by: Sarah Joson
A 25-percent decline in European mega outsourcing deals was spotted during the first quarter of this year by outsourcing consultancy agency Information Services Group (ISG). Only 128 contracts valued at €1.9 billion (£1.4 billion) were posted during the period. Deals that have an annual contract value of €4m (£3m) or higher are classified as large deals by ISG.
According to David Howie, a partner at ISG, outsourcing activity is still positive, but the buyers’ preference is now leaning more towards smaller deals. He also noted that based on historical trends, the changes in the market could be caused by the upcoming general election.
The report also pointed out that this is the weakest first quarter for the UK since 2010 when the annual contract value (ACV) was only €600 million (£430 million). As for last year, deals during the first quarter reached €1 billion.
In another study on business process outsourcing (BPO) deals, the UK public sector posted the highest volume of contracts awarded globally with a total of €1.9 billion (£1.36 billion). On the other hand, the financial services sector posted the highest increase in contract value with 120 percent to €1 billion (£700 million).
John Keppel, also a partner at ISG, said the outsourcing market in Europe posted a slow start, but there are several regions that posted positive results particularly Germany, Austria, and Switzerland. The financial services sector also showed positive results, but are not enough to offset the decline in other developed markets such as the Nordics, France, and the UK.
Amidst the decline, outsourcing providers still closed a decent amount of big wins in the first quarter of this year. A great example of a huge win is the 10-year, multi-billion dollar global deal of HP with Deutsche Bank which was closed last February.
by: Sarah Joson
According to Rajiv Biswas, Chief Economist at research and consultancy firm IHS Asia-Pacific, the bullish information technology business process outsourcing (IT-BPO) sector and strong inflow of remittances from overseas Filipino workers will continue to drive the economy of the Philippines.
He pointed out that between 2008 and 2014, the country’s revenue from service exports has doubled and over a million jobs were created. Last year, the sector posted an 18.7-percent revenue growth to US$18.4 billion.
In an earlier statement, Biswas said the Philippines and Malaysia are the frontrunners for IT-BPO in Southeast Asia as both countries have large pools of English-speaking, university-educated workforce. Meanwhile, the Bangko Sentral ng Pilipinas (BSP) reported that the total remittances in 2014 went up by 5.8 percent to US$24.31 billion.
The IT-BPO and inflow of remittances also propel the growth of the construction sector. Remittances push the capabilities of consumers to spend, particularly for residential properties, and act as leverage for the Philippines’ balance of payments. The IT-BPO sector, on the other hand, reinforces the commercial property sector.
The Philippine economy is predicted to post a 6.7 percent growth this year, according to the International Monetary Fund (IMF). However, even if the growth prediction is marginally higher than the previous estimate of 6.6 percent, it is still lower than the growth target eyed by the local government.
IMF released a statement after its recent event “Mission to the Philippines”, saying the slight increase in the 2015 growth outlook is caused by strong private construction, export expansion, low commodity prices, and increase in public spending. In addition to that, IMF expects inflation to stay at the lower end of the Bangko Sentral ng Pilipinas’ (BSP) target range (2-4 percent), due to lower commodity prices. Also, the nation’s account surplus is seen to strengthen since the price of oil is lower, and earnings from the business process outsourcing (BPO) sector, tourism, and remittances remain strong.
However, IMF noted that risks to inflation outlook will be caused by external and domestic pressures. For instance, disruptive asset price shifts in financial markets due to varying monetary policies in developed nations are considered threats, but the strong fundamentals of the Philippines provide adequate buffer to the impact. Moreover, external demand could be weaker should key emerging markets face deflation threats and lower potential growth.
The IMF also pointed out that the BSP’s efforts of reducing risks to financial stability, which include the real estate exposure of banks, have been successful and in fact contained liquidity and credit growth.
As for the Philippine government, growth projections are set at 7-8 percent this year, from 6.1 percent in 2014.
According to Globe Telecom Inc., one of the major telecommunication companies in the Philippines, the $250-million Southeast Asia-United States (SEA-US) cable link will be advantageous for Filipinos and business process outsourcing (BPO) companies in the country.
Gil Genio, EVP and COO at Globe, said the project will give Globe the leverage and ability to provide excellent connectivity services for consumers and organizations, specifically ones that have tie-ups in the US. He added that it will benefit the business process outsourcing sector, large financial institutions, and other companies that operate in a global scale, especially now that the Philippines has stepped up to the plate as one of the preferred destinations of investors.
The submarine cable link worth $250-million is a project of global telco companies. It will be connecting Southeast Asia and the US by the fourth quarter of 2016. Other companies included in this project are PT. Telekomunikasi Indonesia International (Telin), RAM Telecom International, Hawaiian Telcom, Teleguam Holdings GTI Corp. (a member of the Globe Telecom group of companies), and Telkom USA. System suppliers of the project are NEC Corp. and NEC Corp. of America.
The areas that the SEA-US cable link are set to link up are Manado in Indonesia, Davao in Southern Philippines, Piti in the Territory of Guam, Honolulu on the island of Oahu in Hawaii, and Los Angeles in California.