Companies in India, as Buyers, Lead Outsourcing Growth in Asia Pacific
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According to the latest TPI Index from sourcing advisory firm TPI, the outsourcing market in Asia Pacific grew substantially in 2007, fuelled primarily by increased demand from corporations based in India. Outsourcing in Asia Pacific saw its second consecutive year of strong growth and showed an increase in demand across all measures. Although the number of contracts signed in 2007 grew by just 4 percent, their total contract value increased 30 percent year over year from US$9.9B to US$12.8B and annualised revenues showed a 13 percent increase, nearly double that of the global average. Asia Pacific was the only geography to show an increase across all of these measures.
The average value of outsourcing contracts in Asia Pacific increased by 25 percent from US$141M to US$176M, due largely to increased mega relationship activity in the region, especially in the last quarter of 2007. The region showed particular strength in mega relationships with nine signed in 2007 at a total value of US$1.5B. This represents one third of the mega relationships globally and contrasts sharply with the region’s overall share of one-sixth of the global outsourcing market. Larger contracts have become popular among companies based in Asia.
In addition, BPO performance in Asia Pacific was particularly strong in 2007. BPO TCV in the region soared by 101 percent, yielding the best year ever for BPO contract values in the region and leading average BPO contract value to increase by 81 percent.
Outsourcing growth in Asia Pacific was largely driven by corporations in India and China: Countries traditionally known for their provision of outsourced resources are becoming buyers of outsourcing. India has seen stepped up outsourcing activity within the Telecommunications and Financial Services sectors whereas growth in China has been strongly influenced by a single telecommunications mega deal.
Arno Franz, Partner and Managing Director, TPI Asia Pacific, explained:
“In Asia Pacific, we usually we see Australia, India and Japan topping the list of countries buying outsourcing services. In 2007, India led the pack by almost doubling the value of its outsourcing work year on year. It appears that, fuelled by a booming economy, Indian industry in particular has found outsourcing to be a viable tool to improve performance and drive growth in market share. With increased competition among Indian corporations and the potential privatisation of public sector organizations in the next few years, we expect to see this level of activity continue through 2008 and beyond”.
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