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Outsourcing hits €58bn high as Big Six control slides
Europe takes over...

By Jo Best

Published: Friday 14 January 2005

The total value of the outsourcing market hit a record high in 2004, with the value of major outsourcing contracts rising to €58bn worldwide, according to new research.

The majority of the deals covered IT outsourcing - 67 per cent - but the total proportion of contracts worth over €40m made up by business process outsourcing deals has doubled since 2003.

The research shows that the growth spurt can be put down to European companies increasingly turning to BPO and IT outsourcers - European firms awarded €28bn worth of contracts in 2004, almost doubling what they spent in 2002.

Europe has now outstripped the US and the Asia-Pacific region as the biggest outsourcing spender. Of all outsourcing deals worth €40m or more, 49 per cent of them are awarded by European firms, with the US giving out 44 per cent and Asia Pacific just seven per cent.

But while the market has been growing, the biggest players in the area haven't necessarily been benefiting.

The Big Six outsourcing providers - IBM, CSC, EDS, Accenture, ACS and HP - have witnessed their share of big contracts dwindle as emerging companies start to snap at their heels.

The Big Six managed to grab 44 per cent of larger contracts in 2004, compared to 71 per cent the year before. European buyers in particular seem to have fallen out of love with the outsourcing heavyweights.

In IT outsourcing, the Big Six's market share dropped by 51 per cent year on year, while in BPO, the drop was 42 per cent.

Duncan Aitchison, international MD of TPI, said: "If we look at the fastest growing market geographically - Europe - the global Big Six are not maintaining their market share in either BPO or ITO."

According to the research, the companies picking up some of the slack are European outsourcing providers, including Capgemini and Siemens.

Aitichison added that he didn't expect the outsourcers to take the change lying down. "They'll see where there winning and losing and they'll alter their tactics accordingly," he said. "If we look at the market and how it's developing, the issue of diversity is starting to take hold in terms of buyer behaviour."