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Asia: Outsourcing Activity Hits Stratosphere

The Asia-Pacific outsourcing market reached a five-year high in 2006 with a 43% increase in high-value contracts

The Asia-Pacific outsourcing market grew strongly in 2006, with contract volume and value reaching record numbers.

According to the latest report by outsourcing advisory firm TPI, the number of contracts valued at more than US$25 million increased by 43 percent last year. The total value of these contracts increased 67 percent, representing a five-year high in outsourcing activity for the Asia-Pacific region, TPI said in a statement Wednesday.

However, the region paints a different picture compared to the global numbers. Although the number of contracts signed globally increased by 3 percent, the value of these deals declined by 8 percent compared to 2005, the report found.

According to TPI, the Asia-Pacific region is showing consistent year-on-year growth in annualized revenues--the total revenues available annually for service providers to capture. The compound annual growth rate (CAGR) for the region stands at 10.5 percent, more than double the global rate of 4.5 percent.

Arno Franz, managing partner of TPI Asia-Pacific, said in a statement: "2006 was a stand-out year for outsourcing in Asia-Pacific. The region accounted for 13 percent of the global outsourcing market in 2006, the first time its market share has exceeded 10 percent since 2002.

"However, because the relative immaturity of the Asia-Pacific market makes it prone to spikes in activity, it remains to be seen if this is the start of an on-going growth trend," Franz noted.

Competition will continue to be rife in the Asia-Pacific market among the Big Six outsourcing vendors--Accenture, ACS, CSC, EDS, Hewlett-Packard and IBM--and smaller, specialized service providers, which are getting a bigger piece of the action.

According to TPI, the Big Six are winning a decreasing proportion of deals valued at over US$25 million. This group won 40 percent of the region's total contract value, compared with a 60 percent share in 2002.

"The increasing level of competition confirms that clients in Asia-Pacific are following the global trend, and are becoming more receptive to doing business with non-Big Six providers," Franz said.

Provided by ZDNet Asia—Where Technology Means Business

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