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Outsourcing upheaval.

The 'Big Six' of outsourcing--Accenture, ACS, CSC, EDS, HP, and IBM--saw their combined market share fall by well over half (57%) in the first quarter of 2005, according to the latest Quarterly Index from TPI. They have won only 27% of the 11 billion euros of major contracts (those worth over 40 million euros) awarded so far this year, compared with 63% in the first quarter of 2004. Non-Big Six firms have secured the majority (64%) of new deals against 45% a year ago.

Comment:

So far in 2005 a number of smaller companies have successfully challenged the Big Six, continuing the trend in 2004. The growing number of service providers successfully contending for deals could indicate further competition for the Big Six and an increasing choice of suppliers for clients this year.

The providers who gained on the Big Six include Atos Origin (4 contracts worth 800 million euros.), British Telecom (7 contracts totalling E3.6 billion) and Hewitt (4 contracts and over 600 million euros). The Big Six particularly lost ground in information technology outsourcing (ITO). Most of this shortfall was in Europe, where their market share fell to only 18% of the E6.9 billion of major contracts signed so far this year, compared with 36% on average during 2004.

The Big Six rallied somewhat in their share of the global business process outsourcing (BPO) market, winning a third of all BPO contracts over E20 million signed in the first quarter, an increase of 10% on their share of contracts let in 2004. However, this slight increase was driven largely by a massive E460 million contract between British Telecom and Accenture for HR outsourcing.

Without this contract the Big Six's share of new contracts would have fallen in BPO as well as ITO.

Europe's dominance continues to grow

Europe's share of the total value of new outsourcing deals more than doubled in the first three months of 2005, accounting for 70% of just over E11 billion of contracts awarded, compared with a share of just 34% in the same period last year.

UK overtakes US as leading market for new outsourcing contracts for the first time

The UK overtook the US for the first time to become the leading national market for new outsourcing contracts in the first three Months of 2005. TPI data reveals that the UK represented over 37% of the market for major outsourcing contracts awarded worldwide so far this year, with the US standing at 25% and Asia Pacific at 4%. This huge increase in outsourcing in the UK was very largely driven by the massive deal between Reuters and BT, which represented over half (58%) of the contract value let in the UK.

Human Resource Outsourcing soars

The total contract value of Human Resources Outsourcing (HRO) more than trebled to AEI.37 billion in the first quarter of 2005, compared with only E0.44 billion in the first quarter of 2004. Almost two fifths (38%) of BPO contracts signed so far in 2005 have been HRO.

Europe has significantly lagged behind in HR outsourcing representing only 26% of the global market since 2001, compared with 74% for the Americas.

www.TPI.net
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Title Annotation:IT News
Publication:Software World
Geographic Code:1USA
Date:May 1, 2005
Words:530
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