NelsonHall BPO Index Indicates BPO TCV on Rise Despite Credit Crunch
Government Sector Sees Increase in BPO Contracts While Banking Industry Sees Decline
BOSTON, MA and LONDON and COLOGNE, FRANCE and PARIS--(Marketwire - October 15, 2008) -
NelsonHall, the leading BPO analyst firm, today announced the results of
its "BPO Index" market monitor for the period ending September 2008.
NelsonHall's BPO Index shows that, despite the credit crunch and downturns
in Q2, the BPO TCV grew by 28 percent in the past twelve months.
While the second quarter was not as profitable a quarter for BPO contract
signings, there was an overall 13 percent increase in contract signings in
commercial and civil government sectors for the first 9 months of 2008.
While the number of new BPO contracts has arguably continued to decline,
the number of BPO contracts valued at over a $100 million has increased by
21 percent in the last 12 months and the average value of the top 20 - 50
deals has increased by 34 percent. This has been at least partly driven by
some very large deals in the insurance sector, including the $1Bn contract
between WNS and Aviva following the $228 million acquisition of Aviva's
captive unit by WNS Global Services and Capita's estimated $350 million
contract to deliver Marsh UK's back office administration functions.
The BPO contract value in the "growth economies" grew slightly faster, at
31 percent, than the BPO contract value in the "mature economies" which
grew at 28 percent. However, while BPO is becoming increasingly important
to support domestic activity in the growth markets, it remains a small
portion of overall BPO activity and the growth markets are at this stage
predominantly consulting and systems integration markets rather than BPO
The two sectors that usually dominate the contract activity, financial
services and government, have increased their share of contract TCV from 62
percent to 72 percent. However, there has been a significant shift in the
balance, with BPO activity in the government sector growing sharply over
the past 12-months and overtaking that in the financial services sector.
BPO contract activity has increased dramatically at both the federal and
state levels in the U.S. and continues to grow in local government in the
BPO activity in the insurance sector has grown strongly in the past 12
months, accounting for approximately two-thirds of activity in the
financial sector, while activity in the banking sector has declined. This
can be largely explained by the credit crunch, which has hit the banking
sector hardest and earliest. At the moment, the banking sector needs more
dramatic remedies than BPO can provide. However, BPO is likely to be an
increasing part of the solution in the medium-term.
Front-office and middle-office outsourcing areas have strengthened
considerably over the past 12-months and they now account for 81 percent of
BPO contract value. Major front-office BPO contracts are also very
prominent, recent examples of contracts include the "USA Contact" contract
and a number of major commercial CMS contracts awarded to vendors such as
Convergys and TeleTech.
Elsewhere, the telecom sector has been very active in BPO recently and
activity is up in both transportation and healthcare. The manufacturing and
retail sectors have recently seen lower levels of BPO activity. These
sectors, like the banking sector, have some immediate rethinking of their
wider strategies to carry out but, similarly are likely to turn to greater
use of BPO in the medium-term once they have addressed any urgent crises.
NelsonHall's quarterly BPO Index reports are available as part of
NelsonHall's BPO subscription services. For more information about
accessing this report and NelsonHall's BPO subject matter experts, please
contact the following NelsonHall representative:
Paul Connolly at email@example.com.
Founded in 1998, NelsonHall is the leading global independent analyst firm
in Business Process Outsourcing (BPO). The company provides buy-side and
sell-side organizations with deeper research and analyses in major BPO
disciplines than any other research firm in the world. These include
Finance and Accounting, Human Resources, Procurement, Banking, Insurance,
Government and Customer Management Services. The company's
subscription-based model provides subscribers with robust market analyses,
case studies, vendor assessments, contract analyses, market reports and
access to a content-rich BPO contracts database. The firm covers a wide
range of industries, including financial services, government and utilities
sectors, and tracks worldwide and regional BPO activity. For more
information on NelsonHall, please visit www.nelson-hall.com.