Report includes focus on Eastern European sourcing market
DALLAS, May 4, 2011 ─ The global outsourcing and offshoring market continued to witness steady growth during the first quarter this year, led by a three-year high for Business Process Outsourcing (BPO) transactions as well as continued investment in new captives while no divestments occurred for the second consecutive quarter, according to Everest Group, an advisory and research firm on global services. Outsourcing transactions saw a marginal decrease of five percent compared to Q4 2010 but an increase of 14 percent compared to the previous year. A one-hour Webinar will be held May 12, 9 a.m. CDT, to present study findings and insights as well as a discussion about the offshore services market in Brazil.
Everest Group’s Market Vista: Q1 2011, a quarterly report on global outsourcing and offshoring activity, reports first quarter global transaction volumes reached about US$3 billion in annual contract value (ACV). Compared to Q4 2010, the BPO market saw transactions increase by 25 percent, with adoption led by BFSI (banking, financial services and insurance), MDR (manufacturing, distribution and retail) and Healthcare verticals. Conversely, IT Outsourcing (ITO) transactions dropped 17 percent from the previous quarter.
Other first quarter 2011 findings include:
- The Public Sector vertical continued to dominate ITO transactions while the BFSI and MDR verticals contributed towards half of BPO deals signed.
- All geographies showed positive trends in the BPO market, whereas the ITO market only witnessed increased activity in the United Kingdom.
- Volume of renewals and restructured deals increased by 10 percent from Q4 2010, but ACV of the deals dropped 17 percent.
- In addition to four mega deals with contract values over US$1 billion, three of which were ITO engagements, 17 deals with contract values between US$200 million-1 billion also were recorded during the quarter.
- There were 35 new captive announcements reported, with most activity in India, followed by other countries in Asia and the Middle East.
- Offshore activity saw a decrease in location activity with 35 delivery centers established in the first quarter compared to 46 in the previous quarter. In addition to Asia, significant activity was also reported in Latin America.
- In line with the trend seen in the past few quarters, service providers’ consolidated revenues and operating margins grew in the fourth quarter over the previous quarter. (Financials lag other service provider activity by one quarter.)
“The global sourcing market continues to see steady growth in terms of transactions. Contract volumes increased by 14 percent compared to the first quarter of last year, indicating secular growth in outsourcing and offshoring activity,” said Eric Simonson, managing partner of Research. “Transactions, ACV and captives activity is reflective of the emergence of hybrid sourcing models that extract maximum impact from sourcing.”
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 service provider 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 Q1 report also includes these focus sections:
- Eastern Europe: analysis of labor arbitrage sustainability, operating costs, operating cost inflation, arbitrage sustainability and currency trends. Cities profiled include Prague and Brno in the Czech Republic; Budapest, Hungary; Bucharest, Romania; Sofia, Bulgaria; Bratislava, Slovakia; and Warsaw, Krakow and Poznan in Poland.
- Location optimization insights include focus on Everest Group’s reclassification of Brazil as a mature location; Uruguay’s emergence as a credible location for multi-lingual BPO support; Tier-3 cities in India leveraged by service providers to serve the country’s domestic market and the impact of turmoil in Tunisia, Libya and Egypt.
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 service provider profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.
The Webinar will be held May 12, 9 a.m. CDT; 2 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: Q1 2011 report or other research services, please visit research.everestgrp.com, e-mail [email protected] or call +1-214-451-3110.