Back Office Outsourcing Trend Currently Mercurial

With regards to spending and budget, it makes sense for companies to outsource back office functions which range from simple processes such as web data entry, to more complex functions such as procurement and to a certain extent, payroll.  The trend however in back office outsourcing is mercurial at best with some companies achieving more success than others such that it becomes quite unpredictable to determine at first glance how the back office outsourcing industry will fare.





Lloyd’s Banking Group (LON:LLOY), for example, is currently under fire for its decision to outsource 450 back office roles to its outsourcing partner iPSL, which is a direct result, the company says, of its integration with HBOS.  Likewise, BC Hydro’s outsourcing contract with Accenture (NYSE:ACN) is also attracting attention because of the former’s plans to restructure its back office work and potentially affect the status of the contract.



But even with its mercurial state of affairs, back office outsourcing looks to be going strong with companies signing on to share its workload with outsourcing companies in an effort to focus more on core functions rather than on non-core back office business functions.



If you’ll recall in a previous article we mentioned that Intelenet Global has signed an outsourcing partnership with Tata Teleservices (BOM:532371) to deliver finance and accounting outsourcing services which including back office processes.  The company cites its need of Intelenet’s expertise to manage its back end operations as one factor that lead to the company’s decision to outsource.  Likewise, Telstra is also looking at outsourcing some of its back office processes presenting an estimated $8o million revenue opportunity for outsourcing companies which could include Infosys (NASDAQ:INFY) and Tech Mahindra (NSE:TECHM) as well as HP (NYSE:HPQ) and IBM (NYSE:IBM).



Meanwhile, in a bid showing the industry’s potential for outsourcing companies.  Some are betting on future demand for back office services for growth plans.  Outsourcing company SPi Global, for one, is expanding its global reach as it extends its services to the Latin American market this year.  In a news article on the 15th of March, the company announced that it is opening a new office in the Latin Americas this year in order to cater to Spanish-speaking customers in the US.  The firm estimates that it will be starting operations in the next 3 to 6 months, offering both voice and back office services.  The company sees almost 70% of its business within non-voice services to which back office belongs to, while the rest are for voice services.



One company however who does not seem to be fairing well is outsourcing firm Xchanging (LON:XCH), who reported on the 1st of March a 0.8% decline in its 2010 adjusted operating profit to 55.5 million pounds.  The previous month, the company estimated that its operating profit for this year will likely be within the range of 55.5 million to 80.2 million pounds.  The company is attributing the decline to its acquisition and subsequent operation of its Cambridge IT line of business to which the company says that it has not been successful in countries such as the US and Australia.



The potential benefits that back office outsourcing presents are significant and even with its mercurial nature, some companies are seeing potential in the industry enough to pursue expansion plans.  This bodes well for the industry.



Author: Audrey B.