Firm releases market activity reports for Q4 2011 and 2011 in Review1
DALLAS, February 8, 2012 ─ The global sourcing market saw a marginal decrease in outsourcing transaction volumes in 2011 compared to 2010 due to decreased transactions in the second half of the year, according to Everest Group, an advisory and research firm on global services. After a strong start, transaction volumes dropped in the second half of the year including fourth quarter activity numbers that were the lowest since Q1 2009. Although captive activity also dropped in the second half of last year, 2011 saw captive set-ups almost double in number compared to 2010. These findings and other market insights are detailed in Everest Group’s Market Vista: 2011 in Review and Market Vista: Q4 2011 reports, which capture key developments in the outsourcing and offshoring industry. A one-hour webinar will be held Feb. 16, 9 a.m. CST, to present findings and insights from both studies as well as a discussion of options for tier-2/3 service delivery locations in the United States.
Everest Group’s quarterly and annual Market Vista reports include analyses of outsourcing transaction trends, captive-related developments, market activity by locations, location risks and opportunities, key service provider developments, and implications for sourcing industry stakeholders.
“In 2011, the first two quarters showed a continuation of the upward, positive market traction we began to see in 2010, but activity dropped during the last two quarters, leveling out the year and thereby resulting in almost a repeat of the previous year,” said Eric Simonson, managing partner of Research. “We also saw strong captive activity in the first two quarters of 2011, which further validated our firm’s long-held opinion and research findings that the captive model can be a viable core component of sourcing strategies for many organizations. Our outlook for 2012 is cautious given several factors including financial volatility in Europe, anti-offshoring sentiments in the United States and United Kingdom, and the adoption of new technologies, particularly in ITO deals.”
Last year saw 1,929 outsourcing transactions compared to 1,979 in 2010, and annual contract value (ACV) of transactions decreased compared to the previous two years. Contract renewal and restructuring activity was higher in 2011 compared to previous years, accounting for one-fifth of transaction volumes and almost one-third of the market’s total annual contract value (ACV). IT Outsourcing (ITO) contracts accounted for two-thirds of total transaction activity; 32 percent were Business Process Outsourcing (BPO) contracts.
The Market Vista: Q4 2011 report includes a special focus section on the emerging offshoring locations of El Salvador, Guatemala, Mauritius, South Africa, Thailand, Turkey, Ukraine and Vietnam. The Q4 report also examines global locations with French language capabilities, continued political unrest in Egypt, China’s new insurance scheme for expats, downside of Sao Paulo’s rapid IT market growth, and effects of the rapidly depreciating Indian rupee. Additionally, the Q4 report includes the companion study, Global Location Insights: Perspectives on Tier 2/3 Cities of the United States as Locations for IT Services Delivery.
Other findings in the Market Vista: 2011 in Review and Market Vista: Q4 2011 reports include:
- Financial services and manufacturing sectors continued to dominate outsourcing activity while healthcare activity increased significantly and public sector adoption dropped.
- While North American transactions decreased marginally last year, activity in the United Kingdom increased by 32 percent compared to the previous year.
- Although Q4 saw the signing of four mega deals, each valued at over US$1 billion in total contract value (TCV), the trend for mega deals shows a continued and steady decrease over the past three years with 11 signed in 2011 compared to 19 in 2010.
- Asia continued to see the most new captive developments but notable activity also occurred in Eastern Europe, Middle East and Africa.
- Last year saw the emergence of Brazil and Poland as mature global sourcing locations, underscoring their relevance in the global delivery footprint of leading players.
- Political unrest in North Africa, examined in the Market Vista Q2 2011 report, reinforced the importance of risk management in sourcing portfolios.
- Currency depreciation eroded arbitrage potential in Brazil, Chile and Malaysia while the rapidly depreciating Indian rupee created near-term opportunities for service providers and new entrants.
- Revenues of leading service providers increased in 2011 compared to 2010, but operating margins fell.
- Service providers continued to consolidate with Market Vista Index providers reporting about 50 merger and acquisition activities in 2011.
“The last year witnessed the continued trend towards service provider consolidation with many high-profile mergers and acquisitions,” said Salil Dani, research director. “Within leading providers, the offshore-centric providers witnessed higher growth in both revenue and operating margins compared to traditional global majors.”
Market Vista reports comprise key developments among 20 leading global service providers. Traditional service provider profiles include Accenture, ACS Xerox, AON Hewitt, Atos, Capgemini, Convergys, CSC, HP Enterprise Services, IBM, Dell Services and Unisys. Offshore-centric service provider profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.
The webinar will be held Feb. 16, 9 a.m. CST; 3 p.m. GMT Standard Time. To register, please visit: research.everestgrp.com/Events/Webinars.
Market Vista is a subscription service with four reports published per year, including location datasets, Breaking Viewpoint briefings, Market Vista Primer and Global Locations Insights newsletter. For information about Market Vista reports or other research services, please visit research.everestgrp.com, e-mail [email protected] or call +1-214-451-3110.