BPO, NelsonHall, Outsourcing, Contract, Research

Mixed review for BPO contracts from NelsonHall research

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16 Jul 2006 | (News)

NelsonHall, a leading BPO analyst firm, recently held a contract analysis webcast. The HROA participated and recorded some interesting key points:

The good news: The total outsourcing contract value awarded over the past six months increased by six per cent to $64Bn.
The bad news: From a BPO perspective, the growth was provided by IT outsourcing contracts. BPO contract value has fallen by twelve per cent over the past twelve months.
This gives a worrying trend in terms of BPO contract value share over the past three 12-month periods:
- In the 12 months, ending June 2004, BPO accounted for 48% of North American outsourcing total contract value (TCV)
- While in the 12 months ending June 2005, BPO accounted for 37% of North American outsourcing TCV
- In the most recent 12-months ending June 2006, BPO accounted for just 23% of North American outsourcing TCV.
On the other hand, BPO’s share of outsourcing contract value has been growing steadily in Europe, from 17% in the twelve months ending June 2004, to 23% in the twelve months ending June 2005, to 28% in the twelve months ending June 2006.
BPO still has the potential to be a much larger market than IT outsourcing but it has so far failed to reach similar levels of contract activity on a consistent basis.
Leading BPO contracts decreased by 18% in average value
BPO activity in the government and financial services sectors are still at the top of the BPO league table globally, accounting for 56% of BPO contract value awarded in the period ending June 2006 compared to 66% of BPO contract value in the period ending June 2005.
The manufacturing and retail sectors have jumped considerably in their use of outsourcing.
In addition, healthcare BPO activity has continued to grow strongly and now accounts for 6% of BPO contract value globally.
The high level of interest in HR outsourcing can be expected to continue in both the manufacturing and retail sectors. Companies keep a close watch on sources of competitive advantage within their major competitors and if other consumer goods, appliance manufacturers, and chemical companies perceive that the above companies have achieved either significant cost savings or improved workforce management through these contracts, then they are highly likely to outsource their own HR functions.
In the public sector, there has been a return to outsourcing single processes such as revenues & benefits
There has been a major market shift in favor of outsourcing support functions.
Over the past twelve months there has been less emphasis on transformation of customer-facing and industry-specific delivery capability and a greater emphasis on removing cost and improving the quality of information from support functions.

Source: NelsonHall

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