1Q10 EquaTerra Advisor and Service Provider Pulse Survey Results
Appetite for Outsourcing Healthy but Deals Harder to Digest as Cautious Buyers Weigh Options
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Introduction
EquaTerra is pleased to release the findings from its 1Q10 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.
In addition to the global advisor and service provider Pulse surveys, EquaTerra conducts service provider Pulse studies in the UK and the Netherlands, recently launched a twice yearly legal Pulse survey, and periodically conducts additional function- and industry-specific studies. A source-to-pay outsourcing service provider Pulse survey is planned for later this year.
This edition of the advisor and service provider Pulse surveys reflects business and IT service market activity during 1Q10 (January through March 2010) as well as market demand and top trend predictions for the balance of 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
- Challenges to outsourcing deal consummation in the current market environment
- Outsourcing deal scope, sales cycles, pricing, contract value and profitability
- Service provider pursuit and delivery capacity
- Outsourcing buyer governance and service provider management capabilities and needs
- Outsourcing buyer change management capabilities and needs
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
- HCL Technologies
- HP
- IBM
- ICG Commerce
- Infosys
- Mercer
- Outsource Partners International
- Patni
- Steria
- TCS
- Wipro
- WNS
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Conclusions
BPO and ITO market demand continued to grow in 1Q10 though at a slower pace than in recent quarters, especially in the view of EquaTerra advisors. Third-party business and IT service providers polled remained more bullish on outsourcing market growth. In interpreting their bullishness, however, it is important to differentiate between inherent outsourcing demand in the market and the ability of buyers and service providers to get deals closed.
The range of functions and processes that buyers deem in-scope for outsourcing continues to grow. This includes both new process areas in more mature back-office functions, as well as in more activity in less mature outsourcing areas like knowledge management, research and development, and real estate and facilities management. This bodes well for the long-term growth of the overall outsourcing market.
There has been a slight resurgence in outsourcing deal flow disruption driven by negative economic conditions in western markets. This is manifested by more cautious buyers that are hesitant to make any major upfront outlays to support outsourcing efforts or enter into larger, more complex and uncertain deal arrangements. This double dip is creating market conditions similar to those witnessed in late 2008 and will likely continue for at least the next one to two quarters.
Buyers still aggressive about reducing and keeping down operating costs continue to work to overhaul service delivery models, trends that are positive for long-term outsourcing growth. In the near to mid-term buyers more often are employing internal process improvement efforts or alternative service delivery models like shared service centers as a complementary or alternative means to outsourcing to enable these change efforts. More rapid and continual change, and even more diligent focus on process efficiency, is another aspect of the “new normal.” Buyers are employing a greater diversity of tools in response.
Many buyers continue to struggle to adequately perform outsourcing governance and management activities, though most are focusing more attention and resources on improving capabilities. The situation is similar to conducting the necessary change management efforts to support outsourcing activities. Buyers’ organizations typically must do several things to improve capabilities in these areas, including getting more and better executive-level support and deploying and expanding the use of more adequately skilled and dedicated resources. |
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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 Global Research, +1 203 458 0677.
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