In Q1 2009, BFSI grows despite drop in overall outsourcing: Everest Market Vista study

GURGAON, May 14, 2009 ─ Global outsourcing market decreased 7% in transaction volume in Q1 2009 as compared to Q4 2008, according to the latest quarterly Market Vista: Q1 2009 report on global outsourcing and offshoring activity by the Everest Research Institute. During the same period, the global annual contract value (ACV) dropped 16% from US $3.55 billion to $2.97 billion. BPO activity dropped 15% in transaction volumes.

Says Nikhil Rajpal, Principal, Everest Group, “Our analysis reveals that aggregate US$ revenues across the Market Vista Index of suppliers continued its decline and dropped by 2.2% in Q1 2009, falling in step with the 2.5% decline in previous quarter. Revenues of offshore-centric suppliers registered a 2.3% decline, while those of traditional global suppliers declined by 2.2 percent.”

The North American outsourcing market witnessed a 15% decrease in transaction volume during the first quarter this year compared to the previous quarter. Although Europe witnessed a reduction in transaction volumes, its Annual Contract Value (ACV) was higher than Q4, primarily pushed up by some large deals.

Says H. Karthik, Research Director, Everest Research Institute, “Whereas other industries signed lesser number of outsourcing deals in Q1, the banking and financial services (BSFI) sector actually picked up to register a 30% growth in transactions, fuelled especially by increased activity in Europe.”

Captives activity included 20 new announcements in Q1, compared to 22 in each of the previous two quarters. Asia continued to dominate offshore delivery. Another recurring trend included preference for Tier-II cities with new centers arising in locations such as Iloilo City & Bacolod in Philippines, and Gdansk, Lublin & Poznan in Poland. The study also warned of potential near-term risk issues arising in Mexico, El Salvador, Poland and Thailand.

Says Nikhil, “In Q1 2009, several incidents have culminated to altogether reshape the outsourcing and offshoring market. Be it Tech Mahindra’s historic acquisition of Satyam, or violence in Mexico leading to shifts in risk, or speculation related to captive divestitures – all of these new dynamics have made it imperative for business leaders to develop a more profound understanding of the fast-changing market dynamics to help steer through these turbulent times.” We expect the overall market activity to start picking up by Q4 this year, he remarks.

Everest Research Institute’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations, key supplier developments, and key developments across the top 20 financial services companies globally. Traditional supplier profiles include Accenture, ACS, Atos Origin, Capgemini, Convergys, CSC, EDS, Hewitt, IBM, Perot Systems and Unisys. Offshore-centric supplier profiles include Cognizant, EXL, Genpact, HCL, Infosys, Tech Mahindra, Tata Consultancy Services, Wipro and WNS. The Market Vista Q1 report also includes special sections on industry-specific FAO and an analysis of the outsourcing market in Eastern Europe.

About Everest Research Institute

Everest Research Institute, the research arm of global consultancy firm Everest Group, serves as a central source of independent and objective strategic intelligence, analysis, and actionable insight for leading corporations, suppliers, technology providers and investors in the global outsourcing and offshoring marketplace. Everest Group has earned a worldwide reputation for ongoing innovation as it helps clients achieve maximum value from their operations including sourcing strategy and implementation. Please visit www.everestresearchinstitute.com for more information.

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NOTE FOR EDITORS:

We invite you to please pre-register for a one-hour free Webinar on Tuesday, May 19, 7:30pm IST, titled, “Key Market Developments in Q1-2009: Market Vista Report Briefing”, that will present study findings and insights from the MV Q1 2009 report. To register, please visit: www.everestresearchinstitute.com/Events/Webinars.

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