What makes these firms more special than the ones that ranked just behind them or that finished out of the running in our respective categories? These firms demonstrated a pattern of market leadership, innovation and outstanding customer service. Sometimes it is difficult to differentiate a so-called commodity-service offering such as claims processing or customer care. Believing that there’s no one-size that fits all service providers, we chose to include a few emerging companies in the mix, plus some providers known for their specialized offerings or vertical-industry expertise.

The study was aimed at identifying global service providers who exhibit balanced excellence in the way they run their operations, address client needs through service offerings, manage their client relationships and manage their human capital. We looked at a combination of factors including size, profitability, a multishore presence, demonstrated capabilities and staff training or certifications. Each of these areas is essential for a world-class service provider, but what distinguishes GS100 companies is their ability to effectively integrate and combine these capabilities to create value for their clients and stakeholders.

Effective Operations. GS 100 companies were asked to share information about their growth, geographic presence, revenue streams, size, and focus on outsourcing as a percentage of their business — information intended to generate a clear understanding of the company's historical growth trajectory and future strategy. For organizations that are looking at engaging a service provider, or renegotiating an existing contract it is important to understand the stability of the prospective partner, but perhaps even more relevant, the ability of the partner to provide solutions that reflect changing market conditions and evolving client needs.

Service Offerings. GS 100 companies were asked to share information regarding their portfolio of service offerings, their core skill sets, their key differentiators, and what type of processes and certifications the company employed to ensure high quality services delivery. Companies that excelled in this category had either impeccable focus on a specific service area or were positioned to cater to a client's comprehensive business needs. Service providers who aimed too broadly or were unable to differentiate their offering in some way tended to falter. The ability of a service provider to clearly communicate the offerings, ensure that true capability exists behind the slide-deck and the ability to provide consistent quality should be key decision criteria for leading end-user organizations.

Client Relationships. GS 100 companies were asked to share information about the quality, breadth and depth of their client relationships. Service providers who were able to demonstrate how they invest and maintain client relationships tended to perform well in this category. In a rapidly evolving market, client organizations often feel the brunt of exponential growth on the part of a service provider in the form of diminished attention and the appearance of the "B" team.

Human Capital. GS 100 companies were asked to share information about the scale, profile and investments they make in their people. In an environment where companies are increasingly struggling to recruit, hire, train and retain the right people, service providers who are able to get this aspect of their business right were appropriately rewarded. End-user organizations at times rely too much on the service provider to deal with personnel issues and are mainly concerned with the ultimate output. These relationships often result in unpleasant surprises along the way. The human-capital formula employed by service providers should be carefully reviewed by end-user organizations to avoid sub-optimal productivity, inflated cost and project delays or failures.

When evaluating a potential service provider, each end-user organization depending on its size, vertical industry and market strategy will have a very specific set of criteria used in the decision-making process. However, every customer of business and technology services needs to consider how their potential partner(s) stack up in the four foundational areas, and learn how the service provider drives value for their clients.

A Steady State It’s Not

• Overall, corporate demand is growing for global services and the sector is healthy:
• As a group, the GS 100 boast a 20% compound annual growth rate (CAGR), based upon reported numbers and estimates in the fiscal year 2004–2006.
• Altogether, these providers book more than $80 billion a year in outsourcing revenue.
• Revenue is predicted to grow at 25% per year according to a December 2005 Prudential Financial estimate.

By the Numbers

20.4% is the estimated & projected CAGR of the GS100, from 2004–2006, mirroring last year’s study from 2003–2005

About one in three members of the GS 100 are public, the rest are privately held

92% of the GS 100 have a U.S. sales and marketing presence, up slightly from last year

71% of the GS 100 have a U.S. legal presence, up from 67% a year ago.

Two-thirds of the GS 100 have a U.S. delivery location

Three-quarters of service providers say they are in compliance with Sarbanes-Oxley service rules

Four weeks is the average training time for new hires

Two is the median number of Six Sigma black belts at each company

ISO standards at 68% is the leader among all the quality audits undertaken by global service providers spanning the range of BPO, ITO and call centers, edging out the Software Engineering Institute’s CMM-I.

But while the industry itself is rapidly maturing it is not yet close to a “steady state.” There are expansions, contractions, mergers & acquisitions and investment strategies yet to be fully played out. A number of industry observers expect that 2006 will bring structural changes such as the consolidation of service providers. At the year’s end several leading global service providers like the $14 billion Computer Sciences Corp. (CSC) and $4 billion Affiliated Computer Systems (ACS) were either up for sale or seeking additional investment. The reported $8 billion ACS deal to capital investors from Bain Capital, Texas Pacific and Blackstone Group (according to several reports) surprised some industry analysts — ACS went public with more wins in the past year than any of its peers. The same investor coalition is apparently joining with Lockheed Corp. to launch a $12 billion takeover of CSC. Lockheed reportedly covets CSC’s government contracts.

Unquestionably, these investments and takeovers pose a challenge to CSC customers such as DuPont, and ACS customers such as McDonald’s Corp. Will the targeted companies take on additional debt? Will units or management be consolidated in a way that affects customer-service levels? Yet on the plus side the proposed buyers are tech-savvy venture capitalists. Texas Pacific boasts of Vivek Paul, Partner and Managing Director, who is the former Vice Chairman of Wipro and was responsible for building it into an IT powerhouse.

In recent months we were struck by a prescient comment by Manoj Saxena, CEO, Webify, who while speaking about Fireman Fund’s use of Services Oriented Architecture (SOA), said, "In the way that Michael Dell used interoperable parts to create a global supply chain, somebody's going to figure out how to create a global services [supply] chain." Architecturing a global-services strategy is the first order of business for executives in 2006.n

--With additional reporting by neoIT’s Eugene Kublanov and InformationWeek