Equaterra, BPO, Outsourcing, Market

Equaterra analyzes flat BPO market in their outsourcing survey

Key findings from EquaTerra’s 2Q06 Outsourcing Pulse Surveys – conducted among its advisors and a wide variety of leading service providers to reveal in-the-field insights into sector trends and projections – include only a modest increase in outsourcing demand growth as compared to 1Q06 and a decline in growth levels year over year, flat to declining deal scope, and continuingly tight service provider capacity (as cited by a full 50 percent of EquaTerra advisors.)

While the above findings point to current market-state and ongoing service provider issues, buyer challenges were also identified, including:  finding service providers that can meet their needs and ongoing challenges with transition and outsourcing management and governance (cited by EquaTerra advisors); and in building solid and accepted business cases (cited by service providers.)  These findings collectively highlight areas in which there is room for improvement by both outsourcing buyers and providers.

A comprehensive analysis of the results of EquaTerra’s 2Q06 Outsourcing Pulse Surveys – covering ITO and BPO activity during April through June 2006 – will be disclosed in a webcast on Thursday, July 20 at 11am eastern time.  To register for the webcast, please contact:  allison.norman@equaterra.com.  Reports detailing the survey findings will be available in late July by sending an e-mail to:  research@equaterra.com.

Said Stan Lepeak, EquaTerra’s Managing Director of Research, “The outsourcing market has undergone a period of rapid growth coupled with globalization over the past two – four years.  As a result, service provider capacity, especially for BPO and multi-national or global deals, is constrained.  At the same time, many leading service providers feel pressure to improve or at least maintain margins.  As a result, buyers with more complex requirements or weak business cases cannot always find providers with the requisite skills and/or desire to compete for their business.  Buying patterns are also trending toward more multi-sourcing and greater demands for process improvement over just cost reduction, creating more complex deals that can exacerbate buyer challenges with transition and ongoing governance.  So while outsourcing continues to grow in size and acceptance, it is experiencing some growing pains that must be addressed.”

Other key study findings include:

• HRO slipped to the third most outsourced process, replaced by ITO and Procurement, respectively, according to EquaTerra advisors
• Cost reduction was cited as the leading reason buyers outsource, though it was followed strongly by  process improvement and shifting focus to more strategic work, particularly for BPO efforts, according to both advisors and service providers
• Pricing competitiveness was generally stable quarter over quarter for ITO, but less so for BPO, as cited by both advisors and service providers
• Contract value held steady, though more so for BPO than ITO, according to advisors
• The number of service providers expecting recompetes/renegotiations to increase over the next quarter declined, but still came in at over 25 percent of respondents

The surveys cover a variety of other topics including challenges to deal consummation, the impact of compliance, levels of offshore outsourcing and demand breakdown by process and sub-process, horizontal and vertical industry trends, and other critical measurements.