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TPI Index cites strongest-ever first quarter in outsourcing contracts
 
 The outsourcing industry
performed very strongly
in the first quarter,
according to advisory
firm TPI. Total contract
value (TCV) for contracts
worth $50m or more was up
173% year on year at
$22.7bn. The quarterly
figure represented a
record number of 83
outsourcing transactions.
TPI’s latest market
observations are
published in the TPI
Index, a quarterly report
on the state of the
global outsourcing
industry.
   “Restructurings of		 
 first-generation
agreements have had an
increased impact on both
the volume and the value
of contracts in the
broader market this
quarter, with
restructurings
representing 33% of the
TCV signed," said Peter
Allen, partner & managing
director, market
development. "This
compares to 24% of TCV
during the whole of 2005,
which was a record year
for restructurings."
   Restructurings include
renegotiations,
extensions and renewals		 
 to existing agreements.
The 19 contracts
restructured this quarter
were worth $7.5bn.
Contract restructurings
tended to increase the
average TCV for
outsourcing contracts
this quarter.
   Business Process
Outsourcing (BPO) also
saw a distinct increase
this quarter. The number
of BPO transactions was
up 63% year on year,
totalling 49, which marks
an all-time high for BPO
contracts signed in a
single quarter. In terms
of TCV, this quarter was		 
 also strong with $7.3bn
in total BPO value,
significantly higher than
this time a year ago.
   "In 2005, BPO TCV was
relatively soft, but both
this quarter and last
quarter have shown a
marked rebound, giving us
the best consecutive
two-quarter performance
since early 2004," said
Allen.
   American firms signed
approximately two-thirds
of all BPO contracts in
the marketplace this
quarter, led
predominantly by the
financial services		 
 industry. Financial
services accounts for
more than 30% of total
BPO contracts, and 46% of
the total value signed.
   TPI's pipeline has
expanded to a record
number of 79
transactions, valued at
more than $22bn in
anticipated awards, an
indicator of strong
potential market activity
in the coming months.
   		 
 
Is South Eastern Europe the next offshoring frontier?
 
  
   
 
 
 
 
 
 
 
 
 
 
 Croatia's readiness as
supply-side services
globalisation
destinations and rank
each country's offshore
readiness.
   As services
globalisation evolves,
companies are seeking
relevant, up-to-date data
in order to evaluate the
state of readiness of
developing countries as
locations and suppliers.
Central Europe has been
the primary beneficiary
of sourcing deals in the
European region, with
Poland, the Czech
Republic and Hungary		 
 leveraging their skilled
workforce and cost
competitive advantages to
garner business from the
United Kingdom and the
European Union. This has
prompted the SEE
countries to hone their
offering in order to more
fully participate in the
services globalisation
arena.
   In its white paper,
"Offshore Readiness of
SEE Countries", neoIT
evaluates the four SEE
countries' abilities to
attract and successfully
implement information
technology outsourcing		 
 (ITO) and business
process outsourcing (BPO)
work. The study examines
each country's
regulations, business
environment,
infrastructure and
resources.
   Of the four countries,
Slovenia appears to be
the most offshore ready,
given its excellent ICT
(information &
communications
technology)
infrastructure and a
supportive business
environment; however the
country's small labour
pool and high wage rates		 
 could prove to be a
disadvantage. Romania's
strength is its skilled,
cost competitive labour
pool and the relatively
low cost of setting up a
business. Bulgaria has
the lowest wage rates of
the four countries and a
fairly large labour pool,
but has low supplier
maturity. Croatia was
ranked the least offshore
ready of the four, with a
small labour pool,
relatively high wage
rates and low level of
supplier maturity.
  
   		 
 A new white paper on the
state of readiness of the
South Eastern European
(SEE) region has been
issued by neoIT, which
advises on outsourcing
issues. The new research
findings look at Romania,
Bulgaria, Slovenia and