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12/22/2005
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Report: Outsourcing Market To Restructure

A number of trends are converging, the Everest Group says, including the coming of age of Indian suppliers and the shrinking of contract size and duration.

BANGALORE, India — Trends in the global outsourcing industry point to a market ripe for restructuring, according to a report by market researcher Everest Group.

"A number of trends are converging and market-changing drivers are coming into play-- from the coming of age of the major Indian suppliers, to the unbundling of contracts where deal size is getting smaller. Contracts are getting shorter and work is being spread across multiple providers, and large outsourcing contracts signed in the 1990s are coming up for re-bidding," said Peter Bendor-Samuel, chief executive of Everest Group.

"What we are witnessing today is a global industry on the verge of restructuring, which will result in a redistribution of wealth across the entire spectrum of suppliers, buyers and investors," he added.

The report noted that competition began to heat up as the foreign offshore market prepares to expand into new regions. Major players are buying their way into the human resources outsourcing market, such as EDS’ $420 million equity purchase in ExcellerateHR. Other key events included outsourcing giant Computer Sciences Corp. (CSC) attracting potential suitors and India’s TCS signing two contracts worth a combined $1.08 billion to provide outsourced services to overseas firms.

According to the report, India’s Infosys ranked third among the most valued IT supplier, ahead of CSC and EDS.

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