Source: www.businesswire.com

According to the latest TPI Index from sourcing advisory firm TPI, the outsourcing market in Asia Pacific grew substantially in 2007, fuelled primarily by increased demand from corporations based in India. Outsourcing in Asia Pacific saw its second consecutive year of strong growth and showed an increase in demand across all measures. Although the number of contracts signed in 2007 grew by just 4 percent, their total contract value increased 30 percent year over year from US$9.9B to US$12.8B and annualised revenues showed a 13 percent increase, nearly double that of the global average. Asia Pacific was the only geography to show an increase across all of these measures.

The average value of outsourcing contracts in Asia Pacific increased by 25 percent from US$141M to US$176M, due largely to increased mega relationship activity in the region, especially in the last quarter of 2007. The region showed particular strength in mega relationships with nine signed in 2007 at a total value of US$1.5B. This represents one third of the mega relationships globally and contrasts sharply with the region’s overall share of one-sixth of the global outsourcing market. Larger contracts have become popular among companies based in Asia.

In addition, BPO performance in Asia Pacific was particularly strong in 2007. BPO TCV in the region soared by 101 percent, yielding the best year ever for BPO contract values in the region and leading average BPO contract value to increase by 81 percent.

Outsourcing growth in Asia Pacific was largely driven by corporations in India and China: Countries traditionally known for their provision of outsourced resources are becoming buyers of outsourcing. India has seen stepped up outsourcing activity within the Telecommunications and Financial Services sectors whereas growth in China has been strongly influenced by a single telecommunications mega deal.

Arno Franz, Partner and Managing Director, TPI Asia Pacific, explained:

“In Asia Pacific, we usually we see Australia, India and Japan topping the list of countries buying outsourcing services. In 2007, India led the pack by almost doubling the value of its outsourcing work year on year. It appears that, fuelled by a booming economy, Indian industry in particular has found outsourcing to be a viable tool to improve performance and drive growth in market share. With increased competition among Indian corporations and the potential privatisation of public sector organizations in the next few years, we expect to see this level of activity continue through 2008 and beyond”.

Alongside increased domestic demand for outsourcing, the India-heritage service providers’ share of global contracts continued to expand in 2007, up from 6 percent share in 2006 to 9 percent in 2007. No other category of service provider increased market share at such a pace. Their share of the regional market also increased strongly, from 11 percent to 16 percent.

Other major findings of the latest TPI Index include:

* Global outsourcing growth driven by Asia Pacific and EMEA

In 2007, annualised revenue figures, the estimated annual revenue potential available to service providers from all active contracts, confirm an upturn globally. At the end of 2007, about 2,700 active contracts delivered around USD$80B globally in revenue to providers, accounting for a growth rate in annualised revenue of more than 7 percent, ahead of the 5-year global CAGR of 5.3 percent. However, from a regional perspective annualised revenues in Asia Pacific and EMEA revealed 5-year CAGRs of 10.8 percent and 15.8 percent respectively, while the Americas CAGR for the same period shows a decline of 1.9 percent highlighting significant regional differences.

* On a global level the fourth quarter was the best quarter on an ACV basis in eleven years

On the basis of Annualised Contract Value the more than US$15B of ACV awarded in 2007 matched the five-year average. New scope ACV was up globally year-over-year by a healthy 13 percent. The fourth quarter was the best quarter on an ACV basis in eleven years.

* Mega-Relationships revived globally in the fourth quarter

The fourth quarter TCV was fuelled by strength in mega-relationships, those transactions with an ACV, or an average annual value, of US$100M or greater. The fourth quarter witnessed the greatest number and value of mega-relationships signed than any quarter in recent years. Despite this, globally there were fewer mega-relationships in 2007 than in 2006, and their yearly value was down slightly.

* Large BPO contract awards

Additionally, the fourth quarter included some large BPO contract awards, which elevated the 2007 BPO TCV to the same level seen in 2006, despite fewer BPO contract awards. In 2007, 171 BPO contracts worth more than US$23B were awarded globally. The awards in the fourth quarter represent 23 percent of the year’s total number but 40 percent of the year’s TCV. The fourth quarter performance of 2007 represented the best quarter for BPO on a TCV basis in two years and the best in ACV in more than three years. Nevertheless 2007 saw a shift in relative share of BPO contracts from the Americas to EMEA and Asia-Pacific by both number of contracts and their TCV.

Source: www.computing.co.uk

Europe has overtaken the Americas as the world’s biggest IT outsourcing market, in the number of contracts signed and their total value.

In 2007, 220 major contracts were signed in Europe, compared with 194 in the Americas. The total value was €32.7bn (£24.5bn) and €21.3bn (£16bn) respectively, according to outsourcing adviser TPI.

The rise is due to the expanding use of outsourcing in countries traditionally reluctant to pursue the model, said TPI Europe president Duncan Aitchison.

“As well as the established UK market, there is increased activity across northern Europe, especially in Germany, the Netherlands, Sweden, Switzerland and France,” he said.

Europe’s particular strength was the number of new contracts, up almost 31 per cent on 2006 levels, compared with an increase of 13 per cent worldwide.

Globally, the market continues to grow. The last quarter of 2007 was the strongest in total value in 11 years, with more than €12bn (£9bn) worth of contracts awarded.

And the trend is likely to continue, according to Aitchison.

“Given the sustained growth rate and the level of activity, particularly in Europe and Asia-Pacific, we expect similar strength in the market going forward,” he said.

Increased outsourcing is one of the ripple effects from the global credit crunch, said Mark Kobayashi-Hillary, director of the National Outsourcing Association.

“People are looking at outsourcing again as a way of saving money, rather than just being a strategic partnership,” he said.

But even as the number of contracts goes up, the success of European suppliers is dwindling. The lion’s share of the business will be non-European suppliers ­ India’s share of the market rose 42 per cent, while Europe’s fell 17 per cent.

Developing economies are also seeing significant market growth. India’s total contract values grew from €2.2bn (£1.6bn) to €3.9bn (£2.9bn), while China‘s rose from €400m (£300m) to €1.52bn (£1.14bn).