Process outsourcing businesses manage key operational functions for their customers. Process outsourcing is distinct from IT outsourcing and typically refers to rule-driven administrative and professional services, such as customer contact, transaction processing and accounting. Increasingly, however, it also covers services with a high intellectual content, such as research and development.
By specializing in a few core areas, these companies develop unique expertise in managing processes and are able to deliver the required services more efficiently than in-house providers. Many of the best process outsourcers not only generate cost savings for their clients, but also drive revenue growth by improving the quality of service.
To achieve long-term profitability, a process outsourcing company needs a clear competitive advantage. In most cases, this will come from one of two sources:
Scale – the largest providers compete through the size of their infrastructure, their wide industry knowledge, their well-established processes, their ability to attract and retain large quantities of talent, their volume-based cost economies and, typically, the complementary offerings from sister companies.
Specialism – successful smaller-scale providers typically compete by providing industry-leading people, processes and technology to niche markets. The services are usually complex and non-commoditised, and the market may have significant barriers to entry.
As a significant global investor in outsourcing businesses, 3i tends to work with specialist companies who share one or more of the following characteristics:
- Strong client relationships and a deep understanding of the client’s industry and needs.
- A revenue model that is based on outcomes, not inputs, giving the outsourced provider the opportunity to increase margins through efficiency and innovation.
- A leading-edge technological platform that enables delivery of complex services and can be scaled up for extra volumes without significant cost increases.
- The ability to offer incremental, allied services that play to the provider’s deep sector knowledge.