Outsourcing's Acquiring Minds

Last week’s decision by General Electric to sell a majority stake in its Indian outsourcing unit, GECIS, to two private-equity companies confirmed what industry analysts have been saying for months: The business-process outsourcing sector is in the midst of a consolidation wave.

But, the question remains: Who’s going down the aisle next?

Predicting acquisition activity can be a fool’s game, especially in a market as far-reaching as business-process outsourcing (BPO). Unlike information technology (IT) outsourcing, which deals primarily with software development, the former is a catchall category that usually refers to a company’s non-core operations. Examples include insurance claims processing, payroll operations and customer support call centers.

Though not always sexy, BPO is lucrative—and it’s growing. The sector is expected to generate revenue of $117 billion in 2004 and $128 billion in 2005, according to Kennedy Information, an industry consulting firm. Over the next three years, the sector is forecasted to grow 9.6% annually worldwide, versus an overall industry growth rate of 6.7%.

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