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Outsourcing market grew 6 percent over 2008- Everest Group 2010 Report projects positive growth outlook for the global sourcing market in 2011

The global outsourcing market continued to steadily grow in 2010 with an annualized growth rate of 6 percent compared to 2008 with the year seeing transactions reach a 36-month high in the fourth quarter, according to Everest Group, an advisoryresearch firm on global services. Transaction volumes in North America and Europe were higher than 2009 volumes by 20 percent and 17 percent respectively, indicating revival of activity in these geographies.

Everest Group’s Market Vista: 2010 in Review captures key developments in the outsourcing and offshoring industry in 2010. The report includes an analysis of outsourcing transaction trends, captive-related developments, market activity by locations, location risks and opportunities, key service provider developments, and implications for sourcing industry stakeholders. The report compares market activity in 2010 with preceding years to capture evolution of the outsourcing market.

In 2010, the outsourcing market saw IT Outsourcing (ITO) transaction volumes increase at an annualized rate of 5 percent from 2008 while Business Process Outsourcing (BPO) transactions increased 12 percent during the same period. The market recovery was led by traditional industry verticals, such as BFSI (banking, financial services and insurance), and buyer geographies, such as North America.

Other 2010 findings include:

* A revival in high-value deals occurred with the number of mega deals, transactions with total contract values (TCV) of US$1 billion or greater, reaching a two-year high in the fourth quarter.

* The captive model continued to grow with 132 captive set-ups and only six divestitures last year compared to 77 and 114 set-ups in 2008 and 2009, respectively.

* Although Asia continued to lead offshore activity, offshore adoption also spread to other locations.

* Last year saw 39 new delivery centers in India followed by 32 in Eastern Europe, 27 in Latin America, 25 in the Philippines, 16 in China and six in Africa. Last year, China was reclassified as a mature location by Everest Group, which was reported in the firm’s research report, What is the True Maturity of China’s Offshore Services Market?

* Political crises in Egypt and Tunisia brought concerns and new implications to the outsourcing industry as discussed in Everest Group’s report, Turmoil in Egypt and Tunisia: What’s Next for the Global Services Industry?

* Despite the economic slowdown, leading service providers in Everest Group’s Market Vista Index saw increases in revenues, operating margins and headcount.

* The service provider landscape witnessed significant M&A activity in 2010. M&A activity in the near to medium term is likely to focus on Tier-2 IT and pure-play BPO service providers.

“There is a positive growth outlook for the global sourcing market in the near term, driven by renewals and expanding scope of existing contracts, tapping into new buyers in new geographies and expanded use of global sourcing,” said Eric Simonson, managing partner of Research. “Demand from North America is likely to pick up with recovery in the overall macroeconomic environment and demand from Europe should pick up also. In the medium to long term, restructuring, integration, and redefinition of sourcing strategies by large financial services companies are likely to drive significant growth in outsourcing and offshoring.”

(Source- Press release of Everest Group of 1st March 2011)





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