By Andy McCue, 14 April 2005 13:15
NEWS The offshore element of IT outsourcing deals continues to increase, but businesses are choosing the perceived safety of the 'big six' western firms over the emerging home-grown offshore providers in countries such as India, according to a new report.
Outsourcing contracts with an offshore component accounted for 57 per cent of the total IT outsourcing contracts during the first quarter of 2005, compared with 40 per cent for the same period last year.
The quarterly global IT and business process outsourcing (BPO) market index report is compiled from data about the contracts that outsourcing advisers TPI are involved in.
Duncan Aitchison, partner and MD at TPI, said: "There are more offshore elements than usual to outsourcing deals, but we continue to see companies contract with the established outsourcing providers and not the emerging offshore providers, except for small scale application development projects."
But he warned that confidence in the Indian players, such as Infosys, TCS and Wipro, is increasing among UK business executives and that this could diminish the advantage of the 'big six' western IT firms.
That could spell bad news for the 'big six' outsourcers Accenture, ACS, CSC, EDS, HP and IBM who are continuing to lose market share in the overall outsourcing market to a raft of smaller players, according to TPI's latest figures.
The market share of the big players fell to only 18 per cent of the 6.9bn of major contracts signed so far this year in Europe, compared with 36 per cent in 2004.
"Those who gained on the 'big six' in the first quarter were Atos Origin, BT and Hewitt," said Aitchison.
Only one of the 'big six' EDS has not seen a decline in its contract pipeline, in terms of the deals advised on by TPI.
Europe also continues to assert its newly-found dominance over the US outsourcing market, accounting for 57 per cent of global deals and 70 per cent of global outsourcing contract value in the first quarter of this year.
Aitchison also played down talk of a slowdown in the market. "I think Europe still has a long way to go. I see no logical reason for that to slow down. We have still got a lot of legs left in the European market with a few years of European expansion yet," he said.
The BPO market has got off to a slow start in 2005, but contracts there are dominated by human resource (HR) deals, which more than trebled to 1.37bn in the first quarter of this year, compared with only 0.44bn for the same period last year.
Aitchison said the HR BPO space remains a huge opportunity for both customers and service providers.
"More than any other BPO process, HR has demonstrated global scope," he said.
A separate report by analyst Datamonitor this week found a decline in the value of IT outsourcing contracts during the first quarter of 2005. Datamonitor tracked 456 IT contracts worth a combined total of $31.4bn, a 13.7 per cent decline on the same period last year. The number of contracts signed, however, was up by five per cent, suggesting customers are signing smaller, more focused deals with suppliers.
Comments
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1. anonymous
Since the so called "big six" have a consistent record of failure what is "SAFE" about them. They are just money sinks that don't deliver what the client needs
2. Victor Mojo
While the larger Offshore Outsourcing Providers have seen substantial gains, we have found that our customers who are seeking to outsource, are starting to look at those providers who provide a more substantial value proposition other than price. They are seeking business advice as well as a quantifyable ROI. Furthermore, most of these providers do very little to optimize business processes, nor do they adequately address SARBOX issues confronting many companies.