Indian BPOs won biggest outsourcing deals

Monday, 17 July 2006, 07:00 Hrs
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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Experts here say that some British firms such as Powergen and Abbey may have withdrawn their call centers in India, but this is unlikely to be a trend.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: "Contrary to speculation about rising levels of dissatisfaction with offshore outsourcing, our data predicts further growth in the value of work being moved offshore.

"In 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."

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

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

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

Of 11 contracts totaling €1.38 billion awarded to Indian providers this year, nine are in Indians' 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: "The mature Indian vendors have achieved significant growth. Infosys, Satyam, Wipro, TCS and HCL are beginning to win larger and more varied deals. Our 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."

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 percent) of contracts in 2006 to date compared with 18 percent 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 percent) involve off shoring or 'global service delivery'.

This compares with 28 percent at this point last year and represents a record high. Furthermore, where outsourcing contracts contain an offshore element, a far greater proportion of the work is moving offshore, averaging almost half (48 percent) of the contract value, up from 27 percent a year ago.

British companies have signed outsourcing contracts totaling over €5.2 billion so far this year, up 9 percent from €4.8 billion 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 (€4.8 billion) is some 30 percent lower than the equivalent figure at the same time last year.

Taking a global view, Britain accounts for 17.2 percent of the value of contracts signed this year, Germany 6.6 percent and the Netherlands 2.6 percent, with no other country in Europe representing over 2 percent of the global market.
Source: IANS
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