Gartner Says Despite Economic Downturn, Worldwide Business Process Outsourcing Revenue to Increase 11 Percent in 2003
BPO Trends to be Discussed at Gartner Outsourcing Summit 2003, June 23-25 in Los Angeles
STAMFORD, CONN., June 10, 2003 — While other IT services segments are feeling the impact of the economic downturn, the business process outsourcing (BPO) market continues to show healthy growth, according to Gartner Inc. (NYSE: IT and ITB). In 2003, the worldwide BPO market is expected to grow 10.5 percent, to $122 billion, up from $110 billion in 2002.
"Enterprises around the world are attempting to focus their investments on their core business processes and are increasingly looking at outsourcing noncore business processes," said Rebecca Scholl, principal analyst for Gartner's sourcing group. "Early adopters of BPO services, primarily large organizations, continue to expand their relationships to include new process areas, and new technology and media are creating opportunities for outsourcing entire lines of products and services, such as online payroll, online benefits administration, online order management and online transaction processing."
North America is forecast to represent 57 percent of the total BPO opportunity in 2003, with $69 billion. However, growth in other regions will outpace North America during the next few years. Gartner analysts say that after several years of double-digit growth, delays in contract signings and lower negotiated rates for large BPO deals have led to moderate growth in 2002 and 2003.
"Although several large BPO deals of over $1 billion will be signed in 2003, there will be a decrease in growth linked to a period of disillusionment starting in 2004," said Scholl. "2004 corresponds to the five-year mark after the signature of several early BPO 'megadeals'. These deals will be renegotiated, in some instances re-competed, while other late adopters take on a 'wait-and-see attitude'."
Continuing difficult economic times are leading Western European companies to look to BPO as a tool to save costs and provide strategic review of many of their activities. The Western European BPO market is forecast to grow 10.9 percent in 2003, to $27 billion. In Europe, outsourcing of financial services processes are widely used, however, other industries are growing in respect for different types of BPO. Customer interaction for demand-management BPO is proving popular in the utilities and telecommunications sectors. Supply-management BPO is gaining popularity in local governments, and enterprise services are growing in telecommunications for human resources, finance and accounting.
The Asia/Pacific BPO market is expected to grow 7.8 percent in 2003, to $8.7 billion, but it is then forecast to have double-digit growth during the next few years. Australia and New Zealand are the most mature economies in terms of acceptance of BPO services, followed by Singapore. In most other countries there is almost no history of outsourcing other than product support, education and training and some application development. The Indian market is largely export oriented with exports of IT services and BPO services far outstripping the domestic market size, which is still largely immature. BPO markets in China, Taiwan and Malaysia have a large contract-manufacturing base, but outsourcing of other business processes has yet to take off.
Gartner analysts recommend that BPO service providers begin targeting opportunities in other geographic regions during the next three to five years, but they must be cautious not to promise too much, in order to limit the impact of disillusionment in the BPO market.
"The combination of people, process and technology expertise, as well s the ability to sell to business' buyers will be key in determining a provider's success in this market," said Scholl.
Additional information is available in the Gartner Dataquest Alert BPO Market to Grow to $173 Billion in 2007. This report examines the current state of the worldwide BPO market and looks at the trends that will drive future growth in the market. This report can be purchased on Gartner's Web site.
To keep up to date on latest outsourcing issues, please visit Gartner's Outsourcing Web site at www.gartner.com/outsourcing. This Web site offers content, tools, products and services that are needed to make effective, strategic decisions around outsourcing. When browsing the site, users receive a breakdown of key outsourcing issues, industry trends, and best practices for making smarter business decisions. This area also includes relevant research and links to Consulting and Measurement services. Custom Alerts are also available, enabling users to stay current on new research focused on their outsourcing agendas.
Gartner will provide additional analysis on the outsourcing industry at Gartner Outsourcing Summit 2003, to be held June 23-25 at the Century Plaza Hotel and Spa in Los Angeles, California. The Gartner Outsourcing Summit is the most comprehensive conference ever organized for users of outsourcing services, providing a 360-degree view of today's most important outsourcing issues, including offshore outsourcing, business process outsourcing, cost containment, buying smart, and optimizing deals through the Gartner Strategic Sourcing Life Cycle.
For more details or to register for Gartner Outsourcing Summit 2003, visit www.gartner.com/us/itsourcing or call 1-800-778-1997. Members of the media can register for the event by contacting Christy Pettey at christy.pettey@gartner.com or at 408-468-8312. Solution providers interested in sponsoring the Summit should contact Steven Miller at 203-316-3962.
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