CGEY purchases business outsourcing company
By Aleksander Nowacki
Cap Gemini Ernst & Young (CGEY) is catching up with its competition by acquiring a business process outsourcing (BPO) company in Kraków. The move, announced on the same day as another acquisition of a similar firm in China, will see the consulting and information technology company establish a presence in this country on a market that its competitors have already entered.
The deal is indicative of a global trend, as IT firms broaden their product lines by including more general business services, say market watchers. It is now gaining pace domestically, as CGEY follows in the footsteps of IBM, which acquired PricewaterhouseCoopers (PwC) Consulting last year, and California-based Exult, which clinched a $17-million deal to take over PwC's international BPO operations in June of this year.
CGEY's new acquisition, formerly a part of PwC Polska, currently serves only one client, conducting all global finance and accounting functions for Stamford, Connecticut-based International Paper. According to sources within CGEY, the company is planning to expand its Kraków operation's client base, although no time horizon for this was given.
The acquisition boosts CGEY's total employment in this country to more than 300, adding 180 new employees to the payroll. The company already had outsourcing services on offer in the IT and human resources areas. Experts say that its market share in the country is difficult to estimate due to the importance of cross-border services. The value of the BPO market globally is estimated at €108 billion (zł. 484 billion). The figure stands well below the value of the IT outsourcing market, estimated at $171 billion (zł. 679 billion), but it is quickly catching up, as many areas of the technology market have not yet effected a complete recovery from the dotcom bust. The BPO market's growth has been in the double digits.
Outsourcing accounted for 27 percent of CGEY's global revenues in 2002, compared to 21 percent the year before. According to Hubert Giraud, head of outsourcing at the company's Paris headquarters, "it is clearly the hotspot in our market."
A recent study by Accenture and the Economist Intelligence Unit found that 30 percent of companies worldwide outsource at least some of their accounting or finance functions. That proportion is thought to be much lower in this country, although no figures are available. So far, most of the market has consisted of services offered to multinationals, which use outsourcing locally in the same way they do on a global scale.
Giraud said that the importance of outsourcing is likely to grow domestically, as it is in the whole central European region, following accession to the European Union. Accession will also likely give a boost to offshore outsourcing services. Some of Cap Gemini Ernst & Young's competitors believe, however, that Poland is losing a race to land contracts in this area to neighboring countries. Hungary has traditionally been the strongest player in the region, while Slovakia and the Baltic countries are named as the strongest prospective markets.
Business process outsourcing has become a contentious political issue in the United States and other developed countries in recent years, as some politicians worry that outsourcing is pushing down an already weak job market. U.S. states such as Connecticut, Maryland and Washington are contemplating a ban on offshore outsourcing contracts to lower-cost places like India and central Europe.
