New research from Equaterra suggests that the business case for outsourcing is getting stronger, but that uncertainties in the market are making it more difficult to plan for long-term deals.
Some interesting findings in the new research include the prediction that second-tier companies will suffer as clients seek assurance from the big established brands and that India will be more dominant as a destination for sourcing. Stan Lepeak, the firm’s managing director of global research said: “We anticipate heightened scrutiny and greater safeguards being built into new and existing contracts, but India will retain its lead in the near future due to its many advantages, including language, talent and experience.”
Key Findings from EquaTerra’s 4Q08 Pulse:
Demand for outsourcing dips 5 percent quarter-over-quarter – Worldwide, 38 percent of EquaTerra’s advisors reported demand was up for BPO/ITO and other business process/IT services in 4Q08, a decrease of five percent from last quarter. Advisors supporting work in the Americas, where the severity of the economic crisis was felt earlier and organizations are further into the downturn, were more likely to cite increased demand for outsourcing than those working in Europe.
Projections for 1Q09 demand up – Fifty-three percent of the service providers polled expect an increase in demand next quarter, up 14 percent from the 3Q08.
Public sector a bright spot – Demand in government and the public sector remains strong for IT outsourcing, back-office process improvements and support for deploying shared services. But service providers are also winning contracts for training, operational support and supply chain management.
Buyer’s market developing – The deteriorating economy has a positive side for organizations seeking to expand their scale/scope of work. Outsourcing service providers feeling the impact of the downturn are focused on increasing market share by expanding existing accounts, providing savvy buyers the opportunity to use the downturn to make great strides toward transforming their business, accomplishing more, faster and with fewer resources..
Emerging markets – Service providers financially able to expand into new market niches will find increased opportunities with global pharmaceuticals, particularly in research and development, financial analytics, document services, facilities and real estate management and logistics services.