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More Captive Center Activity Seen in Q2 2012

by: Sarah Joson

Friday, September 7, 2012 | Outsourcing News |

Transactions for captive centers to surpass outsourcing deals

In an article posted at BPOOutcomes.com, Dan Berthiaume recounted that for the second quarter of 2012, transactions for global in-house centers (GICs) or <a "="" title="" href="https://www.microsourcing.com/virtual-captives.asp">captive centers were at a stable rate, and were seen surpassing outsourcing deals even with the growing activity for high-valued services.
The “Key Market Developments in Q2 2012: Market Vista Briefing” webinar held by global research firm Everest Group pointed out several trends that affected the entire outsourcing industry during Q2 2012.

GIC deals are at a steady rate.
For Q2 2012, construction and development of GICs were at a stable rate, marginally growing from 18 to 19. At a year-over-year angle, it appears to have plummeted nearly 50% from 33. Still, the most recent figure is the highest recorded since Q1 2011. Meanwhile, Q3 2011 posted 20 and Q4 2011 posted 23. However, from last year’s Q1, only one GIC was dissolved and it happened during Q3.
For the outsourcing segment, deals dropped 7% to 411 in Q2 2012. From Q2 2011, the number of deals fell 20%. However, Q2 2012 was seen as the period with the most number of outsourcing deals at 508. 

Tech and manufacturing propelled GIC activity.
Technology and manufacturing sectors are the key drivers of GIC setups and expansions. Of the 37 GIC setups and expansions that happened during this year’s first semester, nine came from manufacturing and 19 came from the technology sector.

On the other hand, traditional outsourcing is slowing down for the banking, financial services, insurance (BFSI), manufacturing, and energy segments. Proof of this is the 25% decline (year-over-year) in BFSI outsourcing deals from 98 in Q2 2011 to 73 in Q2 2012.

A 10% decline was seen for the manufacturing outsourcing deals, from 76 to 68. Technology, which relatively affected other outsourcing transactions (technology, telecom, travel & logistics and miscellaneous companies), fell from 178 to 125.

Data from Everest Group also showed that more and more outsourcing deals are done in Asia-Pacific, Latin America, and Africa where contracts increase 36% or from 66 in Q1 2012 to 90 in Q2 2012. For the same period, deals from North America, one of the major markets for outsourcing, dropped 12% from 150 to 132. Another region that experienced a decline was Europe (excluding UK) which posted a decrease of 22% from 137 to 107. However, UK posted a slight decline from 88 to 82.

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