Siddharth Pai and Melany Williams have talked of their latest report, as at September 2009. Here is some information from their June 2009 report. During 2008, information technology outsourcing (ITO) accounted for 64 per cent of all outsourcing contract awards worth at least $25 million and was more volatile than the business process outsourcing (BPO) segment during the same period. Also during this time frame, ITO contract awards were up sharply in the EMEA (+29.1 per cent) and Asia Pacific (+21.8 per cent) regions compared with 2007, and grew 6.9 per cent in the Americas. India heritage and niche/Tier 2 service providers made strong gains in many segments of the market. The market for BPO contracts valued at $25 million or more was essentially flat in 2008, with only 10 more such contracts awarded than in 2007. The overwhelming majority of BPO transactions are stand-alone contracts, and there is a general trend away from bundling BPO services, though multiple service provider arrangements are becoming more common in several service lines.
Demand for Application and Development (ADM) was very strong in 2008 and buyers were driven by the need to improve productivity.
In an effort to implement global changes faster in response to changing business needs, clients are actively trying to consolidate their Managed Network Services (MNS) service providers and move away from multi-sourcing arrangements. The heritage carriers have been expanding their MNS services beyond Transport Services, and many clients find this compelling as they attempt to consolidate service providers. In terms of solutions, TPI has seen an increase in the number of clients asking about comprehensive security solutions, as opposed to having individual security solutions across many statements of work.
Clients are challenging their End User Computing (EUC) service providers to do more — particularly, to improve security, ensure that agents have strong multi-language skills, improve support for mobile devices and adhere to ITIL process standards. EUC contracts are more likely to be decoupled from bundled agreements than in the past, but the overall market and its pricing have been flat.
Most of the change is occurring on the Server side of the Data Centre market, where, as clients desire more transformative technology solutions, virtualisation and service provider toolset offerings are making an impact on how contracts are won. Cost reduction remains the major driver for the Mainframe portion of the market. Clients are showing more willingness for higher-level Data Centre support functions to be moved offshore, but are also tightening reliability requirements in SLAs and want new ways to measure service in addition to requiring robust business continuity and resiliency strategies.
In the area of Finance & Accounting Services (F&A), companies seek benefits beyond labour arbitrage, including access to better technology. Service providers have been investing to deliver. Service providers are also offering greater diversity of geographic delivery centers in an attempt to differentiate themselves from competitors. Clients are particularly interested in delivery centres located in Latin America due to their alignment with North American business operations and strong English language skills. The number of contract awards was up in 2008 over 2007 levels, with increased activity in the Americas.
Sourcing of the Procurement function can provide great long-term cost savings for clients, yet adoption rates have been flat since 2006. There are several reasons for this, including a value proposition that is still not crystal clear in the eyes of many prospects. There are often many internal stakeholders that resist sourcing the Procurement function, and there were many early and over-aggressive contracts signed that didn’t work out as expected. The result is that clients often start small at the outset of a relationship, sourcing low-risk elements of their external spend in an effort to test the waters. The India heritage firms are very effective at this type of market approach, and TPI has seen them win an increasing share of the smaller contracts as a result.
The value proposition for Contact Centre Services (CCS) remains strong, as the gap between most client in-house operations and the robust solution of the service providers continues to widen. 2008 was the third consecutive year with increasing contract awards above the $25 million threshold, with the bulk of the growth coming from the Americas and Asia Pacific markets. TPI observes that companies continue to send back office work to delivery centres in India, but there is a continuing trend of sending voice work to other locations, such as the Philippines. The competitive landscape for CCS services is highly fragmented, with more than 300 service providers yet none with double-digit market share.
In the area of Facilities Management (FM), many clients are sourcing their Facilities Management in search of short-term cost savings. One of the key value propositions is that clients can realise returns almost immediately and there is often little or no capital investment or transition cost as a result. The number of large contract awards spiked in 2008 as a result, nearly tripling the 2007 volume. Looking forward, TPI believes that clients will place increasing importance on service providers’ ability to deliver services that promote corporate social responsibility – namely reduced energy consumption and carbon emissions. TPI is already seeing well-developed sales materials on these topics. As demand increases, the footprints of service providers expand as well. There are only a few truly global service providers today, but many of the large regional service providers are extending their global footprints through alliances with key players in other regions.
The Human Resources Outsourcing (HRO) service provider landscape changed dramatically with traditional leaders ExcellerateHRO and Fidelity exiting the market; India heritage service providers TCS, Wipro and Infosys aggressively trying to move in; and HP/EDS against traditional positioning by promoting highly customised solutions. These changes came against a backdrop of declining demand. Clients are trending away from single multinational agreements and toward multiple contracts that are intended to provide best-of-breed services for each geographic region and for each specific area of HRO. There is a preponderance of niche service providers focusing on specific areas such as payroll only. The market is expected to rebound with the economy, though the trend for more employee self-service functions in HRO will continue to affect contract sizes.
Source:http://www.thehindubusinessline.com/ew/2010/01/11/stories/2010011150190400.htm
