The total contract value of outsourcing contracts signed
in the third quarter of 2007 was down 16 percent, with the
actual value of the contracts signed shrinking as well,
according to outsourcing adviser TPI. At the heart of
the decline: the slowing pace of contract awards in the U.S.
TPI’s numbers show that U.S. companies are also
keeping a lid on outsourcing growth, with new scope down 50
percent from last year.
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Conversely, Europe and Asia are showing growth in
outsourcing deals year over year, with Europe accounting for
more than a 50 percent share of global market deals. New scope
is up 36 percent in Europe and 72 percent in Asia Pacific,
according to TPI. Competitor EquaTerra also found that outsourcing
growth was strongest in the Europe/Middle East/Africa
Almost as many Global 500 companies are inking outsourcing
deals in the U.S. and Europe (43 percent of leading U.S.
companies and 52 percent of leading European companies), says
TPI. It’s just that the American deals are smaller.
Mega-deals—those once popular billion-dollar-plus
behemoths—are still getting signed (by General Motors,
Johnson & Johnson, Credit Suisse, Reuters and the U.K. Post
Office, among others). They’re just getting less
“mega.” The average size of the billion-plus
contract in the first quarter of last year was $9.6 billion. In
the third quarter of 2007, it was down to $2.4 billion, TPI
Major India-based vendors have seen their U.S. customer
revenue increase 37 percent, despite the slowdown in overall
outsourcing in the Americas, says TPI, adding that “the
latter exemplifies the diversity in the global outsourcing
industry as well as India’s expanding influence and
strength.” Meanwhile, EquaTerra’s third-quarter
survey revealed increasing interest in offshoring
outside of India. Wage inflation, U.S. dollar weakness
and changing buyer demands are driving the expansion of
delivery centers in China, Central and South America, and
Central and Eastern Europe, EquaTerra notes.
Business process outsourcing (BPO) analyst firm Nelson Hall says the BPO market is hot,
with year-over-year total contract value growth of 26
percent in the third quarter and 54 percent growth during
the first nine months of the year. TPI characterized global
BPO growth as “sluggish.” But both TPI and
Nelson Hall’s reports agreed that BPO contract
activity was strongest in North America.