Everest Group Q1 Report: BPO Deals Reach Three-Year High, Captive Divestments Zero for Second Consecutive Quarter

DALLAS – (BUSINESS WIRE) – The global outsourcing and offshoring market continued to witness steady growth during the first quarter this year, led by a three-year high for Business Process Outsourcing (BPO) transactions as well as continued investment in new captives while no divestments occurred for the second consecutive quarter, according to Everest Group, an advisory and research firm on global services.

Outsourcing transactions saw a marginal decrease of five percent compared to Q4 2010 but an increase of 14 percent compared to the previous year. A one-hour Webinar will be held May 12, 9 a.m. CDT, to present study findings and insights as well as a discussion about the offshore services market in Brazil.

Everest Group’s Market Vista: Q1 2011, a quarterly report on global outsourcing and offshoring activity, reports first quarter global transaction volumes reached about US$3 billion in annual contract value (ACV). Compared to Q4 2010, the BPO market saw transactions increase by 25 percent, with adoption led by BFSI (banking, financial services and insurance), MDR (manufacturing, distribution and retail) and Healthcare verticals. Conversely, IT Outsourcing (ITO) transactions dropped 17 percent from the previous quarter.

Other first quarter 2011 findings include:

The Public Sector vertical continued to dominate ITO transactions while the BFSI and MDR verticals contributed towards half of BPO deals signed.

All geographies showed positive trends in the BPO market, whereas the ITO market only witnessed increased activity in the United Kingdom.

Volume of renewals and restructured deals increased by 10 percent from Q4 2010, but ACV of the deals dropped 17 percent.

In addition to four mega deals with contract values over US$1 billion, three of which were ITO engagements, 17 deals with contract values between US$200 million-1 billion also were recorded during the quarter.

There were 35 new captive announcements reported, with most activity in India, followed by other countries in Asia and the Middle East.

Offshore activity saw a decrease in location activity with 35 delivery centers established in the first quarter compared to 46 in the previous quarter. In addition to Asia, significant activity was also reported in Latin America.

In line with the trend seen in the past few quarters, service providers’ consolidated revenues and operating margins grew in the fourth quarter over the previous quarter. (Financials lag other service provider activity by one quarter.)

“The global sourcing market continues to see steady growth in terms of transactions. Contract volumes increased by 14 percent compared to the first quarter of last year, indicating secular growth in outsourcing and offshoring activity,” said Eric Simonson, managing partner of Research. “Transactions, ACV and captives activity is reflective of the emergence of hybrid sourcing models that extract maximum impact from sourcing.”


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