Asia Pacific Outsourcing Market Bucks Global Trend

Outsourcing deals inked in the Asia Pacific in 2006 topped US$25 million, a 43 percent increase on the previous year, according to advisory firm TPI Inc. Asia Pacific managing director of the outsourcing consultancy, Arno Franz, said 2006 was a stand-out year for the region accounting for 13 percent of the global market.
"It is the first time market share has exceeded 10 per cent since 2002; but the relative immaturity of the Asia Pacific market makes it prone to spikes in activity so it remains to be seen if this is the start of an ongoing growth trend," Franz said.

The compound annual growth rate for service providers in the region is 10.5 per cent, according to TPI, which is more than double the global rate of 4.5 percent.

Despite the 'lumpy' nature of the Asia Pacific market in terms of yearly contract awards, Franz said the sustained growth in annualized revenues since 2002 suggests there is some strength in the region's outsourcing market.

The big six service providers, namely Accenture Ltd., Affiliated Computer Services Inc., CSC Corp., EDS Inc., Hewlett-Packard Co., and IBM Corp., are losing market share.

This group won 40 percent of the region's contracts last year, compared with a 60 percent share in 2002.

Franz said the increased competition shows clients are more receptive to doing business with the non-Big Six providers.

"Alongside the global giants of outsourcing, there is clearly room for smaller, specialized service providers who can address specific client needs," he said.

"At the moment success for service providers in Australia, India and Japan , seems to be the determining factor for success in the Asia Pacific."

Indian outsourcers are increasingly becoming the big winners in the region.

For example, Tata Consultancy Services Ltd. (TCS) announced today it has become the first Indian IT company to net $1 billion in revenues in one financial quarter (Q3 ending December 31, 2006) and post a 40 percent revenue increase year on year.

TCS recently signed a multi-year application development and support contract worth $90 million with Qantas.

Another provider Infosys Technologies Ltd., said earlier this month it expects full year revenue to be US$3.09 billion, up by 43.6 percent from revenue in the previous fiscal year.

In Australia, more than A$7 billion (US$5.46 billion) worth of outsourcing contracts are up for grabs in 2007.

According to research firm IDC, which has released the results of its 2006 Australian outsourcing end-user survey, a number of large contracts are expected to go with selective sourcing as organizations continue to unbundle mammoth IT contracts and look to best-of-breed providers.

IDC research manager for outsourcing and BPO (Business Process Outsourcing), Aprajita Sharma, said tier one providers face tough competition from Indian offshore outsourcers.