Going pretty much unnoticed last week was the acquisition of receivables management firm Outsourcing Solutions Inc by the global market leader in Collections BPO, NCO Group, to create a combined accounts receivable (AR) BPO giant with revenues of $1.5 billion, and adds nearshore service center capability in Puerto Rico, Canada and Mexico to NCO’s current global delivery portfolio, which includes the USA, UK, India, Australia and the Philippines. NCO has steadily been focusing on developing offerings in reporting, analysis and budgeting areas, and now only needs to acquire a major capability in accounts payable services to boast a pretty impressive full-service F&A offering. What’s impressive about this expanding portfolio is the multiple geographic locations being developed, and the avoidance of over-reliance on India. The added capabilities in the Philippines and Latin America put the firm in a strong position to compete for global AR contracts, service all the necessary major languages, and jostle service delivery across several low-cost locations to accommodate multiple time zones, combat attrition issues and the appreciation of currencies such as the Rupee. NCO boasts several high-profile clients, where it delivers outsourced AR services, often as augmented offerings to existing shared services operations.
NCO’s expansion into F&A BPO is not dissimilar to the approach taken by Human Resources services giant ADP, which developed its HR solutions around its global payroll business, which grew up through multiple acquisitions of payroll bureaus across global locations over many years. ADP developed a comprehensive HR outsourcing solution in the middle market, based on its strengths in delivering administrative areas of HR – notably payroll and benefits administration – before adding HRIS and workforce administration to complete end-to-end HR capabilities with its GlobalView solution, underpinned by SAP. The company is now competing for global high-end HR BPO contracts, and has multiscope HRO engagements with clients such as Carmax, IKEA and Rhodia.
NCO’s approach of focusing heavily on centering its capabilities on receivables management is putting the firm in a strong position to take on middle-market F&A contracts, but it does need to develop a competency in accounts payable before it can effectively compete for the higher-end multi-scope F&A engagements. With several accounts payable services firms currently ripe for acquisition, surely this is not a far flung reality for the firm in the near future…
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ADP and NCO… BPO cousins?
Posted in : Finance and Accounting, HR Outsourcing
Phil – a very good comparison between the firms. Those BPO providers which build scale to deliver operational work have the backbone to yield long term profitable services businesses. They are not taking a gamble with a handful of major clients, but slowly building up large numbers of smaller client engagaments. The ability to run BPO services profitably is the key to a stable industry, and ultimately, more stable client relationships.
Andrew