It is no small accomplishment for Affiliated Computer Services (ACS) to emerge as the top BPO service provider at a time when offshore pure-play BPO vendors are clearly scoring some points over integrated IT-BPO providers. ACS is neither pure-play nor primarily offshore.

But discerning observers (and competitors of ACS) would also know that ACS is the only integrated-services’ companies with significantly higher revenue from BPO services, at 74%, as compared to the remaining 26% from IT services.

That is surely an impressive transformation for a firm that started in IT services. ACS entered BPO quite early with a 1996 acquisition of Unibase, and followed it up with a combination of organic and inorganic (M&A) growth. Today, most of its biggest customers in the commercial space (the company still gets about half of its revenues from government contracts) are its customers for BPO, though many of them outsource both IT and business services to the company. What helped ACS win in this category is a combination of factors, the most important of which are, its solid grasp over the growing horizontal BPO areas of HR and F&A BPO, where it has an impressive client list and steady gain in the transactional BPO areas in financial services and insurance. ACS’ clients in HR outsourcing include big names such as Delta Airlines, Motorola, Chubb & Sons and Goodyear.

With its Mellon HR acquisition, ACS’ portfolio of clients in this area took a big leap. GM remains one of its biggest clients in F&A. ACS has been succeeding in the vertical-specific transactional BPO with clients such as American Express, UPS and MetLife. In fact, customer service in the form of call centers, which ACS was late in getting into, has also seen major customer wins like Nextel. With its LiveBridge acquisition last year, that area is expected to become stonger.

Though it started late, ACS has stepped up its offshore-delivery capability, setting up facilities in India, China, Malaysia, the Philippines and Ireland, in addition to nearshore facilities in Mexico, Argentina and Brazil. In India, it has ramped up fast by taking headcount to 3200 in just three years. ACS’ impressive showing in the Global Services 100 survey also stems from its focus on BPO, unlike others in the big six (IBM, HP, EDS, Accenture, ACS, CSC) category. According to TPI, an outsourcing advisory firm, while the collective market share of big six firms dropped significantly (38%) in new contracts, ACS was the only vendor that gained market share.

Mark King CEO, Affiliated Computer Services(ACS)

However, going forward ACS is likely to face challenge from emerging broad-based players such as Genpact and pure-play BPO specialists such as Hewitt and Cambridge. What also remains a cause of worry is the lack of investor confidence despite growth in revenues and fairly good earnings.

While IBM and Accenture score because of their global presence, offshore vendors such as Infosys, Wipro and TCS impress the Street with their 30%–40% annual revenue growth. Companies in the middle such as ACS and CSC miss the limelight. Probably that is why at press-time, the company was weighing an investment or possible buyout from a group of venture-capital firms.