number of demand markets will experience unneeded exposure to business disruption.  Obviously for smaller outsourcers playing in a limited number of countries is a reality as they aim to grow. But for larger players that choose not to move into new demand markets, there is no excuse.  With resources at hand, efforts need to be made to court new geographic opportunities either by way of acquisition or by establishing themselves greenfield.  Regardless, 2017 marked the clearest signal yet that fresh thinking is the only way to ensure strong results in 2018, and beyond.