Understanding the ARM + CRM = BPO Equation

Mike Ginsberg

The customer relationship management (CRM) industry has always run parallel to the accounts receivable management (ARM) industry. Consider that both industries consist of regulated, outsourced service providers that date their origins back to a time, many decades ago, when companies typically handled their own needs internally and only outsourced their basic needs. Over the years, because of technology advancement, intense client demands, significant market and regulatory changes, the ARM and CRM industries have evolved considerably on their own and have also been pulled closer together. Let’s examine why.

From inception, the similarities between ARM and CRM have been apparent although the industries operated separately from each other. The first call centers in the United States were created internally in the early 1960s by information dependent companies in industries such as airlines and banking. More industries adopted their own call center strategies over the next 30 years and third party specialist started to emerge as long-distance deregulation and technology improvements lowered costs and increased efficiency for inbound and outbound customer service. With demand for call center services surging in the 1990’s, more and more third party specialists were formed to help companies with their customer management needs and the global call center industry that is present today emerged. To learn more about the CRM industry, download our free CRM Outsourcing Industry Report here.

Hello ARM professionals, doesn’t this sound a little like the evolution of your industry? Collections as an industry also traces its roots back to the 1960’s when most credit grantors handled their collection needs internally and turned to bill collectors only as a last resort to recover highly delinquent past due accounts. As the amount of consumer debt increased and technology improved over the next 30 years, more and more credit grantors and governments turned to third party specialists, doing so earlier and earlier in the recovery cycle. To learn more about the evolution of the ARM industry, download our free report here.

Other trends have also linked these industries over the years, including:

1. Technology. The call center industry was initially driven by telephone related services made to handle high volumes of outbound and inbound needs. Collections were driven by sophisticated technology that could handle communications with vast numbers of consumers. Today, call centers and collection agencies have morphed into more elaborate customer-care oriented service providers in which only select players can provide on a large scale, leading to consolidation within the market.

2. Expansion. Both collection agencies and call centers have established near-shore and offshore centers over the years to cut costs and better handle client needs. Popular destinations used to be India and the Philippines; however coverage has become much broader for both industries including the Caribbean, parts of Eastern Europe, China, and Latin America. For both industries, the quality of service overseas and regulatory scrutiny has led some companies to bring their offshore call centers back to the U.S.

3. Efficiency. More and more CRM and ARM companies are employing work at home agents (WAHAs) who work from home rather than from a call center, reducing the need for large capital investment in facilities and cutting down employee turnover.

4. Population Changes. With the Hispanic population reaching 52 million in the United States, ARM and CRM companies are becoming more focused on delivering quality customer service to this market.

5. Adaptation. Social media is becoming a primary channel for consumer communications. Call centers and collection agencies are beginning to integrate social media management platforms into their business models.

6. Competition. Both markets are fragmented and fiercely competitive. In the CRM industry there are about fifteen global outsourcing firms that continue to dominate the industry in North America. The smaller call centers consist of hundreds of small providers whereas in the ARM industry consists of dozens of dominant players that specialize by market segment.

It is not coincidental that some of the largest ARM companies have re-established themselves as broader business process outsourcing (BPO) service providers and some of the largest CRM companies have acquired their way into the ARM industry. NCO, iQor and GC Services, arguably the largest collection operations in North America, all operate large call center operations. Teleperformance, Covergys and West, all have sizeable collection platforms.  Smaller and midsize players have also expanded their service offerings.  As market trends continue to evolve, we may see more of a convergence between the CRM and ARM industries.