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BPO Providers Eye Mid-Market

Business process outsourcing (BPO) providers are looking to add mid-market companies to their roster of Global 500 clients, a new survey from Gartner finds.

Though the BPO definition varies most agree that the following functions can fit: human resources, logistics, procurement, engineering, marketing, sales, facility operations and management, legal, finance and accounting.

In 2002, 64 percent of survey respondents'BPO revenue came from large clients (more than $500 million in revenue) compared with 75 percent in a 2001 survey. Another 36 percent of the 2002 sample targeted companies with less than $500 million in revenue, compared with 25 percent in the 2001 sample.

BPO companies are also looking to new sectors, the Stamford, Conn., IT research firm said. In 2001, nearly every BPO firm was targeting Global 500 companies in the financial services sector, but as BPO gains more attention, Gartner analysts expect BPO to gain interest in other vertical markets.

"Financial services and large corporations are often among the first to try out new business models," said Rebecca Scholl, a Gartner senior analyst. "Now other vertical markets are formalizing their adoption of BPO."

While Scholl believes there are opportunities in other markets, BPO providers must exercise caution.

"Do not try to be all things to all people in BPO, which is impossible even for the largest BPO vendors," Scholl advised. "This mean selecting the appropriate mix, scope of services, countries and industries to target for BPO opportunism may lead to client disillusionment and unprofitable engagements."

Depending on how it is defined, estimates vary on the total market for BPO. A report by IDC last year predicted that spending on BPO would jump from $712 billion in 2001 to $1.2 trillion in 2006.