|
According to the latest TPI Index from sourcing advisory firm TPI, 2007 witnessed a landmark regional shift with Europe, the Middle East and Africa EMEA taking the lead in outsourcing activity. 2007 was the first year ever
that both the number of contracts and the total contract value TCV in EMEA exceeded those measures in the Americas. Although the final quarter of 2007 had the lowest quarterly number of contracts awarded in EMEA that year 51, it yielded the highest quarterly TCV , up nearly 43 percent quarteroverquarter and 18 percent yearon year. And despite the award of fewer contracts in 2007, EMEA accounted for EUR6.4B more in TCV yearoveryear a 24 percent increase on 2006.
The average contract value in EMEA increased yearoveryear from EUR112M to EUR149M due largely to greater new scope added and increased average BPO value. The average contract value for new scope added in EMEA increased by 40 percent. 187 contracts valued at EUR27B in TCV and EUR4.7B in an Annualised Contract Value ACV were incremental to the market last year. Incremental new scope ACV was up almost 31 percent year over year in EMEA, compared to an increase of 13 percent globally.
In addition, BPO performance in EMEA was particularly strong in 2007. The average BPO contract value jumped 82 percent, driven by an exceptionally strong fourth quarter performance. With EUR10B in TCV, the region accounts for more than half of all global BPO TCV in the Broader Market for the first time ever.Several large BPO contracts awarded in the fourth quarter, like those with Nielsen and Prudential, boosted the 2007 TCV results. In this sector, especially Financial Services Outsourcing FSO saw strong TCV gains in 2007, increasing by 56 percent year over year.
Enterprises in Continental Europe are now outsourcing in greater numbers, said Bernd Schaefer, partner and managing director, TPI Germany. We have seen increased yearoveryear activity in EMEA, mainly in Germany, The Netherlands,Sweden, Switzerland and France.
EMEA also saw increased megarelationship activity in 2007, particularly in the last quarter of the year. The 18 mega relationships valued at EUR2.7B signed in EMEA in 2007 represented a yearoveryear increase of 63 percent by number and 50 percent by value. And in comparison to the Americas, where average contract sizes for the year decreased by about 17percent they surged by 33 percent in EMEA.
The Indiabased providers share of global contracts continued to expand in 2007, up by 42 percent on last years share and 114 percent on the threeyear average 20042006. By contrast, despite Europes overall growth as an
outsourcing market, the European Big Five Atos Origin, BT, Capgemini, Siemens and TSystems saw their collective share of outsourcing contracts signed globally decline by 17 percent since last year, and by over 50 percent over the
previous three years. Indeed, the Indiabased providers have, for the first time, equalised their share with the European Big Five.
Other major findings of the latest TPI Quarterly Index include:
On a global level the fourth quarter was the best quarter on an ACV basis in eleven years
On the basis of Annualised Contract Value the more than EUR12B of ACV awarded in 2007 matched the fiveyear average. New scope ACV was actually up globally yearoveryear by a healthy 13 percent. The fourth quarter was actually the best quarter on an ACV basis in eleven years.
High value of TCV awarded in the final quarter, but low number of contracts.
The fullyear global performance was materially influenced by the fourth quarter because of the notably high value of TCV awarded in that quarter. Compared with the previous three quarters the fourth quarter TCV lifted the annual totals to more than EUR64B. However, it is almost the same number and EUR6.4B more in contract value than the fiveyear average. Despite the strong 4th quarter TCV, the fullyear global TCV represents the smallest award value in the past five years and a yearoveryear decline of about 5 percent.
In addition, the fourth quarter showed a relatively low number of contracts. The 108 contracts awarded globally in the fourth quarter of 2007 represented the lowest number awarded in any quarter since the third quarter of 2005 but the largest value EUR21.5B in TCV and EUR4.3B in ACV.
MegaRelationships revived globally in the fourth quarter
The fourth quarter TCV was fuelled by some megarelationship strength, those transactions with an ACV, or an average annual value, of EUR80M or greater. The fourth quarter witnessed the greatest number and value of megarelationships signed than any quarter in recent years. Despite this, globally there were fewer megarelationships in 2007 than in 2006, and their yearly value was down slightly.
India heritage providers experienced notable year over year share growth off a small base.
While there was still a significant number of service providers participating in this industry, 12 percent fewer service providers won contracts in 2007 than in 2006 this after four successive years of increasing numbers of providers.
|