Outsourcing service providers serving the mid-market - defined as companies with $1bn to $3bn in annual revenues - face challenges that differ from working with large corporate buyers. How do they provide the same type of services as they do for enterprises and stay profitable, especially when offshoring labor arbitrage is something they want to avoid?

Mid-market firms feel "a greater sense of urgency to remove general and administrative costs than the larger enterprises do," says Mike Atwood, an independent senior outsourcing consultant. A just-released finance and accounting report from HfS Research found 90 percent of mid-market companies outsource to reduce cost, according to CEO Phil Fersht. Fifty percent reported they outsourced to transform and reengineer processes.

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