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Global Sourcing Market Activity Increases Significantly in Q4 2012

By Rajani Baburajan, TMCnet Contributor

The global sourcing and services market has gained in transaction volumes in the fourth quarter of 2012 compared to the third quarter, according to Everest Group, an advisory and research firm on global services. Everest Group’s Market Vista: Q4 2012 finds that the fourth quarter transactions and annual contract volumes increased 6 and 47 percent compared to the third quarter of last year, respectively.

The fourth quarter transaction volume and ACV for IT Outsourcing (ITO) deals rose and Business Process Outsourcing (BPO) deals saw similar transaction volumes but a sharp increase in annual contract value (ACV).

During the quarter, the global outsourcing market saw 401 outsourcing deals signed with an annual contract value (ACV) of approximately US$2.1 billion. Forty seven were major deals, each valued at over US$50 million in total contract value (TCV), of which one was a mega deal valued at over US$1 billion in TCV.

“Pent up demand usually propels third quarter activity, but this activity spike occurred during the fourth quarter and ended a six-quarter slide of declining market transactions,” said Eric Simonson, managing partner of Research, in a statement.  “The market at the end of last year was largely driven by ITO activity in the public sector and BPO activity in the BFSI (banking, financial services and insurance) sector. The fourth quarter also saw significant increases in Global In-house Center (GIC) activity and new delivery centers.”

Sector wise, BFSI sector held about 19 percent of total market volumes, similar to the previous quarter, but the MDR (manufacturing, distribution and retail) sector saw sharp increases in both transaction activity and ACV. The GIC market saw 18 new set-ups, compared to 15 in the third quarter, and one divesture.

Additionally, transaction volumes remained steady in North America while Europe witnessed an increase in activity over the previous quarter.

The report also noted that location activity increased with 45 new delivery centers set up across GICs and service providers. Unlike the second and third quarters last year, the fourth quarter saw more activity in tier-1 locations than in tier-2/3 cities. Meanwhile, consolidated revenue of service providers decreased in the third quarter of 2012 compared to the previous quarter but margins increased during the same period.

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