According to a new report released by Baird, investor interest in the outsourced customer care industry is at an all-time high, with mergers and acquisitions in the sector hitting record levels in 2006 both in terms of the number of transactions and dollar value. The sector ended 2006 with $8.2 billion in total global M&A deal volume, including a record $7.4 billion in the U.S. and is currently on pace for continued strong activity in 2007.
In the report, M&A Market Analysis: Outsourced Customer Care Industry, Baird defines the Outsourced Customer Care industry with four broad categories: customer interaction services (customer service, technical support, marketing services and sales), fulfillment and logistics, CRM technology hosting, and consulting services.
The global market for these services has been expanding at a double-digit compound annual growth rate (CAGR) over the past five years. Industry sources estimate the global customer care market to be about $300 billion worldwide in 2006, including both in-house and outsourced services. The market is expected to reach $377 billion by 2010, with the outsourced segment contributing 25 percent of the total, or $92 billion, up from $58 billion, or 19 percent in 2006.
"Growth in outsourcing of services, including customer care services, is being driven by competitive pressures forcing corporate clients to improve their organizational focus and structure. Outsourcing a variety of non-core functions allows management to focus on core business operations, free up resources and better utilize existing assets," said Brian Doyal, a Managing Director at Baird and head of the firm's Business and Technology Services investment banking group. "Specific benefits of outsourced customer care include higher quality service at reduced costs, access to best practices and specialized expertise, which would be difficult and costly for an in-house staff to replicate."
Other key industry trends discussed in the report include an increase in the overall focus on customer service, market globalization, the competitive dynamics of offshore locations, the rapidly-expanding use of at-home agents, and the impact of new technologies.
