North American transaction volumes increased by 24 percent while ACV decreased by 10 percent over Q3.
DALLAS, February 7, 2011 ─ Building on the momentum gained in mid-2010, the global outsourcing and offshoring market continued on a growth trajectory with eight mega deals, each having a contract value over $1 billion, announced in the fourth quarter of 2010, according to Everest Group, an advisory and research firm on global services. The number of outsourcing transactions was at a 36-month high while captive activity continued to remain healthy. There was also significant offshore activity reported with buyers and service providers setting up their delivery centers in many locations. A one-hour Webinar will be held February 10, 9 a.m. CST, to present study findings and insights.
Everest Group’s Market Vista: Q4 2010, a quarterly report on global outsourcing and offshoring activity, reports global transaction volumes reached a three-year high with deals accounting for about US$4.9 billion in annual contract value (ACV). Compared to the previous quarter, the outsourcing market grew by 6 percent in terms of transactions and 44 percent by ACV. Compared to Q3 2010, the IT Outsourcing (ITO) market increased by 16 percent in terms of transaction volume, and the number of Business Processing Outsourcing (BPO) transactions slightly dipped.
Other fourth quarter 2010 findings include:
- While North America and UK continued to dominate the outsourcing market, other markets, such as Germany and India, reported growth in transaction volumes. In North America, transaction volumes increased by 24 percent while ACV decreased by 10 percent compared to the previous quarter.
- The BFSI (banking, financial services and insurance), MDR (manufacturing, distribution, retail) and healthcare verticals contributed towards almost half of the outsourcing transactions signed.
- Activity in Infrastructure Outsourcing (IO) market increased considerably compared to Q3 2010.
- In addition to the eight mega deals, six of which were ITO engagements, 69 large deals with contract values exceeding $50 million also were recorded during the quarter.
- There were 34 new captive announcements reported and no divestitures. Although Asia gained half of the new captives, Eastern Europe and Latin America witnessed adoption with eight and four announcements, respectively.
- Offshore activity saw 46 delivery centers established in the fourth quarter, a 12-month high. In addition to Asia, significant activity was also reported from locations in Eastern Europe.
- In line with the trend seen last quarter, consolidated revenues and operating margins grew in the third quarter of 2010 versus the previous quarter (Financials lag other service provider activity by one quarter.)
- Both M&A and alliance activity for service providers fell considerably compared to the previous quarter.
“The fourth quarter capped off a year where we saw the global sourcing market gain traction in terms of transactions yet, for the most part, see lower annual contract values,” said Eric Simonson, managing partner of Research. “This trend is reflective of a steady rebounding of the recessionary economy as companies refocused on their sourcing strategies and consider ways to optimize their existing sourcing portfolios.”
Everest Group’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations and key supplier intelligence insights. Everest Group’s industry trends research complements the Market Vista reports through quarterly updates focused on industry specific global sourcing data, developments and insights across four industries (BFSI, MDR, Healthcare and Energy and Utilities).
The Market Vista Q4 report also includes these focus sections:
- Emerging locations analysis of labor arbitrage sustainability, operating costs, operating cost inflation, arbitrage sustainability and currency trends. Cities profiled include Johannesburg, South Africa; Ho Chi Minh, Vietnam; Istanbul, Turkey; Bangkok, Thailand; Guatemala City, Guatemala; San Salvador; Kiev, Ukraine; and Port Louis, Mauritius.
- Location optimization insights include focus on financial incentives and other initiatives in South Africa; growing significance of the Philippines in non-voice BPO and IT; worsening of narco-violence in Mexico; and impact on labor arbitrage for source geographies outsourcing to Brazil and Chile, due to currency appreciation.
Quarterly Market Vista reports comprise key developments among 20 leading global service providers. Traditional service provider profiles include Accenture, ACS Xerox, Atos Origin, Capgemini, Convergys, CSC, AON Hewitt, HP Enterprise Services, IBM, Dell Services and Unisys. Offshore-centric supplier profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.
The Webinar will be held February 10 at 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, now enhanced to also include location datasets, Breaking Viewpoint briefings, Market Vista Primer and Global Locations Insights newsletter. For information about the Market Vista: Q4 2010 report or other research services, please visit http://research.everestgrp.com/, e-mail [email protected] or call +1-214-451-3110.
