Gartner: 25% of BPO companies will disappear
Twenty-five percent of today’s top business-process outsourcers (BPO) will not exist in the next three years according to a research note released yesterday by Gartner.
Gartner reported that economic pressures, poorly conceived contracts and the inability to adapt to standardized delivery models are all having a big impact. “Some will be acquired and some will exit the market completely to be replaced by dynamic new partners delivering BPO as automated, utility services,” said Gartner research VP Robert Brown.
Outsourcing is a controversial trend that is hotbed of discussion that saved IT companies’ money and created a loss of jobs for U.S. workers–is going through some critical times and putting enterprises at risk.
CIOs can mitigate the risk of being entangled with an inadequate BPO partner, Gartner said, by checking for signs of trouble.
Cancellation rates among Gartner’s annual BPO buyer survey in 2008 rose sharply from the 2007 data. Therefore, Gartner advises buyers to build exit strategies into contracts and develop contingencies for contract termination, especially before signing the deal. BPO switching costs can be steep, so it’s important to understand contractual issue escalation procedures to ensure that all rational options are exhausted before initiating legal and/or termination discussions.
Source: WTN
Startling revelations indeed. How will be the job market impacted with this trend should be watched closely. would be great if you can post the link to complete report.
Thanks
Janaki
This report should serve as a warning to both BPO providers and businesses that are into outsourcing. I still think that choosing the right BPO partner where both parties’ risk is significantly limited is the smart way to do. Of course following also Gartner’s advice to build exit strategies into contracts and develop contingencies for contract termination before signing a deal also helps for a company to stay in business.
It is a bad news to every outsourcing businessman and employees. I hope it would not happen and the companies could fight for this issues.