Indian BPOs have won the biggest outsourcing deals so far this year

Published: Sunday, 23 July, 2006, 01:11 PM Doha Time

LONDON: Indian service providers have bagged the biggest outsourcing deals during this year and such deals have reached record levels so far, according to an authoritative analysis of the global outsourcing industry.

The figures released by sourcing advisory firm TPI says that despite the continued controversy surrounding off-shoring in Britain and elsewhere, a record level of outsourcing deals currently under negotiation involve off-shoring to places such as India.

Experts here say that some British firms such as Powergen and Abbey may have withdrawn their call centres in India, but this is unlikely to be a trend. The TPI analysis reiterates the economic logic of outsourcing of back office operations.

Duncan Aitchison, managing director, International, with TPI, said: ãContrary to speculation about rising levels of dissatisfaction with offshore outsourcing, our data predicts further growth in the value of work being moved offshore.

ãIn our experience, the approach of many companies to outsourcing has now matured to the extent that it is now no longer a question of whether to offshore, but rather which elements and to what degree.ä

The analysis reveals that the growth in offshore outsourcing is further evidenced by impressive gains for the Indian service providers, whose market share has risen to 5.2% of the total value of contracts signed so far this year - up from less than 3% in 2005 and just over 1% in 2004.

ãMoreover, data relating to deals currently under negotiation (with which TPI is involved) points to a dramatic, almost three-fold (284%) increase in the value of deals for which the Indian providers are competing, compared with three months ago,ä the analysis says.

The size of deals the Indian service providers are winning is also increasing, up by 25% from an average deal size of 101mn euros in 2005 to 126mn euros in 2006 to date.

Of 11 contracts totalling 1.38bn euros awarded to Indian providers this year, nine are in Indiansâ traditional areas of strength in applications development and maintenance (ADM) or finance and accounting (F&A).

However, data on the transactions on which TPI is currently advising reveals that the Indian providers are now being considered for remote IT infrastructure work as well.

Aitchison said: ãThe mature Indian vendors have achieved significant growth. Infosys, Satyam, Wipro, TCS and HCL are beginning to win larger and more varied deals.

ãOur data suggests that there is no reason to doubt that this trend will continue, especially as buyers gain experience of working with them, and their confidence grows as a result.ä

However, the Big Six of outsourcing - Accenture, ACS, CSC, EDS, HP and IBM - still dominate the offshore outsourcing market having won almost three quarters (73%) of contracts in 2006 to date compared with 18% for the Indian providers.

An analysis of deals on which TPI is currently advising (which represent approximately a quarter of the commercial outsourcing market and provide a six to nine month indicator of where the market is heading) reveals that almost half (47%) involve off-shoring or Îglobal service deliveryâ.

This compares with 28% at this point last year and represents a record high.

British companies have signed outsourcing contracts totalling over 5.2bn euros so far this year, up 9% from 4.8bn euros this time last year.

The continued strength of the UK market contrasts with the rest of Europe, where demand for outsourcing has dipped. The total value of contracts signed in Continental Europe so far this year (4.8bn euros) is some 30% lower than the equivalent figure at the same time last year.

Taking a global view, Britain accounts for 17.2% of the value of contracts signed this year, Germany 6.6% and the Netherlands 2.6%, with no other country in Europe representing over 2% of the global market. ö Indo-Asian News Service

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