- There are the (relatively) large pure-play LPO providers who have global customers and are building strategic relationships with their clients. In reality there are really only a handful of these companies.
- Below them are a large number of smaller LPO suppliers who specialise in tactical, or project-based, work for their clients. Because the LPO market as a whole is fairly nascent, there is a lot of churn of suppliers in this group, with new ones being created just as quickly as others fail.
- Then there are the Business Process Outsourcing suppliers who have moved into the LPO market. These tend to be large, global organisations with a legacy of Knowledge Process Outsourcing, Finance and Accounting Outsourcing and even IT Outsourcing. LPO is simply another service line to move into.
The question is; which of these groups will ultimately succeed in the marketplace?
In our work as outsourcing advisors, we have issued LPO-based Requests-For-Information to over 50 providers, and have personally visited the delivery centres of a number of these in India. Add in our own research, and this experience has given us an unparalleled insight into the suppliers, how they operate and how they might fare in the future. We’ll obviously reserve some of those views for our own clients, but the comparison we want to make in this article is between the LPOs (in particular that first group of larger, established players) and the BPOs who want to play in the LPO space.
Perhaps the first thing we should say is that there are very credible providers out there who we would have no issues including on anyone’s long-list; the market is mature enough now that there are some very satisfied customers extracting real value from their relationships with their LPO providers.
So, when putting those long-lists together, and bearing in mind that you might be entering a relationship that will run for many years, how should you approach the issue of selecting between the nimble-yet-immature LPO players or the large and stable BPO guys?
If you look at the situation right now, one of the key learnings from our recent India visit was the credibility gap that still exists between the LPO and BPO players. Whilst the LPOs could offer roomfuls of qualified, experienced lawyers, and client lists from some of the most respected companies in the world, the BPOs were still focusing on process and technology, with only a handful of LPO-ish projects, some of which were simply serving their parent organisation.
If you were to put your GC in front of one of each of these (which we did with one of our clients) then, today, it would be the LPOs who would win hands-down. Having lawyers involved in running the company as well as providing the services, and being able to demonstrate established and satisfied clients for services similar to the ones that you might use, are really the only two things that matter to them. Suppliers can talk about processes, methodologies and technologies all day, but unless they have those two things then they’ll fail to get the attention most likely deserve.
So, should the BPOs just give up now? Far from it. The bedrock of process and technology is an excellent place to start, and expensive and time-consuming to build if you don’t already have it. Getting the right people in place is what these firms do best, and getting some relevant clients is only a matter of time.
As a customer, it really depends on whether you want to be the one who takes that risk (as a ‘foundation client’) now, or you wait until they have some more experience under their belt. There are pros and cons to each, but it will be important to look at it in the context of your overall sourcing strategy, especially what that might look like in a few years time. But, one thing is clear, either through organic growth or acquisition, it surely is only a matter of time when the BPOs are competing credibly alongside the LPOs.