The low cost advantage and broken business model, which are the key drivers of the outsourcing, will lead to a phase of widespread consolidation of global outsourcing units in the next couple of years, according to a research report from Forrester Research. | |
| Even the top-tier Indian firms will have to rely on acquisitions to compete with global giants like IBM, EDS or CSC. |
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| The report analyses potential buyouts of global outsourcers by private-equity firms as well as the trend among the outsourcing industry leaders' scramble to buy or be bought. |
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| It indicates that leading equity buyers believe there's an opportunity to make money fast in the outsourcing space, and that mergers and acquisitions could dominate this space mainly due to double-digit growth in new deals, long-term contracts, and the popularity of outsourcing. |
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| The report adds that given the recent hostile takeover attempts in this space globally, expectations of seeing many leading outsourcers making aggressive moves to protect their businesses. |
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| These strategies will range from acquiring other competitors to acquiring their own stock. Already, there are firms (like EDS, CSC, ACS) that have made moves on these lines. |
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| For the top-tier Indian firms, the report asserts they will likely have to acquire either BPO firms with vertical industry knowledge or "� infrastructure outsourcers with experience of managing servers, desktops, or networks if they are going to compete head-to-head with top global firms. |
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| The report states the level of experience required before a customer will trust its operations to a third party is something the Indian outsourcers do not have yet. So they will likely have to buy their way in by acquiring firms - or similar firms - such as Getronics or Siemens Business Services. |
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| According to the report, in a leveraged buyout scenario of a major outsourcer, shareholders and the private equity firms will emerge likely winners; but the universal loser in all of this will almost certainly be the outsourcing customer. |
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