Business process outsourcing is becoming more sophisticated and specialized.
Take the finance and accounting segment of BPO. A number of vendors offer accounts payable/receivable processing. But Paul Schmidt, a partner at sourcing advisory firm TPI Inc., called finance and accounting BPO "generic" services that apply to any business. In contrast, Schmidt pointed to FSO (financial services operations) BPO as offering greater value add, since the processes involved apply to a specific vertical industry.
An FSO project might involve trade finance administration for a commercial bank, loan processing for a retail bank, or investment portfolio tracking.
Karvy Global Services (KGS), a new BPO market entrant, appears to be targeting both the low-end and the high-end of the services spectrum. The company offers finance and accounting BPO, but also transaction analysis, marketing decision support, investment analysis, and shareholder services.
The analytical services require "a little more knowledge" on the provider's part and bring more value to customers, said Arthur Flew, KGS' chief executive officer. Some of that knowledge stems from KGS' parent company and its financial services background. KGS is a subsidiary of Karvy, an India-based financial services firm that includes brokerage and merchant banking operations.
Richard Schroth, a senior fellow with Katzenbach Partners LLC, a management consulting firm, said KGS' service line "appears to be consistent with more complex BPO offerings that are appearing in the market.
Focused BPO ventures may attract attention from the old-line outsourcers.
Indeed, companies that succeed in building their BPO specialties into "knowledge brands" may become acquisition targets down the road, Schroth said. "One thing to watch will be the acquisition of these types of firms by the major outsourcers," he added.
Schroth likens the situation to Host Marriotts' providing well-known food brands in the turnpike travel plazas it operates. Marriott came to understand that customers related to brands such as Starbucks or Sbarro more than they did with the Marriott name in the restaurant space, he noted. So the objective became acquiring the best brands for the travel plazas.
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"I think as we move into more BPO, the equivalent is going to occur with the big outsourcers," Schroth said. "Eventually, co-branding is going to be an important acquisition strategy for the big guys."
In this approach, the major outsourcing vendors would purchase an established knowledge brand to include in their services portfolios. Co-branding might also take the form of a strategic alliance, but Schroth said he believes the top-tier outsourcers will likely take the acquisition path.
Flew said KGS is open to partnerships but not of the investment variety. The plan isn't to build the company for three or four years and then sell it, he said.
"I'm in this for the long term," said Flew, who seeks to make KGS a major force in BPO in the coming years.
The cultivation of higher-end services should help in that respect. The BPO market is growing, but so is the number of providers.
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