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Outsourcing Market Trends Signalling Global Recovery

by: Admin

Saturday, June 12, 2010 |

Global Outsourcing Market

A recent report by global consulting and research firm, Everest, proves an ongoing theory that the growth of the global sourcing market is indicative of a recovering global economy. The IT outsourcing and offshoring industry has experienced particularly high growth – climbing 43 percent from the last quarter of 2009 to the first quarter of this year. In addition to that, transaction volumes are valued at US $3.9 billion, maintaining its stride for its third straight quarter.

According to Everest's quarterly report on the outsourcing and offshoring industry, activity in North America for Q1 of 2010 is up 18% while the ACV increased 36% in the fourth quarter of last year. Also reported was a 6% climb in transaction volumes in Q1 2010 from Q4 2009. The quarter featured four more mega deals of contract values over US $1 billion compared to last quarter.

With 35 new captive centers officially announced in Q1, the captive market remained on a steady growth path - a quarter of the 35 located in Asia and the remaining 11 in India. Outsourcing and offshoring suppliers in India revealed plans of aggressive hiring in order to meet the rise in demand, with leading IT providers Infosys, Cognizant, and TCS already annoucing a 50-60 thousand increase in staff throughout this year. Similar plans were announced by global-centric providers Capgemini, IBM, and CSC. The trend has begun affecting attrition rates as well as wage inflation in India, the leading offshore services location.

Compared to the fourth quarter of 2009, Business Process Outsourcing (BPO) accounted for 32% of deals signed with transaction volume increases of as much as 30%. Transaction activity in Europe experienced a marginal volume largely owed to a 33% growth in transaction volumes in the United Kingdom.

The Philippines joins Brazil, China, and India as locations that saw a notable increase in offshore activity, with 44 new delivery centers having been created. A significant amount of activity was recorded in Asia in Q1 2010 with its Tier 1 cities reporting more activity than its Tier 2 cities. Supplier transaction activity volumes remained steady overall.

“Outsourcing market activity during the last quarter was largely led by renewals and restructuring of existing contracts”, stated Everest Group Principal and Country Head India, Gaurav Gupta. Amneet Singh, Vice-President-Global Sourcing, Everest Group commented, “It is encouraging to see demand side momentum translate into 44 new supplier delivery centers in Q1 with activity continuing to be concentrated in Asia.”

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