Customer management services (CMS) is no longer the red-headed step-child of the BPO world.  In spite of the exit from this area of IBM, most CMS pureplays are currently achieving improving margins and revenue growth. With multi-channel delivery proving crucial in winning new contracts, and the increasing importance of big data and analytics in the value proposition, 2014 is set to be an extremely interesting year.

While multi-channel is increasingly important, not all multi-channel CMS delivery is created equal. NelsonHall has identified three distinct multi-channel delivery models:

• Unlinked multi-channel, the most simplistic form of multi-channel delivery, entails delivery of a service in various channels by separate agents, with no connectivity between the channels
• Linked multi-channel; here services are delivered by different agents but they are able to view a customer’s lifecycle of interactions across all channels
• Unified multi-channel, the delivery of a multi-channel interaction by a single agent. As with the linked model, the agent has a complete view of previous customer interactions.

In 2014, we can expect to see a slowdown in the growth of the unlinked multi-channel model, but much greater growth of the linked multi-channel delivery model as a consequence of the increased focus of customer experience enhancement. This model is effective at delivering a better customer experience, greater conversion rate, and a reduction in customer churn for larger scale interactions. The telecoms and retail sectors will lead this adoption, particularly in support of customer care and up/cross sell strategies.

The unified multi-channel model will also grow during 2014 although at a slightly slower rate than the linked model. This model will continue to be used for lower volume, higher value engagements. While the adoption of this model is unlikely to match that of the linked multi-channel platform, due to its limited application in high volume engagements, organizations are recognizing the potential of this model for strategic applications. Some voice-only contracts are now being won and lost on a vendor’s ability to provide this unified agent model of delivery. Vendors who we see capitalizing on this include Sitel, Serco, Teleperformance and Sutherland.

Vendors offering wraparound desktops to adapt client’s legacy systems to multi-channel delivery will continue to lead the growth in the multi-channel CMS market during 2014. The majority of the leading CMS vendors will have launched their multi-channel platforms by mid-2014.

One of the key channels of this multi-channel CMS delivery model is social media. The growth of this channel during 2014 will be huge with growth outstripping any other area of BPO, albeit from a small base. The drive behind this adoption in 2014 will be the need for increased customer experience enhancement although social media will also increasingly be adopted for revenue optimization strategies. The high-tech, manufacturing and retail verticals will lead growth in the social media management BPO market in 2014. Manufacturing will continue to focus on using social media BPO for gaining market insight and competitor intelligence while the retail & consumer electronics sectors will use it for customer care and lead generation opportunities.

So what are the trends in global delivery?

Nearshore destinations have previously mainly handled voice interactions. We are now seeing these destinations also being increasingly used for non-voice services such as webchat, email and social media.

There is a seismic shift in the CMS BPO vendor landscape, with M&A activity leading to the emergence of two new heavy hitters:

• Concentrix’s acquisition of IBM’s CMS business will shift it this year into the top ten global CMS vendors by revenue
• Convergys’ acquisition of Stream will create a pure play CMS organization with annual revenues of ~$3bn, making it number two in size globally, behind Teleperformance. The deal has been in the pipeline for a number of years. The acquisition will bring together two well-performing organizations with complementary capabilities in terms of global delivery and offering portfolio which will result in a company capable of winning high-value, transformational contracts, including outside the U.S.

Looking at some other CMS BPO vendors who are ones to watch in 2014:

• Xerox continues to grow its European footprint with the imminent acquisition of Invoco, a German CMS vendor. And it is still only January! Expect to see further M&A activity in 2014: LATAM is a region of interest for several major players, both because of growth in the domestic market and also to serve the U.S.
• Sitel has made significant headway in addressing its profitability also in developing its multi-channel and social media capabilities. Holding company Onex has now held a majority stakeholding in Sitel for 15 years; given vendor consolidation, could this situation change in 2014?
• Transcom is still going through a transitionary period. The firm made divestments in unprofitable locations including Canada, Chile and France in 2013 and has begun to divest its credit management services division. In spite of these divestments, topline growth has been promising with Transcom averaging double digit growth over the last five quarters.