SOFTER MARKET DEMAND, DECLINING PIPELINE GROWTH AND CONTINUED PROVIDER CAPACITY ISSUES AMONG KEY FINDINGS IN EQUATERRA’S 3Q06 OUTSOURCING PULSE SURVEYS

HOUSTON (October 24, 2006) — While outsourcing service providers cited slowing to flat quarter over quarter deal pipelines growth and slower demand level growth for the next quarter, EquaTerra advisors saw modestly improved quarter over quarter demand growth, according to the results of EquaTerra’s 3Q06 Outsourcing Pulse Surveys.

Stan Lepeak, EquaTerra’s Managing Director of Research, explained these findings by stating, “The growing complexity of outsourcing deals – especially multi-national or global deals that inherently encounter transition and ongoing governance challenges – coupled with an increasing volume of re-competes and renegotiations, is impacting demand.  It is also driving more buyers to seek the assistance of sourcing advisory firms, which explains the difference in service provider and advisor findings.  At the same time, service providers continue to struggle with “A-team” capacity challenges, increasing competition and re-competes and renegotiation issues, all of which are limiting their pipeline and profitability growth.”

An overall analysis of both advisor and service provider responses to EquaTerra’s 3Q06 Pulse Surveys shows that 4Q06 market opportunities will be somewhat constrained and volume levels will be in line with YE05 and below YE04.  However, both communities cite a robust future market, while at the same time acknowledging industry growing pains, particularly in Business Process Outsourcing (BPO.)

Key 3Q06 survey findings include:

• Top threats to successful deal consummation – both EquaTerra advisors and service providers cited inadequate management support as the chief problem
• Pricing competitiveness – most EquaTerra advisors cited stable overall, with 28 percent citing more competitive pricing; service providers also cited stable to more aggressive pricing
• Leading market segments – both advisors and providers named HRO as the leader; they disagreed on the number two and three spots, with advisors placing ITO in second place and providers dropping ITO to third place
• Leading industries – interestingly, there was a fair amount of disagreement here between advisor and provider responses.  While both named CPG as one of the leading industries, advisors cited energy/utilities and pharmaceuticals as the others in the top three, while providers included manufacturing and financial services in the top three

A comprehensive analysis of the results of EquaTerra’s 3Q06 Outsourcing Pulse Surveys – conducted among its own advisors and a wide variety of leading service providers to reveal in-the-field insights into ITO and BPO activity during July through September 2006 – will be disclosed in a webcast on Thursday, October 26 at 11am eastern time.  To register for the webcast, please contact:  allison.norman@equaterra.com.  Reports detailing the survey findings will be available at the end of October by sending an e-mail to:  research@equaterra.com.