Europe's Appetite for Outsourcing Grows

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After years of being the biggest and most powerful consumer of outsourced services, the U.S. could lose its top-dog status to Europe.


Continental Europe now accounts for 30 percent of global outsourcing activity, reports CRM Buyer, citing TPI's latest Quarterly Index. Five years ago, the region generated just 12 percent of such activity.


The value of new outsourcing deals in Europe grew a whopping 78 percent in 2007's first half, over the same period in 2006. That blazing pace means that Europe accounts for 52 percent of all deals signed so far this year, vs. 32 percent last year and a five-year average of 38 percent.


TPI also noted growth in European outsourcing and a relative flat line in the U.S. in 2007's first quarter. Then, as now, it's largely the result of market maturity: saturation in the U.S., not so much elsewhere around the world.


Europe's increasing appetite for outsourcing was good news for the so-called "Big Five" firms that dominate services deals on the continent: Atos Origin, BT, Capgemini, Siemens and T-Systems. Those firms won 27 percent of global mega-deals in 2007's first half, compared to 16 percent over the last five years.


In another notable trend, and again driven by activity in Europe, a number of networking mega-deals propelled several telecommunications providers -- notably BT Group, Alcatel-Lucent, Ericsson and AT&T -- up the outsourcing food chain.


Also, despite the recent decisions of some companies to sell captive offshore operations and the opinions of some experts that captives are not cost-effective, a TPI analyst says such operations are "currently considered an alternative to outsourcing by some client organizations looking for short-term cost savings."