I have a special place in my heart for Call Centre and CRM operations. The first consulting I ever did was in 1999 for the call centre operation of a major Australian insurance firm. I was tasked with imparting the importance of customer segmentation and helping staff embrace the “new” technology of email as a communication tool. Following this, in 2000, my first report as an analyst was on the then fledgling Call Centre BPO market in the Asia Pacific region.
The announcement today (Sept. 10 2013) that IBM has sold its CRM BPO business to Synnex, specifically the Concentrix division of the distributor, reinforces how commoditised the market is. When IBM bought Daksh in 2004 it was a commoditised market, but now the scale of the commoditisation is unstoppable as technology finally grips it and labour arbitrage dynamics change.
The financial numbers reported around the deal highlight the commoditised character.
- Revenue = $1.2B
- EBITDA = $120M
Price – US$505 million.
Not too many banks will give you 20% for your money. This highlights two potential drivers for the transaction for IBM:
- IBM needed the cash (unlikely)
- IBM saw the market zooming towards further commoditisation with limited upside
Clearly, capioIT believes the second reason to be paramount. IBM is investing in higher value assets through software and services. Similar to the x86 server market, there is only one future for CRM BPO that IBM considers. Consolidation.
It can leave the “people” side of CRM outsourcing to the new chosen partner, Synnex and concentrate on value add in automation, social media and analytics all driven by the integration of software and services. This continual shift feeds into increased demand for asset based services and outcomes based pricing, both of which are essential for IBM’s evolved business model.
From a broader IBM perspective there are some interesting impacts.
- Engagement with IBM CRM has been important for several accounts. This has helped “recapture” IBM as a strategic provider in selected customers.
- Several IBM delivery locations around the world (Ballarat – Australia, Auckland – New Zealand, Cairo – Egypt) have a strong presence and history with CRM BPO.
The most important element is the increased focus of the overall IBM BPO capabilities following the divestment. I have a long held belief that 4-5 different BPO offerings spreads capability to thin regardless of scale. For example Accenture largely avoids CRM, HP is selective with offerings by region.
This will allow IBM to focus more executive time and strategy on maximising opportunities in the less commoditised markets of:
- Human Capital Management
- Financial Performance and Operations
- Supply Chain Management
Bottom Line – IBM has structured a deal where the executives can all talk “Win-Win”. Synnex and Concentrix gets scale, IBM gets out of an increasingly commoditised market shifting to automation. The key variable is the transition for customers. Clearly both parties will look to ensure that their customers actually experience excellence to ensure business continuity. As ever only time will tell.
If you require further information, please contact Phil Hassey, Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,