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Global outsourcing market drops 10 percent in the third quarter, but US financial sector outsourcing deals double

November 4, 2009 – North American banking and financial services firms signed twice as many outsourcing deals in the third quarter as compared to the second quarter this year, according to the Market Vista: Q3 2009 report by Everest, a global consulting and research firm. Everest’s quarterly study on global outsourcing and offshoring activity reports transaction volume decreased 10 percent globally in the third quarter compared to the previous quarter, while captives activity was at an 18-month high.

Comparing Q3 to Q2 this year, the report includes the following findings:

The BFSI (banking, financial services, insurance) services and MDR (manufacturing, distribution, retail) verticals contributed towards 36 percent of deal signings, and healthcare deals increased 4 percent.

While BFSI sector transactions doubled in North America and accounted for almost half of all global transactions, global deals in the sector dropped from 88 in Q2 to 81 in Q3.

North America and Europe contributed towards three-fourths of total transaction signings; Rest of the World activity remained steady.

Transaction volume in BPO decreased 14 percent; ITO activity decreased 8 percent.

Twenty-eight new captives were established in Q3 – an 18 month high. India led with 11 new centers followed by Europe with eight, Rest of Asia with six, and Latin America with two new centers. Divestiture of four captives occurred.

Suppliers announced a total of 144 new transactions in Q3 versus 161 in Q2, led by IBM. Overall transactions activity improved for offshore centric-suppliers, while it declined for traditional global majors.

“We continue to see indications that the market is gradually progressing towards recovery as buyers are now able to re-focus attention towards proactive measures to add value and lower costs for their organizations,” said Eric Simonson, Managing Principal of Research, Everest. “We expect to see recovery continue into 2010, driven by gradual stabilization of the global economic and business environment.”

Cost arbitrage in many European countries increased over the past 12 months due to factors including favorable exchange rate dynamics expected to hold for 6-9 months and reduced operating costs. As a result, offshore activity increased over last two quarters and 14 new centers were established in Q2-Q3 compared to nine during same time period in 2008.

Several new delivery centers and captives were established in China over the last few quarters that mostly serve markets in Japan, Korea and the domestic market in China; however, there is little evidence of large-scale offshore operations for United States and United Kingdom clients.

(Source-Everest Group)

Insurers In Asia/Pacific Are Increasingly Receptive To IT Outsourcing





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