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AMI Partners survey: Is Business Process Outsourcing (BPO) losing steam?

About 60% of medium businesses opt for BPO today – same level as 3 years ago – says AMI

NEW YORK, NY, October 18, 2007 -- Is business-process outsourcing (BPO) losing its steam among medium businesses (MBs, or companies with 100-999 employees) in the United States?

That seems to be the conclusion from the latest study from New York-based Access Markets International (AMI) Partners, Inc.

About three years ago, about 60% of the US’s 97,000 MBs did some level of BPO. Today, in percentage terms, that number seems to have stayed stagnant, with 60% of 99,000 MBs saying they outsource some business processes and don’t plan to change their level of spending this year or next.

The most commonly outsourced business processes among MBs are internal (back-office) business functions, such as payroll and accounting. Front office outsourcing, such as customer support/call centers, are only used by 3% of MBs. Spending on BPO services by U.S. MBs totaled $2.4 billion over the last twelve months. In addition, most of these outsourced services are still performed onshore. Only 5% of MBs outsource their business processes to offshore companies.

“The lack of momentum in BPO usage implies that MBs’ wants and needs—such as improved processes, turnaround time, and cost cutting goals—are not being met,” said Melissa Chong, New York-based Research Analyst at AMI-Partners. “MBs in the US have over the years reported revenue growth of 7% - 8%, slightly higher than actual GDP growth. In addition, the need for cost control and decreasing operating costs is of high concern among US MBs.”

On average, MBs earn US$68 million in revenues and employ 200 people and have the business scale to take advantage of BPO. Cost control and instilling greater efficiency in non-strategic processes are the primary selling points of BPO, yet MBs do not seem to be acknowledging or reacting to this benefit,” Ms. Chong says.

A key factor may be education.

BPO service providers should share their benchmarking processes and methods to measure performance outcomes with their customers. This could improve the trust and professionalism of the vendor from the MB’s perspective. This is significant alongside other improvements that must be made as the BPO market evolves, such as the way outsourcing contracts are drawn up and standardizing BPO delivery models. These issues are critical to making MBs feel more confident and comfortable in their working relationship with the BPO providers.

Related Study

AMI’s 2006-2007 U.S. Medium Business Market Overview and Comprehensive Market Opportunity Assessment study highlights these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI’s annual surveys of MBs across the U.S, the study tracks a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. These data point to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, please call 212-944-5100, e-mail ask_ami@ami-partners.com, or visit the AMI Web site at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a strong focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and “go-to-market” solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 25 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.



Contacts 
AMI-Partners
Quoted Analyst:
Melissa Chong, 212-944 5100 ext 523
mchong@ami-partners.com

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