Business Outsourcing Deal Activity Makes Strong Push Forward with Small and Midsize Deals Fueling Growth, IDC Reveals
FRAMINGHAM, MA – MARCH 16, 2006 – According to a newly released IDC study, the business outsourcing market progressed positively in 2005, experiencing a 33% increase in the volume of deals signed. The IDC study, which provides an in-depth comparison of 2005 and 2004 business outsourcing deal activity, finds market adoption expanding and becoming more mainstream, as large, midsize, and small companies from a variety of industries embrace the business outsourcing model.
"The business outsourcing market saw healthy growth in 2005," said Romala Ravi, director of IDC's BPO Services research. "While the small number of megadeals signed caused overall contract values to slightly decline, the rest of the market pushed forward strongly. Megadeals can cause wild swings in the total contract values each year, but the reality is that these deals only represent a mere 3% of business outsourcing deal activity. The majority of this market, comprising deals under $1 billion in value, continued to see vibrant activity with adoption spread out across a wide range of company sizes, industries, and geographies."
Key findings from IDC's investigation of business outsourcing deal activity between 2005 and 2004 include:
— Small and midsize deals are fueling growth. Underlying this trend is an increase in the share of new deals versus extensions and renewals, which indicates that a growing number of new organizations are buying into the business outsourcing model.
— While horizontal business processes continued to dominate deal activity, 2005 also saw an increase in the number of vertical-industry specific deals, particularly in the financial services and government verticals.
— Manufacturing, financial services, and government verticals registered the strongest adoption of business outsourcing overall.
— Human resources had a strong year in 2005, registering double-digit growth in deal activity and deal value.
— Business outsourcing deals continued to have a local flavor with single-country scoped deals dominating the deal mix.
The IDC study, Trends in BPO Deal Activity: 2005 Versus 2004 (Preliminary Results) (IDC #34804), provides a comparative analysis of 2004 and 2005 worldwide business outsourcing deal activity. Using information gathered directly from business outsourcing vendors, along with publicly available information, this study examines key differences, growth patterns, major trends, and characteristics of these deals, and identifies how business outsourcing deal activity continues to evolve. In addition, the study provides a future outlook of the business outsourcing market and essential guidance for market players.
The BPO and processing services contract data presented in this study was drawn from IDC's Worldwide Services Contracts Analysis service, which provides access to the Services Contracts Database online tool and supporting research. With coverage starting in 1995 and over 9,100 services contracts, IDC's Services Contracts Database represents the largest and richest information repository of services deals in the world. This service helps vendor, end-user, and financial services communities monitor the demand for services contracts as well as the subsequent performance of specific vendors.
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