BPO signings shrink, better growth expected in 2011

By siliconindia   |   Wednesday, 27 October 2010, 09:36 IST   |    1 Comments
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BPO signings shrink, better growth expected in 2011
Bangalore: While BPO is still enjoying a healthier growth rate than IT services, it has suffered badly from the global recession, with new contract signings drying up. As per Ovum's IT Services Contracts Analytics, which tracks all IT and BPO contracts worth over $1 million, only 105 contracts with a BPO component were tracked in the first nine months of 2010. Although the figure shows a slight improvement from the period of 2009, it is still disappointing considering the fact that 2009 was a disastrous year for BPO signings. An increasing number of BPO contracts are expiring, bringing new opportunities to vendors to wrestle the work from incumbents. There are 207 BPO deals (or IT service deals with a BPO component) that are set to expire in 2011, totaling $12.2 billion in contract value. This is an increase of 15 percent on the $10.6 billion total value of the 201 contracts tracked that were due to expire in 2010. In terms of vertical markets, the largest opportunities in expiring contracts are in the manufacturing (31 percent of total contract value) and banking (24 percent) industries. Telecommunications (6 percent), as well as both local (9 percent) and central government (6 percent) also represent significant opportunities. "While recovery from the global recession is likely to continue at a slow pace, the way the BPO market will address the changing needs and desires of potential customers will be more rapid," said Patrick O'Brien, Principal Analyst. There have been a number of mergers and acquisitions in the BPO space recently, mainly in the multi-process HRO market, in which the HR operations of Hewitt, HP, Convergys, and ACS have all been purchased for knock-down prices. This trend of bundling IT and business processes runs parallel with the trends towards vendor consolidation and adoption of cloud computing and software-as-a-service (SaaS) models. While vendor consolidation seems to contradict the "best-of-breed" approach that was a reaction to the overpriced multi-tower megadeals of the past, it is a bundling of IT and BPO within a defined area that gives the vendor more control of the overall process. Therefore this can often lead to greater efficiencies and enable the vendor to deliver the contract on a business outcomes basis.