Asia-Pacific lucrative for IT outsourcing

The Asia-Pacific region is emerging as a lucrative market for outsourcing contracts. In 2012, the region recorded annual contract value (ACV) of $3.1 billion, a 55 per cent rise on the previous year, said the Asia-Pacific TPI Index.

The steep rise was driven by awards in new segments, which accounted for 88 per cent of the contracts awarded, as well as record performances by emerging markets and business process outsourcing (BPO).

The Information Services Group (ISG)’s TPI Index measures commercial outsourcing contracts valued at $5 million or more.

“Asia-Pacific’s robust 2012 performance contrasted sharply with the wider global picture, in which Europe struggled and the Americas remained flat. In contrast to peaks and troughs recorded in other regions, the number of contract awards here followed a pattern of consistent growth,” said Sid Pai, partner and president, ISG Asia-Pacific.

While the Asia-Pacific region is a small market compared to the US and European markets, it is growing at a more sustained pace. “The salient characteristics are it has two massive emerging countries — India and China. These are expected to contribute strongly to demand. It also has excellent BPO growth in addition to ITO (information technology outsourcing) growth,” Pai said.

The number of outsourcing contracts awarded in the Asia-Pacific region rose six per cent year-on-year to 134. The region was the only one where either ACV or contract count saw a rise in 2012.

Pai said India-based firms had fared extremely well through the last few years and had increased their market share to levels equal to those of US-based companies. “In fact, last year, it was heavily skewed towards Indian firms, especially for BPOs,” he said.

The $1.4-billion ACV in the BPO segment in 2012 was 133 per cent more than in 2011, led by contracts for contact centres and industry-specific BPOs. Since 2007, the total number of BPO contracts awarded in Asia-Pacific has doubled.

Emerging markets in the Asia-Pacific region saw record activity in 2012. India and South Asia increased their ACV 175 per cent to $1.5 billion, China’s ACV more-than-tripled year-on-year to $400 million.

“Within Asia Pacific, we see some mixed signals that make it difficult to predict market performance in the next half year. The rise in BPO activity in the region has been remarkable, as was the growth in emerging markets. However, economic factors affecting the rest of the world are beginning to be felt in the region, especially in Australia and India,” Pai said.