Contact Information: Note to editors: All trademarks and registered trademarks referenced herein remain the property of their respective owners. MEDIA CONTACT: Jeanne Achille The Devon Group 732-224-1000 ext. 11 John Willmott NelsonHall
NelsonHall BPO Index Identifies Short-Term Slowdown in BPO Contract Signings Resulting From Credit Crunch
Leading BPO Analyst Firm Issues Quarterly Update on Development of BPO Market
| Source: NelsonHall
BOSTON, MA and LONDON and COLONGE, GERMANY and PARIS--(Marketwire - July 10, 2008) -
NelsonHall, the leading BPO analyst firm, today announced the results of
its "BPO Index" market monitor for the period ending June 2008.
NelsonHall's BPO Index shows that the BPO market has been impacted by the
credit crunch with a decline in contract signings as organizations rethink
their business and sourcing strategies.
While the value of global BPO contract signings in the commercial and civil
government sectors increased by 29% in H2 2007, BPO contract signings in
these sectors have more recently been impacted by the credit crunch and/or
economic downturn in North America and the U.K. with the result that BPO
TCV increased by just two percent in H1 2008.
Indeed the short-term pattern is of a downturn in BPO contract activity
taking place in Q2 2008. While the quarter-on-quarter decrease in global
BPO TCV between Q1 2008 and Q2 2008 was only 8%, the effect has been to
make Q2 2008 the lowest Q2 for global BPO TCV since 2003, with Q2 2008
being a below par quarter for signings in both North America and Europe.
This single quarter may not be the start of a trend but there are signs of
a short-term pause in activity while organizations reappraise their
longer-term plans. The broad conclusion seems to be that there is a pause
before the storm with organizations reappraising both their broader
business strategies and sourcing strategies in the light of the current
economic reality. This will almost certainly lead to an increase in BPO
contract activity in the future and mean that organizations need to be more
ambitious and transformational in their sourcing strategies, though looking
for a rapid return from these strategies.
So, in the longer-term, there remains an ongoing and even enhanced need to
use BPO to transform mature operations and to support entry into new
markets. This use of BPO to support entry into new markets is already
apparent. Although emerging markets still only account for approximately 3%
of global BPO TCV, BPO TCV grew 26% in these economies over the past 12
months.
By sector, the government and financial services sectors strengthened their
share of BPO TCV from 60% in the 12 months ending June 2007 to 63% in the
12 months ending June 2008.
However, at this point, the story differs from the usual one. While BPO
contract TCV more than doubled in the civil government sector over the past
12 months, BPO TCV declined by 30% in the financial services sector. Indeed
this slowdown in contract signings wasn't limited to the financial services
sector but was broadly apparent across a broad range of commercial sectors
including the manufacturing and retail sectors. These declines were
typically more pronounced in North America than in Europe.
The pattern of BPO service adoption has also continued to evolve with an
increased emphasis on key operational processes which can have a material
impact on both an organization's effectiveness and its efficiency. This is
demonstrated by the considerable growth in activity in industry-specific
and front-office BPO over the past 12 months. BPO TCV has grown by more
than 50% in these areas, which now account for 85% of BPO TCV, with a
particularly marked increase in the level of customer management services
activity. Customer management services is a key part of the BPO market as
organizations address the key elements of their cost base and look for
mechanisms to support them in new market entry.
The pattern of back-office outsourcing has also continued to change. F&A
outsourcing has been coming into its own and growing strongly in both North
America and Europe as well as increasing in importance in support of market
development in emerging geographies such as Latin America. In terms of
trackable contract value, F&A outsourcing now accounts for 8% of global
contract value.
At the same time, single service activity in HR outsourcing remains strong
with for example in the last quarter both Hewitt and Serco strengthening
their absence management capability.
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 paul.connolly@nelson-hall.com
About NelsonHall
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.