Arno Franz, Managing Partner for Asia-Pacific Region at TPI, explained: "Traditionally the Asia-Pacific outsourcing market has been seen as relatively immature in contrast to the Americas and European markets and thus prone to peaks and troughs in activity. However a strong performance in the region in 2006 has carried on through the first half of 2007 and we have seen three straight half-years of growth in new business demand. There are signs that the Asia-Pacific outsourcing market has steadied. Indeed strong growth in Asia-Pacific and Europe is compensating for a very soft US market, where new outsourcing business is at its lowest level since 1994."
The Asia-Pacific performance has been further impacted by an increase in global share of mega relationship volume and value. Asia-Pacific mega relationships, those transactions with an average annual spend, of US$100M or greater, represented 23% of the global total and 23% of global value, an almost doubling of share by both measures, at the expense of a sharp decline in mega relationship activity in the Americas. Asia-Pacific was the only region to demonstrate growth in the BPO market in the first half of 2007.
Eight BPO contracts, in the US$25 million or greater category, with a total contract value of US$700 million were signed in Asia-Pacific in the first half of 2007, representing growth of 33% by volume and 133% by value compared to the first half of 2006. Arno Franz continued:
"This is the third straight half-year of growth in BPO market contract value. Although still an emerging market, Asia-Pacific BPO appears to be bucking the global trend and is showing signs of sustained growth. This is not the case in Europe and the Americas where BPO markets remain tepid and lumpy. In fact, in those regions we are seeing a tendency to pursue solutions via Captives or offshore tasking as alternatives to traditional outsourcing".
Despite TPI’s observation of an increase in offshoring through captives, the use of offshore service delivery within the scope of outsourcing also continues to expand. In the first six months of this year, 59% of the deals on which TPI advised entailed at least partial delivery offshore - the highest percentage ever.
Over the last five years the financial services sector has accounted for 28% of global TCV for contracts valued at over $25M, and 38% of Asia Pacific TCV. In the first half of 2007, despite a 34% share of global TCV, financial services sector had just 9% of Asia Pacific TCV.
Telecoms sector is the most prolific sector for outsourcing in the region in 2007 to date. Traditionally a strong player in Asia-Pacific, Telecoms took a 46% share of first half TCV in 2007, compared to a 33% average in the previous five years. However, this overall performance was strongly impacted by the China Mobile mega deal.
Other sectors showing increased outsourcing activity in the region include Manufacturing with a 26% share and Energy with 12% of 2007 TCV, compared to just 1% in the previous five years. Deregulation of the energy industry in the region is providing opportunities for outsourcing as companies seek to variabilise their cost structures and become more competitive.
