Slow BPO, ITO Markets Growth in The First Half of 2007

Overall outsourcing demand is generally growing, but at a slower pace than in previous years, and points toward slow Business Process Outsourcing (BPO) and IT Outsourcing (ITO) markets growth for the first half of 2007, unveils the results of EquaTerra’s 4Q06 Outsourcing Pulse Surveys — conducted among its own advisors and a wide variety of leading service providers to reveal in-the-field insights into ITO and BPO activity during October through December 2006.

The Everest’s survey findings also illustrates that contrary to popular views and portrayals, the prevalence of outsourcing contract re-negotiations, re-competes and re-structuring are not a widespread sign of “deals gone bad” or the demise of the outsourcing industry. Rather, buyers, service providers and outsourcing advisors alike view them, in most cases, as a catalyst and opportunity for improving the deal.

The survey result also show that outsourcing of non-traditional functions such as document and imaging services, legal processing, Knowledge Process Outsourcing (KPO) and logistics services is on the rise, which signals an increase in both supply and demand.

According to the survey, a continuing increase in multiprovider sourcing that can benefit buyers if it allows them to engage the best service providers for each of the processes being outsourced, but can also be more complicated and expensive to manage than sole-sourcing, finds the survey. Most buyers continue to underestimate the cost and complexity associated with performing Outsourcing Management and Governance (OM/G) activities, and shortcomings in: The staffing of the governance organization; costs associated with the use of third-party services such as lawyers, advisors and benchmarking firms; and the costs for software tools to support OM/G efforts are often one of the root causes for problems with outsourcing transitions and dissatisfaction with ongoing outsourcing.