BPO up, IT outsourcing down as Europe looks beyond cost cutting

The value of European IT outsourcing contracts was the lowest for five years, while the value of BPO deals rose 35% compared with 2011

The value of IT outsourcing (ITO) contracts signed in Europe last year was the lowest for five years, while the value of business process outsourcing (BPO) deals rose by 35% compared with 2011, according to market research by TPI.

In its TPI Index, which records deals worth at least €4m, the value of European IT outsourcing deals in 2012 was €5.1bn, down from to €7bn in 2010. Meanwhile, annual BPO sales reached a record high at €3.1bn.

“ITO and BPO experienced a surprising reversal of fortunes across Europe. The €5.1bn in ITO contracts awarded in the region in 2012 was the lowest in five years. Contract counts were also down compared with recent years,” said the research.

BPO has been on the increase in recent years as companies look beyond cost cutting as the main driver of investments. 

“Whereas ITO has been the mainstay of organisations looking to cut costs in a challenging business climate, EMEA companies are now looking beyond it to BPO value propositions, which can deliver a more profound business change,” said John Keppel, president at TPI parent ISG.

BPO has been providing businesses with a way to cut costs for years, but current IT trends are shaking up the sector. Technologies such as cloud computing, business analytics software, social media platforms and process automation software are being used within BPO to enable businesses to lower costs and be more effective.

Recent research from Accenture revealed that high-performing BPO relationships – those that deliver business value – use technology as a source of innovation and advantage, rather than just providing the infrastructure of delivery.

Overall outsourcing contract values in Europe last year were 12% down on 2011 levels at €8.2bn, while the number of outsourcing contracts worth €4m or more was 21% down at 434.

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