Did Outsourcing Companies Meet 2010 Industry Predictions?

Includes: ACN, IBM, WIT
by: Outsourcing Insider

By Jamee C.

Every time a year ends, groups of industry experts and organizations conduct studies and analyses on how the industry fared in the current year, and will then formulate a prediction as to how it will be in the coming year. This yearly trend does not exempt the outsourcing industry, especially since outsourcing has gained wider acceptance and is currently poised for massive growth. Given that there are many areas encompassed in the outsourcing industry that have growth potential -- including IT, recruitment process outsourcing (RPO), knowledge process outsourcing (KPO), and contact center outsourcing -- it is more challenging for industry experts to formulate their predictions.

Back in January 2010, the National Outsourcing Association predicted that business process outsourcing would become even stronger as the recession weakens. This was deduced from the notion that companies will need to rebuild their businesses, and to find an alternative that will cost less and will reduce efforts at hiring full-time staff -- leading to the outsourcing of their processes to a service provider. Industry experts also predicted that small and medium enterprises will be venturing into outsourcing, which will make the industry no longer limited to medium and large companies. As for countries that will emerge in the outsourcing arena, the National Outsourcing Association predicted that China will see a growth in call-center outsourcing and will continue to develop its capabilities in other fields. Others, such as the Philippines, Brazil and Russia, have great potential for growth as well in terms of global recognition.

Business developments, such as acquisitions and expansions, were in effect this year at numerous outsourcing service providers, such as IBM (NYSE:IBM) and Accenture (NYSE:ACN). This is a good indicator that industry growth forecasts have materialized.

IBM recently announced that it has entered a 10-year contract deal with Bharti Airtel Ltd. worth $80 million. IBM was on a roll throughout this year in terms of expansions and deals, as it opened two new offices in the Philippines, one in Cebu early this year and another in the National Capital Region. Wipro (NYSE:WIT) and Tata Consultancy Services are two other companies that opened offices in the countries mentioned by the National Outsourcing Association. In the first quarter of the year, Wipro Technologies, aiming for a global diversification, opened a new delivery center in Curitiba, Brazil. The Bangalore-headquartered company established operations in Brazil four years ago, and the expansion shows that it is satisfied with the performance of its Brazilian employees. As for Tata Consultancy Services, it opted to open new centers in the Philippines for its business process outsourcing needs. Just recently, Philippines has attracted a lot of attention, after it was reported that it surpassed its Indian competitors in the contact-center field.

On another note, it seems that there has been a shift towards China as well -- although this is more towards IT outsourcing than in the contact-center outsourcing industry, in contrast to the forecast by the National Outsourcing Association. Greg Leniston, U.K. Sales Director of Chinese IT service provider Bleum, said that companies are opting for China as an alternative to India. China has fared well in the outsourcing industry as a whole, with a growth rate of 30 percent.

With the year about to close and outsourcing industry experts and organizations starting to release their predictions for the coming year, hopefully we can look forward to another year of growth and expansion.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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