Sourcing advisory firm TPI says that the €28 billion of
contracts awarded by European companies last year is more than
double the value in 2002.
"The equalisation between the European and US outsourcing
markets comes through dramatic growth in Europe, not any
significant decline in outsourcing in the Americas," said Duncan
Aitchison, Managing Director, International with TPI. "European
companies realise that they cannot continue to compete effectively
on a global scale without utilising the increased efficiency and
flexibility they can gain through outsourcing."
Looking at individual European countries, TPI found that the UK
represented 20% (€11.5 billion) of the total worldwide value of
major outsourcing contracts in 2004 (those worth over €40 million),
and remains the largest country market for outsourcing after the
US. However, outsourcing in Germany is expanding rapidly, and at
12.5% is the third largest country market.
Just over €7 billion (almost £5 billion) of major outsourcing
contracts have been awarded by German companies in the last 12
months, a 220% increase on 2003 and 1,000% on 2001. The leading
providers in Germany are T-Systems, IBM, HP and Siemens.
TPI's research reveals that the value of major outsourcing
contracts awarded last year was a record high of €58 billion
worldwide. Of the total, 67% was information technology outsourcing
(ITO) and 33% business process outsourcing (BPO), whereby companies
engage third parties to perform functions such as finance and
accounting, procurement, customer relationship management and human
resources processing. BPO expanded by 50% as a proportion of major
contracts last year, from 22% in 2003.
"European outsourcing is likely to increase yet again this
year," said Aitchison. "We expect BPO to continue to gain in
popularity and for ITO's lead to gradually narrow".
Offshore outsourcing is also a growing aspect of the contracts
awarded. According to TPI, 40% of the contracts awarded in 2004 on
which TPI advised contained an offshore element.
"More and more companies, particularly the larger companies, are
moving towards what we term 'global service delivery' in which they
buy services provided in several different locations
internationally through a single contract," said Aitchison. "In
this way they enjoy 24/7 service delivery and are able to ensure
that each element of the service is performed wherever it can be
done most efficiently and effectively."
