4Q09 EquaTerra Advisor and Service Provider Pulse Survey Results
Growth in new deal pipelines increased a record 44 percent in 2009, the second highest single-year surge in demand since the inception of EquaTerra's Pulse survey in 1Q05. EquaTerra forecasts demand for global sourcing will gain momentum as economic activity revs up and organizations retool to compete in an increasingly diverse marketplace.
|
|
Introduction
EquaTerra is pleased to release the findings from its 4Q09 EquaTerra advisor and business and information technology (IT) service provider Pulse surveys. Through these surveys, EquaTerra has developed a highly informative gauge that provides quarterly insights into trends and projections in the outsourcing and third-party business and IT service markets, gleaned from its own field advisors and leading global service providers. EquaTerra’s advisors are the leading experts on business and IT services, assisting buying organizations actively exploring or undertaking shared services, outsourcing, offshore and other service delivery alternatives.
Since their inception in 2004, the EquaTerra advisor and service provider Pulse surveys have yielded insightful analysis of current and ongoing market trends. They capture changes in demand, scope, capacity and related key market indicators. They highlight the changes, and the direction of change, in the business and IT service industry as a whole. The surveys focus on where the market is going and how that direction is changing – or not – compared to prior quarters and years.
EquaTerra also incorporates key quantitative market data and leading indicators from sources outside the Pulse surveys. These sources include experiences from direct client advisory engagements and other EquaTerra market research, as well as service provider performance and satisfaction studies.
This edition of the advisor and service provider Pulse surveys reflects business and IT service market activity during 4Q09 (October through December 2009) as well as market demand and top trend predictions for 2010.
Topics explored include:
- Demand and buying patterns, including the impact of the economy on the demand for outsourcing and related third-party business and IT services
- Top 2010 business and IT service market trends
- Challenges to outsourcing deal consummation in the current market environment
- Buyer preferences for global sourcing models and locations; buyer global sourcing sophistication and maturity levels
- Outsourcing deal scope, sales cycles, pricing, contract value and profitability
- Service provider pursuit and delivery capacity
The Pulse surveys focus on using outsourcing and other third-party services to support the following functional areas: customer care/call center, finance & accounting, human resources, information technology, knowledge process outsourcing, procurement, and vertical industry business services. |
The following leading global business and IT service providers were polled for this quarter’s sell-side survey:
- Accenture
- ACS
- ADP
- Atos Origin
- Caliber Point
- Capgemini
- Ceridian
- Cognizant
- Convergys
- CSC
- Genpact
- Hewett
- HCL Technologies
- IBM
- ICG Commerce
- Logica
- Mercer
- Outsource Partners International
- TCS
- Wipro
- WNS
| |
Conclusions
Business process outsourcing ( BPO) and IT Outsourcing (ITO) demand growth gained strength in 4Q09 according to EquaTerra advisors and third-party business and IT service providers polled. Providers were more bullish on growth than advisors but both groups cited growing market strength. Ongoing pressure to reduce costs continues to drive demand as buyers continue to focus on doing more with less. An improving economy, as well as lack of investments in key operational areas over the past two years, are also favorably driving demand as buyers seek innovative means to support growth and investments.
The market for more discretionary third-party services, such as consulting, systems integration and some application development work, remains weaker than for outsourcing, though there are signs of improvement in demand for application development services. Public sector demand for all types of third-party business, mission support and IT services remains strong.
The top trends indentified for 2010 in the business and IT service market include the following:
- Software as a service (SaaS), especially in the HR functional area
- Cloud computing and the growth of non-traditional software applications (like SaaS and open source)
- Shared service centers as a complement to outsourcing or in lieu of outsourcing industries like the public sector
- Continued service provider market consolidation with mixed results for buyers given the challenges of smoothly completing these efforts
The globalization of business and IT services will continue unabated in 2010. Buyers will continue to diversify the locations from which they source services, as well as take a broader range of services offshore. The growth of global sourcing, however, will continue to outpace most buyers’ ability to source and manage these increasingly complex efforts, leading to underachievement of potential benefits and an occasional failed effort. |
Buyers continue to face many challenges to deal consummation. The key to overcoming these challenges is to recognize and proactively address them early in sourcing efforts and also, where appropriate, modify sourcing efforts to ease the impact of the challenges. The top challenges cited include the following:
- Retained organization, relationship management and outsourcing governance challenges
- Inadequate executive and management support
- Change management concerns
- The economy or the impact of the economy on operations
Service provider capacity is improving somewhat for deal pursuit but remains tight for transition and delivery. Service provider selectiveness is helping to improve capacity, but budget and skill constraints and the need to chase and deliver more smaller deals exacerbate capacity constraints, as do fits and starts in buyers’ sourcing efforts.
Growth in pricing pressure on service providers has reversed direction from the past few quarters and has started to grow again as buyers seek lower cost deals occasionally at the expense of quality.
|
Distribution of the EquaTerra Pulse survey reports, controlled by EquaTerra, is intended for internal use and select delivery to EquaTerra clients, prospects and other marketplace representatives. Questions or comments regarding these surveys should be directed to Stan Lepeak, Managing Director of EquaTerra and EquaSiis Global Research, +1 203 458 0677.
|
