Asia-Pacific Outsourcing Market Bucks Global Trend

The outsourcing market in Asia-Pacific grew strongly in 2006, according to TPI, the world's largest sourcing advisory firm. In its first, semi-annual 'TPI Index' for the region, TPI reported that the number of deals signed in Asia-Pacific valued at more than US$25M had increased by 43%. The total value of these contracts has increased 67%, representing a five year high in outsourcing activity.

This level of activity contrasts sharply with the global trend. Although the number of contract awards globally increased by 3%, the value of these awards declined by 8% compared to 2005.

Arno Franz, Managing Partner of TPI Asia-Pacific, commented, "2006 was a stand-out year for outsourcing in Asia-Pacific. The region accounted for 13% of the global outsourcing market in 2006, the first time its market share has exceeded 10% since 2002. However, because the relative immaturity of the Asia-Pacific market makes it prone to spikes in activity, it remains to be seen if this is the start of an on-going growth trend."

Asia-Pacific is also showing consistent year-on-year growth in annualised revenues, the total revenues available annually to the service provider community. The Compound Annual Growth Rate (CAGR) for the region stands at 10.5%, more than double the global rate of 4.5%

Arno Franz continued, "Despite the 'lumpy' nature of the Asia-Pacific market in terms of yearly contract awards, the sustained growth in annualised revenues since 2002 suggests that there is strength in the Asia-Pacific outsourcing market."

At the same time, competition in the region has been heightened. The Big Six of outsourcing (Accenture, ACS, CSC, EDS, HP, IBM) are winning a decreasing proportion of those deals valued at over US$25M. This group won 40% of Asia-Pacific total contract value, compared with a 60% share in 2002.

Arno Franz concluded, "The increasing level of competition confirms that clients in Asia-Pacific are following the global trend and are becoming more receptive to doing business with non-Big-Six Providers. Alongside the global giants of outsourcing, there is clearly room for smaller, specialised service providers who can address specific client needs. As the market matures, we should see this level of competition increase significantly. At the moment, success for service providers in Australia, India and Japan seems to be the determining factor for success in Asia-Pacific."