| | The latest TPI Index
shows a strong increase
in total contract value
and annualised contract
value in the fourth
quarter after a sluggish
start to the year,
reflecting a strong
industry demand profile
entering 2008. The
latest report, published
by sourcing advisory
firm TPI, is a quarterly
analysis of the global
commercial outsourcing
industry for the fourth
quarter of 2007, as well
as the year overall.
Momentum in the
fourth quarter was
partly driven by the
highest level of total
contract value awarded
since the first quarter
of 2006, and the best
quarter of annualised
contract value in 11
years. While total
contract value for 2007
was the lowest in the
past five years, the
fourth quarter was a
bright spot fuelled by
an uptick in mega
relationships.
Annualised revenue – an
estimate of the revenue
potential available to
providers – for the
global commercial
outsourcing market in | |
|
| | 2007 grew by
approximately 7%,
confirming an upturn in
the market. TPI
estimates that there
were 2,700 active
contracts yielding
approximately $79bn in
annualised revenue at
the end of 2007. An
increase in contract
value was also seen in
new scope deals, which
were up 13% in 2007,
representing truly
incremental demand.
"A landmark regional
shift also took place in
2007 as Europe, the
Middle East and Africa
(EMEA) overtook the
Americas in outsourcing
activity. It marked the
first year ever that the
number and value of
outsourcing contracts
awarded in EMEA exceeded
those measures in the
Americas," said Peter
Allen, partner and chief
marketing officer, TPI.
"Also for the first year
ever, EMEA accounted for
more than half of all
global Business Process
Outsourcing (BPO) in the
broader market."
In the Asia Pacific
region, countries known
for providing
outsourcing resources | |
|
| | are becoming buyers of
outsourcing themselves.
Companies in India,
which nearly doubled the
value of their
outsourcing work, topped
the list of buyers of
outsourcing in Asia
Pacific in 2007,
surpassing companies in
Australia and Japan.
Companies in China
signed several large
outsourcing contracts as
well in 2007.
The India-heritage
service providers also
experienced notable
growth in market share,
up over 40%
year-on-year. This past
year marked the first
time that these
India-heritage providers
matched the share of the
big five European
providers. Overall, the
market witnessed a
decline of 12% in the
number of service
providers winning at
least one of the 487
contracts awarded during
the year.
While contract value
was strong on both a
total and annualised
contract value basis in
the fourth quarter, the
number of specific
contracts awarded (108) | |
|
| | was the smallest since
the third quarter of
2005.
"2007 marked the
first year in a long
time that the absolute
number of outsourcing
contracts awarded
declined
year-over-year," said
Allen. "This decrease of
12% comes after several
successive years of
growth in the number of
contract awards.
Although we saw this
trend develop throughout
the year, it was
atypical to experience
it in a fourth quarter
which is usually more
robust in terms of
absolute award volumes."
BPO experienced a
resurgence after a
lacklustre performance
in preceding quarters.
The fourth quarter saw
the highest total
contract value for BPO
contracts since the
fourth quarter of 2005
and the highest
annualised contract
value since the second
quarter of 2004. This
was due to a number of
large contracts awarded.
Looking deeper inside
the BPO sector,
financial services | |
|
| | outsourcing (FSO) and
multi-process BPO
markets were strong.
Human resources
outsourcing (HRO) demand
fell by 34% (contracts)
and more than $2bn (TCV)
in 2007 compared to
2006. Provider
capability challenges
across the HR spectrum
was a reason for the
lag, however, providers
are continuing to work
on the maturity of their
service offerings.
The TPI Index tracks
and analyses trends in
transactions awarded by
industry, geography and
service provider through
commercial contract
awards valued at a total
contract value of $25m
and greater. Typically
evaluating contracts
with a TCV of $50m or
greater, TPI expanded
its definition of the
broader outsourcing
market in order to
provide better insights
into the dynamics of the
commercial outsourcing
industry.
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