The Customer Care industry is benefiting from a solid economy, increased complexity of calls, and newer verticals, while under some pressure from the secular transition to automation; we view risk/rewards as pretty balanced overall (trading above three-year average multiples). We expect the market to grow low single digits over the next few years, with reasonable growth from newer verticals partially offset by pricing pressures, telco vertical and digital transformation. Give different customer and vertical concentrations, some companies can show out sized growth or declines.
The Customer Care industry has seen some positive and negative trends.-Newer verticals and tech solutions are helping. We believe some verticals are growing well, along with certain products.-Digital automation can be positive and negative. Increased digital products and automation puts pressure on the industry as clients demand less live agent interactions,yet companies that help clients with digital can see some benefit.-Somewhat resilient in a downturn. In the last downturn, it took a little longer for the impact to hit the call center industry. By mid-2009, volumes really dropped off because companies were shutting down their services.-Company-specific impacts. We think some companies can perform better/worse than the overall industry, based on concentrations within certain verticals/clients/service offerings (i.e. communications softness)
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We like the BPM industry as a strong above-market growth industry with highly recurring revenue characteristics. We expect market growth of high single/low double-digits over coming years, and view the industry as somewhat recession-resistant given highly recurring/non-cyclical work, existing clients adding services,reasonably low penetration, and very high renewal rates.
The BPM industry continues to grow around high-single-digits, with high levels of recurring revenue.-Market expanding nicely -- Many participants can win given solid secular growth backdrop. Growth opportunities are not dependent on stealing clients, as (1) existing clients keep spending more (and renew at high-90% rates), and (2) many clients are still new to outsourcing.-Broadening client needs -- Clients are increasingly looking at full redesign plans that can include several-year ramps of recurring BPO services.-Industry growth strong -- all growing around high single/low double-digit organic constant-fx growth.-Fairly resilient in a downturn - The work is highly recurring, and the enterprise group has a larger/more diverse client base than in 2008/2009.
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The IT outsourcing/consulting industry likely continues to grow around mid-single-digits organically driven by the move to digital. While there continues to be some pricing pressure in the more commoditized parts of IT outsourcing, the companies specializing in differentiated cloud/digital/analytics have an advantage (these higher value offerings are growing over above mid-teens organically). Some discretionary client projects may get cut in a recession, but we acknowledge they also have a high level of recurring business.
The IT outsourcing/consulting industry likely continues to grow mid/high single digits organically driven by move to digital. There are levels of recurring revenue, but some discretionary-driven revenue as well. In a downturn, these companies may be negatively impacted as some discretionary spending/IT projects for clients get cut.
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