Outsourcing Market Holds Steady from Renewals amid Concerns over Weak Economy, Says Everest Research

The global outsourcing market remained steady in the third quarter this year due to transaction activity largely fueled by renewals and a healthy captive market, according to Everest Group, a global consulting and research firm. A one-hour Webinar will be held November 9, 8 a.m. CST, to present study findings and insights.

Everest’s Market Vista: Q3 2010, a quarterly report on global outsourcing and offshoring activity, reports global transaction volumes for the third quarter were similar to the previous quarter with deals accounting for US$3.4 billion in annual contract value (ACV). Outsourcing of IT services (ITO) improved while Business Process Outsourcing (BPO) activity marginally decreased compared to the previous quarter. ITO activity was led by five “mega deals,” each having contract values over $1 billion, that significantly contributed to the global sourcing market’s 13 percent increase in transaction ACV over the previous quarter.

Other second quarter 2010 findings include:

  • North America continued to account for about one-third of total transactions; North America and the United Kingdom contributed toward about one-half of all deals. Notable activity was reported from select geographies including Spain, Germany and India.
  • The BFSI (banking, financial services and insurance) and MDR (manufacturing, distribution, retail) verticals continued to dominate transaction signings with some high-value contracts also reported in the public sector.
  • In addition to the five ITO mega deals, 60 large deals with contract values exceeding $50 million also were recorded during the quarter.
    A healthy captive market witnessed a fifth consecutive quarter of robust growth with 25 new announcements, including captive announcements in Africa and the majority in Asia.
  • Offshore activity saw 34 delivery centers established in the second quarter, the majority in Asia followed by Eastern Europe and Latin America.
  • Consolidated revenues increased across offshore-centric suppliers whereas traditional global suppliers saw a marginal decline during the quarter.
  • M&A activity for suppliers substantially increased with 22 acquisitions, almost double the number in the first two quarters combined. The quarter also saw 57 new alliances compared to 52 and 61 in the previous two quarters.

“The global outsourcing market is holding steady and is being upheld by an increase in contract renewals and traction in the ITO segment,” said Eric Simonson, managing partner of Research. “The slowing growth in BPO is not surprising given a slow post-recessionary recovery as well as anti-offshoring sentiment in the United States.”

Source: Tekrati

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