BPO to dominate outsourcing by 2006

Business process outsourcing (BPO) will become the main type of outsourcing contract next year if it maintains current growth rates, according to market analysts NelsonHall.

BPO's share of the global outsourcing market increased from 24 per cent in 2003 to 34 per cent in 2004 on the back of a 38 per cent rise in the total BPO contract value to $24.5bn.

The strongest growth was in Europe where BPO contract value grew by 60 per cent in 2004, driven largely by financial services companies based in central Europe. NelsonHall predicts this momentum will continue in 2005 with strong government demand in the UK.

An increase in US BPO is also predicted now that the presidential election and the accompanying outsourcing political hot potato has passed and dropped from the public radar.

The report said: "BPO activity in the US and in the government sector in particular was impacted by the November elections. However, the US elections are now fading in the distance and the UK government sector has come strongly back onstream in the last quarter and looks set for a promising 2005."

On a vertical basis demand was strong in every sector bar retail and particularly strong in financial services and government.

BPO contracts are also increasing in contract length and value, with 30 per cent a year growth in the number of deals worth over $100m.