| | 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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