Outsourcing News for May 2012 | MicroSourcing
As the effects of the recent economic downturn continue to plague Australia, top business executives shift focus on innovation, streamlining business processes, and upgrade of IT functions to drive growth.
A research from leading market consultancy firm IDC states that the ability of companies to keep up with the latest technological trends in the market is crucial in today’s fast-paced business environment. IDC Australia’s Senior Market Analyst Raj Mudaliar said another strong point that business leaders should look into is customer support to reinforce retention, centricity, and client base to keep the business going.
IT outsourcing services market in Australia projected to reach $9.5B by 2016
He adds that the IT outsourcing (ITO) services market in Australia was valued at $7.3 billion in 2011 and accounted for majority of the entire IT services market. It is also projected to reach $9.5 billion by 2016 with a compound annual growth rate (CAGR) of 5.4 percent for 2012-2016.
On the other hand, Mudaliar said the infrastructure services outsourcing (ISO) market was propelled by long-term cost saving goals, simplified IT infrastructure, as well as access to the latest technological advancements and talent pool with technical skills.
Other factors that are seen to affect Australia’s business environment are the looming economic challenges in Europe as well as the recession in the US and its effects on China which is the largest trading partner of Australia.
The IDC study also shows that the increase in labor and operational costs, tapping new customers, and penetrating new markets are the main concerns of Australian businesses in 2012-2013. Moreover, IDC shares that the concerns of CIOs for 2012 are consistent with their report which are lower costs of infrastructure, partnerships, and stricter IT environment.
According to a study by the Philippine Software Industry Association (PSIA), the country’s software services outsourcing sector grew by 37 percent last year as more clients outsource IT and software requirements to service providers in the Philippines. The sector posted $993 million in revenues and an increase in employment rate at 11 percent.
Increase in IT outsourcing revenues
PSIA President Nora Terrado said the increase in IT outsourcing revenues can be attributed to process optimization and improved technical workforce as a result of the efforts of both industry players and the government.
It was observed that local industry players are moving from providing full services to product development. PSIA has launched PD/SIG, a special interest group focusing on product development. It was created to help the country’s software development sector in producing products and offering them to customers.
To sustain the growth of the sector, Terrado said they are now looking at new opportunities. Capability development and innovations in both products and services are crucial for the continuous growth of the sector especially with the emergence of the cloud and challenges in the global market.
European Data Center Outsourcing Market to Grow 14%
BroadGroup Consulting’s fourth annual report predicts an increase in Western Europe’s data center outsourcing activity.
The firm’s report, which is set to be presented at the DataCentres Europe 2012 event, denotes that outsourcing only accounts for 15 percent of the entire European data center market.
The report also estimates that the market for third party data center providers will grow by 14 percent between 2010 and 2014, and a 25 percent increase in data center outsourcing transactions amongst European companies and third party service providers will be seen by 2014.
BroadGroup Consulting Managing Director Steve Wallage said outsourcing will be a game changer for data center providers in Europe. He adds that BroudGroup was able to identify 400 small and specialist third party facilities in the UK alone. Meanwhile, larger providers are seen to grow and expand. He also said adoption of the cloud, digital media, online shopping, social networking, and mobile technology are the key drivers for the growth of data center outsourcing.
Global IT outsourcing revenues increased 7.8%
According to a report from global research and consultancy firm Gartner, global IT outsourcing (ITO) revenues increased 7.8% in 2011, with Indian IT providers and cloud services vendors posting the highest growth rate. Meanwhile, global ITO market reached $246.6 billion in 2011, from $228.7 billion in 2010.
IBM got the lion’s share of the market and was seen to grown robustly much like the industry. Moreover, IBM’s revenues contribute 10.9 percent to ITO industry’s total revenues. Hewlett-Packard, on the other hand, took the second spot amid a low growth rate at 2%, which is said to be brought on by internal management issues.
An 18.2% growth was posted by Accenture but only had 2.6% of the entire ITO market. Furthermore, 43 service providers reported revenues of more or less $1 billion for fiscal year 2011.
Meanwhile, Bryan Britz, Research Director at Gartner, said the 2011 figures show just how hard it is for top players in the ITO space to maintain market share and acquire new ones. The situation is predicted to get worse for service providers that will not address the issues.
Soon to Rise: BPO City in Subic Philippines
During the recent speech of Subic Bay Metropolitan Authority (SBMA) Chairman Roberto V. Garcia at AMA College in Olongapo City, he shared that SBMA aims to build a “BPO City”, adding that local information technology (IT) professionals have a lot of employment opportunities in the business process outsourcing (BPO) industry.
Garcia said since the Philippines outdid India as the ideal location for voice-based BPO processes, Subic-based BPO and IT businesses have a favorable future. Furthermore, he said the plan of attracting more investors to Subic is aligned with President Aquino’s initiatives such as provision of more jobs and to produce globally competitive talent.
Subic is equipped with communication facilities, public transportation system, well-trained law enforcement department, and medical and fire departments. The area also has numerous establishments where employees, together with their families and friends, can relax and unwind.
SBMA projects that the BPO City will provide 20,000 jobs for IT experts and call center agents by 2016. The organization is also set to invite call center agents from Manila to work at Subic Bay Freeport.
Global research and advisory firm Everest Group’s Procurement Outsourcing (PO) Annual Report 2012 - The PO Market: Steadily Marching Forward shows that the total value of PO contracts had increased 17 percent for the last two years, reaching $11 billion (£7 billion). This can be due to the growth of the average contract value and continued use of the process by companies that post revenues from $1 to $5 billion (£600 million-£3.2 billion)
Procurement outsourcing market posts remarkable figures
According to Everest Group Vice-president Saurabh Gupta, the procurement outsourcing market posted remarkable figures for new deals, renewed contracts, and re-adoption rate for the mid-sized market.
Moreover, 80 percent of the total value of deals awarded in 2011 are from manufacturing, consumer packaged goods, and retail companies. Meanwhile, the finance and accounting sector was seen to gradually outsource accounts payable processes.
Everest also predicts that 2013 may be the third consecutive year of growth for PO as the total value of contracts is expected to reach $1.8 billion (£1.1 billion), a $200 million (£126 million) increase with small firms leading the growth.
Moreover, the report indicated that companies from the Asia-Pacific and South American regions will have an increase in procurement outsourcing activities.
Career Program in BPO Launched by BPAP
The Business Processing Association of the Philippines (BPAP) recently launched the Careers for Street Kids Program, a means to help the “poorest of the poor” yet talented high school graduates and college-level students land better jobs, specifically in the call center industry.
Twenty-five underprivileged but eligible kids were initially chosen by BPAP and its partners, Children’s Hour Philippines, Streetkids International, and Virlanie Foundation. The candidates will go through a six-month long training program. The organizations are now looking at adding 100 more kids for the next couple of years.
The program is divided into two segments. One is for college-level students who can be call center agents. The other one is for high school graduates who can get blue collar jobs like janitors, messengers, etc.
Meanwhile, the Executive Director of Children’s Hour and one the authors of the program, Evangeline T. Mayuga, said they are hoping to prepare kids for a better future and get them out of the streets. She added that major business process outsourcing (BPO) companies contributed funds worth 1.2 million pesos, specifically for the first three years of the project. In return, these companies can hire the beneficiaries of the program.
Mayuga also noted that successfully hired candidates will be assigned to help continue the project by contributing funds after the first three years of employment. The graduates will also be observed and mentored to make sure that their careers will continue to prosper.