Having lost out to rival Capita recently on the £500m Army recruitment deal (see Capita trumps Serco to Army recruitment deal), support services and BPO giant Serco has bounced back with its own megadeal worth £430m over ten years, with UK online and home shopping retailer Shop Direct Group.
Serco will provide customer contact services to Shop Direct from 1 July, and take on approximately 1,800 contact centre and administration employees and deliver servces both onshore and offshore. The new contract actually builds on an existing relationship between Shop Direct and contact centre provider The Listening Company, which Serco acquired recently (see here).
Of course, Serco will be keen to see this win as validation of its recent BPO acquisition strategy (see Serco buys Intelenet for offshore BPO entry), and launch of its Global Services ‘BPO’ operation (see Serco cuts UK workforce). It is certainly one of the largest IT-enabled BPO deals Serco has won, and will give its new GS operation plenty of impetus. Moreover, what it shows us is Serco’s financial strength and ability to win megadeals against smaller competition.
Deals of this size incur high upfront costs, and this precludes smaller and less financially secure players from competing. In this deal, Serco is investing c£25m (or c6% of the total contract value) over the next two years as the programme is implemented in stages. Serco is also investing in new technology such as web chat and mobile digital services. There is no mention on the margin it expects to achieve.
Nonetheless, the deal is an important win for Serco and for its ambitions in the UK BPO/BPS space. Along with Serco's other BPO win recenlty with Freemans Grattan Holdings, it points to an increasing acceptance of BPO among the non-bricks and mortar retailers.