The current slowdown in the global economy and the emergence of CRM technologies is expanding the customer base and revenues of outsourcers. The outsourcing of contact centers and CRM functions is set to grow rapidly, as businesses look for new ways to improve service and retain customers for a low upfront cost. This growth will also drive pan-European consolidation.
A new report predicts CRM outsourcing revenues in Western Europe will grow to $10.5 billion by 2005.
Datamonitor’s new report, Customer Relationship Outsourcing in Europe: Outsourcing call centers and CRM in seven major European markets, predicts that European spending on the outsourcing of customer relationships will grow from $5.1 billion in 2001 to $10.5 billion in 2005.
Although clients’ short-term need to cut costs will squeeze margins, this will be offset by the growth of value added services, such as CRM application hosting, and revenues will grow faster than agent positions over the next four years.
The UK is by far the largest European market for outsourcing taking 45% of total revenues in 2001. Germany and France, which make up 20% and 14% respectively, are the next biggest markets with the Netherlands, Italy, Spain and Ireland following behind them.
Traditional customer relationship outsourcing has primarily focused on providing telephones and people. However, the range of services on offer is now expanding. Many larger outsourcers have begun to provide services outside of the contact center, such as billing and fulfillment. In addition, outsourcers are now beginning to offer operational CRM applications, such as sales force automation (SFA), and the analytical CRM applications that sit behind them.
By making use of existing client hardware, applications, premises and personnel, outsourcers are becoming more flexible as well as offering additional services. This is vital if outsourcers are to expand the range of products that they sell to their clients.
At present the market in Europe is highly fragmented and nationally focused. Most national markets have a few large players who, together, command well under half the market. The largest single player most commonly does all its business in that market. Large pan-European outsourcers, with a foot in many markets, are taking a larger slice of the pie.
This picture is changing as vendors begin to consolidate both within national markets and across Europe. The larger nationally focused players, who are often bigger than the pan-European operators, are looking beyond their borders for international acquisitions and alliances, while individual national markets consolidate.