European outsourcing to catch US market in 2004

Outsourcing is continuing to boom in the UK and Europe, with the total value of contract awards in 2004 predicted to match that of the US.

The latest quarterly statistics from outsourcing consultancy TPI reveal that while the global market remained flat in 2003 with a marked decline in contract values in the US and Asia, Europe experienced a "remarkable increase" in outsourcing activity.

The figures, based on private sector deals that TPI has advised on, show that Europe enjoyed an increase of 66 per cent in contract award values from €15.8bn in 2002 to €26.4bn in 2003, whereas the Americas saw a decline of 15 per cent from €45bn to €38bn.

In 2002, the outsourcing contract volume in Europe was one-third that of the Americas and last year it was 68 per cent. TPI claims this trend will increase as Europe rapidly closes the gap.

Duncan Aitchison, managing director at TPI, said: "It is a very real possibility that the volume of deals signed in Europe could approach that of the Americas in 2004."

The statistics also show that the business process outsourcing (BPO) market still has some way to go before it justifies the current hype, although again Europe is showing signs of early adoption with an increase in total contract values in 2003 - up almost 50 per cent on the previous year to €2.6bn.

"The trend towards BPO is actually not increasing at the rate than many market-watchers had predicted. The global BPO wave is at the early stages of adoption in terms of award volumes. The transactions are not yet in the marketplace," said Aitchison.

Companies are also no longer offshoring IT services to places such as India purely for cost cutting and cheap labour, and are considering it as part of a wider "globalisation" business strategy, TPI found.

2003 also saw a significant change in the service provider landscape with some of the major outsourcers losing market share.

"One point stands out," said Aitchison. "CSC and HP took market share from EDS in 2003."

IBM Global Services remains top dog, however, competing for 40 per cent of deals TPI was involved in, with EDS and Accenture next down the list. In the BPO market Accenture and IBM are out in front.