| | TPI, the sourcing data
and advisory firm, has
released the findings
from its quarterly
analysis of the global
commercial outsourcing
industry for the first
quarter of 2008, as well
as the previous six
months.
According to the
latest TPI Index, which
tracks commercial
contracts valued at
greater than $25m, the
first quarter was within
the range of other
recent quarters in terms
of number of contracts
awarded and total
contract value (TCV).
Additionally, the
quarter had a tremendous
year-over-year increase
of nearly 20% in
annualised contract
value (ACV) – the value
of a contract divided by
its duration.
The first quarter of
this year saw 122
contracts awarded valued
at nearly $21bn in TCV,
and more than $4bn in
ACV. The quarter ranks
as the second best
first-quarter
performance ever for
ACV, pointing toward
underlying muscle in the
global outsourcing
marketplace.
With several mega
deals (contracts
exceeding $1bn in
total), Europe, the
Middle East and Africa
(EMEA) continues to lead | |
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| | – nearly $50bn – was one
of the highest in recent
years; only one other
comparable six-month
period in the past five
years had more TCV. ACV
also saw an unusual
level of activity during
the six months, with
more than $10bn in ACV.
By comparison, ACV for
the same period one year
ago was just under $8bn.
Finally, the 27 mega
relationships awarded in
the past two quarters
represent an all-time
high for any previous
six-month period.
Overall, the last six
months got the year off
to a very healthy start
and lifted the
historical trajectory –
due to greater TCV, ACV
and mega relationships –
suggesting that 2008 is
likely to achieve the
TCV levels of the past
two years.
"Since 2007 ended
with the signing of a
significant number of
global commercial
outsourcing contracts,
we added a view of the
prior six months to this
quarter's TPI Index to
determine if there was a
true trend of vitality
moving into 2008," said
Peter Allen, partner and
managing director at
TPI. "All and all, the
picture of the prior six
months was very robust
and indicates momentum
in the broader market | |
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| | that we haven't seen in
years. Looking forward,
we anticipate near
double-digit growth by
annualised revenue
measures of active
contracts during the
remainder of 2008."
Other major findings
of the latest TPI Index
include:
● Tougher economic
climate brings
opportunity for the
outsourcing industry to
have a defining year.
More than ever,
companies are looking to
their outsourcing
service providers to
deliver variability in
costs and lower overall
expense. In addition,
just as we saw after the
2001 recession, there's
an expectation that the
back-end return to
growth will be made
possible by the
outsourcing industry.
● EMEA on target
to meet or exceed the
number of contracts
awarded in 2007.
EMEA has maintained a
steady pace for the
first quarter and this
holds true even if the
mega deals signed in
this quarter are
discounted.
● Americas region
is demonstrating
structural changes in | |
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| | some of the most vital
measures of outsourcing
strategies.
While other countries
and regions are signing
more contracts of
increasing average
values, the United
States and Americas
profiles are shifting to
contracts of shorter
duration and value, from
ITO to BPO, and to fewer
mega relationships. The
average TCV of contacts
awarded in the Americas
has dropped 50%, from
about $206m in 2003 to a
little more than $100m
in 2008. The average
duration of Americas'
contracts in the first
quarter fell below five
years for the first time
ever.
The net effect is a
market in the Americas
in which offshoring is
increasing in
significance, services
are contracted in more
discrete units, and
cycle-times are shorter.
The service provider
community is
re-orienting itself for
this sort of market.
● BPO contract
awards.
The Americas remain
the largest user of BPO
by number of contracts
signed, while EMEA
accounted for more of
the TCV awarded.
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