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 user 2005-01-16 at 11:05:00 am Views: 66
  • #11320

    Europe outsourcing capital of the world
    US slips into second place for the first time, survey claims

    Europe has overtaken the US as the world’s leading market for outsourcing contracts, a report has claimed.

    According to the latest Quarterly
    Index from outsourcing advisory firm TPI, Europe accounted for just
    under half of the value of major outsourcing contracts (those worth
    over €40m) awarded worldwide in 2004. The US came in second at 44 per
    cent, with Asia Pacific trailing at just seven per cent.

    The €28bn of contracts awarded by European companies last year is more than double the value in 2002, TPI reported.

    Duncan Aitchison, international
    managing director at TPI, said: “The equalisation between the European
    and US outsourcing markets comes through dramatic growth in Europe, not
    any significant decline in outsourcing in the Americas.

    “European companies realise that they
    cannot continue to compete effectively on a global scale without
    utilising the increased efficiency and flexibility they can gain
    through outsourcing.”

    The report also found that the value of major outsourcing contracts awarded last year was a record €58bn worldwide.

    Over two thirds of this was IT
    outsourcing and a third business process outsourcing, whereby companies
    engage third parties to perform functions such as finance, accounting,
    procurement and human resources processing.

    Business process outsourcing expanded by 50 per cent as a proportion of major contracts last year, from 22 per cent in 2003.

    “Judging from the pipeline of deals
    on which TPI is advising, European outsourcing is likely to increase
    yet again this year. We expect business process outsourcing to continue
    to gain in popularity and for IT outsourcing’s lead to gradually
    narrow,” Aitchison added.

    According to the study, the
    increasing dominance of the European market in the global outsourcing
    scene is proving problematic for the ‘big six’ outsourcing providers:
    IBM, CSC, EDS, Accenture, ACS and HP.

    These firms have seen their
    collective market share fall by almost two fifths (38 per cent) in
    2004, winning only 44 per cent of major contracts last year, compared
    to 71 per cent in 2003. ACS is the only big six player to have
    increased its market share, while HP’s market share is static. The
    other four have all experienced a significant fall.

    The squeeze on the market share of
    the big six was particularly severe in Europe. In IT outsourcing, they
    have seen a 51 per cent decline in their market share from 73 per cent
    in 2003 to 36 per cent in 2004.

    This compares to only a 25 per cent fall in their share of the US market, from 87 per cent to 65 per cent.

    “In Europe, the fastest growing
    market geographically, the big six are not maintaining market share in
    either IT outsourcing or business process outsourcing,” said Aitchison.

    “The players that have done well in
    this space in 2004 are companies like Capgemini, Siemens, Xchanging and
    T-systems, each of which signed over €3bn worth of contracts during
    2004. It should come as no surprise that all of these are indigenous
    European service providers.”

    Despite the controversy that
    surrounds offshore outsourcing, 40 per cent of the contracts awarded in
    2004 on which TPI advised contained an offshore, or global service
    delivery, element.

    Offshoring is a more common component
    in business process outsourcing than IT outsourcing contracts, with 76
    per cent of major business process outsourcing deals with which TPI was
    involved last year entailing at least some offshoring, up by more than
    a quarter from 56 per cent in 2003.

    “More and more companies,
    particularly the larger companies, are moving towards what we term
    ‘global service delivery’ in which they buy services provided in
    several different locations internationally through a single contract,”
    said Aitchison.