India takes sourcing to new heights

Led by India, the region's outsourcing market grew in contract numbers, total contract value and annual contract value, says consulting firm TPI.

The number of outsourcing contracts in the Asia-Pacific region as well as contract values have risen for a second consecutive year, according to a report by consulting agency TPI.

The TPI Index, released Wednesday, revealed that the region's outsourcing contracts contributed US$12.8 billion to the global outsourcing market in 2007, a 30 percent increase over 2006. The quarterly index analyzes global outsourcing contracts valued over US$25 million.

Annual contract values also rose by 13 percent year-on-year--nearly double that of the global average.

Indian companies were the main engine behind the growth, accounting for US$4.9 billion, up from US$2.7 billion in 2006. Outsourcing contracts out of Australia contributed a stable US$3.5 billion, while those from China registered a US$1.4 billion increase over 2006 to US$1.9 billion.

Arno Franz, partner and managing director for TPI Asia-Pacific, noted that the growth from China had been largely due to a single telecommunications mega deal; on the other hand, India's growth was championed by its bolstering economy.

"The Indian industry in particular has found outsourcing to be a viable tool to improve performance and drive growth in market share," said Franz. "With increased competition among Indian corporations and the potential privatization of public sector organizations in the next few years, we expect to see this level of activity continue through 2008 and beyond."

At a time when mega outsourcing contracts are far and few between, the Asia-Pacific region witnessed nine deals in 2007--four alone in the last quarter. TPI cited the tie-up between India's third largest wireless operator Vodafone Essar and IBM, as one of the mega deals signed last year.

Indian IT service providers also gained on their global rivals.

Their share of global contracts increased from 6 percent in 2006 to 9 percent in 2007. In the Asia-Pacific region, they held a market share of 16 percent last year, up from 11 percent in 2006.

Asia's BPO market going strong
According to TPI, the Asia-Pacific region recorded the highest growth (101 percent) in business processing outsourcing (BPO) contracts last year. In comparison, the BPO of that scale in the Americas fell by 28 percent, while that in the EMEA (Europe, Middle East and Africa) region increased by 24 percent.

In absolute dollar terms however, the BPO market in EMEA outweighed the other two with a total worth of US$12.45 billion; the BPO markets in the Americas and Asia-Pacific were worth US$8.62 billion and US$2.09 billion, respectively.