Wednesday, 5 November 2008

Good times still rolling for BPO

(By Anthony Miller) It’s not all gloom and doom out there, at least not in BPO-land. In fact the UK BPO market still looks very much alive and well, given not one but two reasonably meaty contracts announced yesterday (Tuesday). First off was Capita’s £130m, 10-year life and pensions (L&P) deal with Abbey Life, now owned by Deutsche Bank. With Liberata’s L&P business causing pain at HCL (see Liberata hits HCL's margins) and TCS yet to discover the true meaning of life (and pensions) with Diligenta (see TCS inches closer to opening the ‘Pearly’ gates), you might be forgiven for thinking that Capita is shooting at an open goal. We’ll be meeting Capita CEO, Paul Pindar, later this month to test his shin-pads.

Also announced yesterday was Steria’s £31m, 12-year IT and BPO deal at Welwyn Hatfield Borough Council. This is a bit of a milestone for Steria, being its first revenues & benefits (R&B) contract in local government. Of course, Steria’s UK BPO business is built on Xansa, acquired last year. Something like 30% of Xansa’s business came from UK public sector, including the landmark BPO joint venture with the Dept. of Health (NHS Shared Business Services). A couple of weeks ago Steria landed a 5-year BPO deal at Whitbread (see Steria profit warning sees off France CEO), suggesting that the rather pricey Xansa acquisition is now starting to deliver on the promise. Mind you, there’s no shortage of players in the local government R&B BPO market, so Steria is certainly not shooting at an open goal! We’ll be talking to Steria UK CEO, John Torrie, soon to get an update on what is now the French SI’s largest market.

The recent flurry of BPO activity is not confined to the UK. Our friends at Regent Partners noted that October was a particularly busy month for BPO acquisitions (see Major BPO takeovers top October's mergers and acquisitions), the largest, of course, being TCS’ acquisition of Citigroup’s Indian BPO captive (see TCS scores largest ever Indian deal). All this activity is frankly not a great surprise to us. Outsourcing ‘boring’ back-office processes just makes good cost-saving sense – even more so if the outsourcer can throw some up-front cash at the deal too! There may be no ‘safe haven’ in the current turbulent market, but ‘quality’ BPO players should be more sheltered than most.

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