Contact Center Solutions Featured Article

November 04, 2009

North American Financial Sector Outsourcing Expands, Global Outsourcing Market Drops: Everest

By Brendan B. Read


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 Group. Everest’s quarterly study on global outsourcing and offshoring activity also reports that 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 2009 Q3 to Q2, the report includes other key findings such as:
 
*          The banking, financial services, insurance services and MDR, or manufacturing, distribution, retail, verticals contributed towards 36 percent of deal signings, and healthcare deals increased four percent
 
*          North America and Europe contributed towards three-fourths of total transaction signings; rest of the world activity remained steady
 
*          Transaction volume in business process outsourcing decreased 14 percent; IT outsourcing activity decreased eight percent
 
*          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.
 
Everest’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations, key supplier developments, and key developments across the top 20 financial services companies globally. The Market Vista Q3 report also includes focus sections on input-based pricing for ITO outsourcing destinations in Asia, and the acquisitions of ACS by Xerox and Perot Systems by Dell. Location optimization study insights include:
 
*          Cost arbitrage in many European countries increased over the past 12 months due to factors including favorable exchange rate dynamics expected to hold for six to nine 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 U.S. and U.K. clients.
 
*          At the current momentum, the arbitrage opportunity for Asian cities is on an average of about 20 years for both ITO and BPO.
 
“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.”

Brendan B. Read is TMCnet’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page.

Edited by Erin Harrison


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