Posts Tagged ‘outsourcing’

2008 was a strong outsourcing year - even for Africa

Saturday, January 31st, 2009

TPI, the largest sourcing data and advisory firm in the world, revealed 2008 was a strong year for the outsourcing industry with both total contract and annualized contract values exceeding overall values for 2007.

The TPI Index, which measures commercial contracts greater than $25 million, also showed that India-based providers made steady and significant increases in market share this year. However, it also indicates that the global financial crisis is impacting the form of outsourcing contracts as corporations focus on near-term concerns related to their day-to-day business.

Total contract values (TCVs) softened in the second half of 2008, producing one of the weakest half years for TCV performance on record. Strong performance from the first half of the year sustained the $90 billion year-end TCV. Annualized contract value (ACV) — the TCV divided by the duration of the contract — was the largest ever with a record $17 billion. This fact reflects the impact of shorter overall contract duration, another evidence of a tactical orientation to outsourcing.

In 2008, the market was defined by a 12 percent increase in smaller contract awards. These comprise contracts of less than $1 billion in value and represent the inherent demand for outsourcing among corporations.

While the first half of 2008 witnessed 12 mega deals, or contracts valued at more than $1 billion, the second half of 2008 only had three mega deals — making the first half of 2008 very front end heavy. Historically, mega deals have been move evenly spread across the half-years. These higher-valued contracts weigh heavily on the TCV record for the full year tally.

With more providers that have deeper capabilities than ever before, the industry stands prepared to respond quickly to these challenges. In many ways, 2009 will be a defining year for outsourcing as the industry steps up to help clients find near-term cost-realignment opportunities.

Additionally there were telling industry sector and geographical trends that are important to note. Declining activity in the financial services sector had the greatest impact on overall 2008 values while manufacturing, telecommunication and energy increased their TCVs a moderate or substantial amount. In the second half of the year, financial services TCV actually increased as a result of companies divesting captive offshore operations and issuing an associated outsourcing services agreement.

Contract volume and its share of the total market have increased in EMEA, with the region accounting for 55 percent of the global outsourcing market TCV, while the U.S. accounted for 38 percent. 2008 is the first year EMEA contracts surpassed those in the Americas. The regional contrasts in the use of IT outsourcing and business process outsourcing are also noteworthy. EMEA adopted the most IT outsourcing – 62 percent in 2008. The Americas adopted the most business process outsourcing – 43 percent in 2008.

While contract values remained steady in the Americas during 2008, EMEA saw its strongest half-year in the first half of the year followed by a drop of nearly 50 percent in the second half. Asia-Pacific values nearly tripled between the first and second half of 2008 with a TCV in the second half that was at its highest in two years. This can be attributed to significant gains in the Indian market as well as captive center disposals as it now ranks fifth among countries where companies were awarding the most outsourcing contract value.

“I still think that 2009 will be a defining year for outsourcing”, Mike Slavin from TPI says.

Chance for Africa: The coming death of Indian outsourcing

Monday, March 3rd, 2008

Forbes wirtes today about the rising salaries of Indian programmers under the title “The Coming Death of Indian Outsourcing”:

However, the reality is that wages are rising in India. The cost advantage for offshoring to India used to be at least 1:6. Today, it is at best 1:3. Attrition is scary.

And the resume about this fact for the Forbes editors?

Jobs that are low value-added and easily automatable should and will disappear over the next decade.

The software as a service (SaaS) megatrend in technology also plays against India, they said. But mainly, in the terms of payment - the times plays for Africa.