New NCO Group Should Expand in BPO Market: Analyst

If NCO Group’s $325 million deal to acquire Outsourcing Solutions, Inc. closes as expected next year, the new company will be in a strong position to compete with larger companies in the massive business process outsourcing (BPO) market, according to a BPO analyst.

The acquisition, announced last week, would merge two of the largest collection agencies in the country. But both companies have recently been emphasizing growth in the broader BPO.

Andy Efstathiou, director of the banking sourcing program at BPO analyst Nelson Hall, told insideARM.com that both NCO and OSI have long been on his company’s radar screen. “They are already both major players,” said Efstathiou. The combined company should provide an even more robust platform for growth in the sector, he explained.

“It’s going to be easier for the new NCO to upsell other services to existing clients,” said Efstathiou. He concurred with comments from an NCO executive last week "NCO-OSI Deal Signed, Now it has to Get Done," Dec. 13), that OSI has a strong position in first-party collections compared to NCO’s core competency of third-party work. That difference alone could lead to additional service offerings, said Efstathiou.

But Efstathiou cautioned that toggling between first-party and third party work is very tricky. “The company must carefully guard their clients’ brand,” he said. “First-party work is typically done under the client’s name, while third-party collections are done under the servicer’s name. The handoff between those two services must be done very carefully.”

While there is plenty of room to expand service offerings into other BPO segments, accounts receivable management and collection services represent the highest growth area in BPO, according to a recent report from BPO analysis firm EquaTerra. According to the report, growth in demand for ARM and collection services outpaced all other services in the finance and accounting umbrella. Total demand for ARM work was eclipsed only by demand for accounts payable outsourcing services.

Any impact the newly-expanded NCO will have on the broader BPO market will hinge on integration, said Efstathiou, and the number of OSI legacy sites that stay open or under full operations capacity. Neither company commented last week on integration plans.

OSI President Kevin Keleghan did tell The Columbus Dispatch (Ohio) Wednesday that he does not expect major changes for the 750 employees the firm currently has in Ohio.

OSI has three locations in the state: Columbus, Westerville, and suburban Cleveland. Keleghan told the paper that due to the narrow focus of the workers in those offices, he felt the centers, and their jobs, were safe.