TPI Data Shows Resurgence of Business Process Outsourcing

Data Shows Resurgence of Business Process Outsourcing

Fueled Solid First Quarter in European Sourcing Market

1Q11 EMEA TPI Index: BPO total contract value hits 2-year high

TPI, an Information Services Group company and the largest sourcing data and advisory firm in the world, today released data showing relative strength in the outsourcing market in Europe, the Middle East and Africa (EMEA) during the first quarter, primarily as a result of the recovery of business process outsourcing (BPO) and some significant mega-deals awarded in the region.

The 1Q11 EMEA TPI Index recorded total contract value (TCV) of Ђ8.1 billion, down 28 percent quarter-on-quarter but just 5 percent year-on-year, making it one of the stronger first quarters of the last decade. In comparison, with just Ђ14 billion in TCV awarded, the global market turned in its worst first-quarter performance in a decade.

The BPO segment awarded Ђ3.2 billion in TCV, more than triple the total during both the prior quarter and the first quarter of 2010 and the highest in two years. While that total included a Ђ2 billion Contact Centre deal in Saudi Arabia, BPO contract volume still rose by 65 percent.

“The resurgence of BPO activity during the first quarter of 2011 is a very encouraging sign for the outsourcing market in EMEA,” said Duncan Aitchison, Partner & President – EMEA, TPI.  “If the tempo of awards continues throughout the year, BPO activity will easily surpass the region’s 2010 results.”

Now in its 34th consecutive quarter, the TPI Index provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media. It is the industry’s authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.

Overall, despite the drop in TCV, the number of contracts signed during the first quarter remained steady year-on-year in both EMEA and globally, reflecting the ongoing trend toward smaller awards.

Following an unprecedented surge in the fourth quarter, mostly in the Nordics, restructuring activity in EMEA returned to normal historical levels, dropping 76 percent quarter-on-quarter.

The decline in restructurings, defined as contracts that are renewed, restructured or renegotiated, hurt IT outsourcing (ITO), which recorded just Ђ5 billion in TCV in the region, down 52 percent quarter-on-quarter and 36 percent year-on-year.

However, a decline in restructurings means awards of contracts for new scope of outsourcing activity represent a larger part of the market. New-scope TCV in EMEA reached Ђ7.4 billion in the first quarter, up 48 percent year-on-year and down just slightly quarter-on-quarter. 

Among sectors, Telecom & Media and Energy accounted for 66 percent of TCV in EMEA during the first quarter of 2011, predominantly due to the award of large deals. Financial Services, usually one of the region’s strongest sectors, dipped quarter-on-quarter, accounting for just 8 percent of TCV.

“The outlook for the rest of 2011 suggests a healthy level of contracting activity and a modest amount of restructuring in the mix,” Aitchison said. “Overall, we are cautiously optimistic about next quarter and more bullish about the second half of 2011.”

Source: sourcingfocus
CATEGORY: Press-Releases

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