Category: Outsourcing

IDC predicts moderate growth for the region from 2006 to 2010 since much of APEJ will remain at the developmental stages of BPO adoption during this period. Over the past 12 months, companies such as Accenture, EDS, HP and IBM have opened massive BPO centers in PRC, India and the Philippines, largely for servicing the United States and Europe, and not APEJ. BPO in 2005 totaled $6 bln and this figure is forecast to rise to about $14 bln by 2010 at a compound annual growth rate (CAGR) of approximately 18%.

Gartner predicted that 85% of US companies will outsource at least one component of their HR function by 2006.

Outsourcing of IT and business services delivers average cost savings of 15%, disproving claims that outsourcing can reduce costs by over 60%. After professional fees, severance pay and governance costs, savings range between 10% and 39%, with the average level at 15% when contracts are first let, according to TPI. Q1 2006 had the largest number of outsourcing contracts ever signed in a Q1. TPI found that 83 contracts were signed, valued globally at $21.9 bln.

India’s $23.4 bln outsourcing industry accounts for most of the country’s software and services industry, which makes up nearly 5% of GDP. The industry employs 1.2 mln workers, has sparked a consumer revolution in India, and is accelerating at more than 30% a year. India produces 3 mln college graduates every year, including nearly 400,000 engineers.

According to IDC, the business outsourcing market progressed positively in 2005, experiencing a 33% increase in the volume of deals signed. IDC finds market adoption expanding and becoming more mainstream, as large, midsize, and small companies from a variety of industries embrace the business outsourcing model.

Though India had earned over $6.7 bln in US-based outsourcing services such as software and call centres till march 2005, the field of legal outsourcing was largely untapped, says Forrester Research. Legal field is poised to increase dramatically from about $80 mln annually to approximately $4 bln, with jobs growing to 29,000 in 2008, 35,000 by 2010, and 79,000 by 2015. At present the number of jobs in legal outsourcing in India stood less than 12,000.

India’s $23.4 bln outsourcing industry accounts for most of the country’s software and services industry, which makes up nearly 5% of gross domestic product. The industry employs 1.2 mln workers, has sparked a consumer revolution in India, and is accelerating at more than 30% a year, NYT says.

In a survey of more than 200 multinational corporations on their research center decisions, 38% said they planned to change substantially the worldwide distribution of their research and development work over the next 3 years, The New York Times reports.

According to Gartner, revenues for outsourcing desktop management hit almost $28 bln worldwide in 2005; at least 22 vendors participated to the tune of $50 mln or more each.

IDC forecasts the total market size for outsourced processing services to achieve a compound annual growth rate (CAGR) of 11.4% from 2005-2009 and generate more than $23 bln in revenues by 2009. IDC found Processing Services amounted to $14.9 bln in 2005 and is forecast to exceed $16 bln by end of 2006.

India’s software and services exports were $17.2 bln in the fiscal year ended March 31 in 2005, up by 34.5% from the previous year, according to the National Association of Software and Service Companies. BPO services industry could be bringing in $60 bln by the year 2010, growing at over 25% a year.

Top three IT outsourcing firms in the world (IBM, EDS, and CSC) kept their top spots. Based on 2004 revenue, IBM occupied the top spot with 15.5% of the global market in 2004, while EDS ranked number two with 11.7%, according to IDC. CDC’s share was 5.5%. The global market for outsourcing services in 2004 hit $84.6 bln. IDC expects the market to grow nearly 6% annually through the end of the decade, reaching $112.5 bln in 2009. The $33.8 bln US market will grow at 4.2%.

The value of the top 100 outsourcing deals in 2004 decreased by 1.2% from $69.1 bln in 2003 to $68.3 bln in 2004. However, qualifying for the top 100 in 2004 required a minimum deal value of $184 mln, a 5.1% increase from 2003. The share of BPO and processing services deals in the top 100 outsourcing deals increased from 15.2% in 2003 to 25% in 2004, while the share of IT outsourcing services suffered a decline to 75% of the 2004 market, IDC says

Global offshore outsourcing market is expected to go up to $50 bln by 2007, Gartner said.

Information Technology Association of America says global outsourcing generated a net increase of US jobs in 2005 of 257,042, and is expected to create a net number of 337,625 new jobs by 2010. ITAA says US economy benefits from global outsourcing because they help increase the US Gross Domestic Product by $68.7 mln in 2005. By 2010, outsourcing will increase GDP by $147.4 mln.

The outsourcing of packaging and test services will continue to expand; market revenue will be $15.5 bln in 2005. Moderated corporate IT spending, more Internet infrastructure development and selective consumer-driven demand will help stabilize the industry for the rest of 2005 and into 2006, Gartner reported.

According to IDC, the worldwide business process outsourcing market is vibrant and brimming with opportunity. Worldwide BPO spending will experience a five-year compound annual growth rate (CAGR) of 10.9%, growing from $382.5 bln in 2004 to $641.2 bln in 2009.

The value of outsourcing contracts has dropped by 10-15% for 2005, according to TPI. Contract value is likely to drop to between $60-65 bln from its $72 bln average in recent years. Q3 2005 saw a record gain of 11% in the total number of outsourcing contracts signed and the number of contracts signed in 2005 so far is 191, compared to 172 signed by this point in 2004.

Worldwide PC shipments increased by more than 17% in Q3 2005 despite rising interest rates and oil prices, according to IDC. International markets continued to grow quickly, but even US shipments grew by 11% YTY. The latest data show total worldwide PC shipments increasing by 17.1% YTY versus an August forecast of 13.3%.

Only 19% of US businesses have an offshore outsourcing strategy, a study by Ventoro found. However, the percentage skyrockets to 95% if only Fortune 1000 companies are considered.

Outsourced IT services brought in $12 bln for India 2004, leading the world in IT exports.

Forrester Research indicates that firms in the UK and Germany, in particular in the financial and public sectors, closed most of the 5 bln euros in outsourcing deals in Q2 2005.

The US offshore IT services market is expected to nearly double in size to an estimated $14.7 bln by 2009, reports IDC. This represents a five-year compound annual growth rate (CAGR) of 14.4%. Discrete manufacturers will continue to generate the largest percentage of overall revenue for offshore services providers, accounting for 17% of spending by 2009. Retail, communications, banking, insurance, and other financial services companies are also expected to be prominent users of offshore IT services. In aggregate, the financial services industry is expected to account for 28.9% of the total spend by the end of the forecast period.

IT outsourcing revenue in Asia/Pacific will rise from $8 bln in 2003 to $14.9 bln in 2009 at a compound annual growth rate of 10.1%. CIOs in the region cite improving services to end users as the top reason for outsourcing, Gartner reported.

IT outsourcing revenue in Europe, the Middle East and Africa will rise from $58 bln in 2003 to $90.9 bln in 2009 at a compound annual growth rate of 6.8%. Infrastructure and application outsourcing continue to be growth areas, Gartner says.