Continued bullish reports of growth in their pipelines by the world’s largest outsourcing providers may be further evidence the economic storm is waning. Over 75 percent of the service providers polled in EquaTerra’s Q309 Advisor and Business/IT Service Provider Pulse Survey reported continued growth in their deal pipeline, up ten percent from last quarter and an impressive 34 percent rise from the same time last year, the highest levels of pipeline growth cited since Q3 2005. EquaTerra’s customer-facing advisors – whose insight into current buyer activity provides a forward view of demand two to three quarters out – forecast steady demand through the first quarter of the year.
“The bulk of outsourcing demand is still defensive, aimed at short-term cost-cutting and cost-containment strategies,” said Stan Lepeak, managing director of global research for EquaTerra.“But roughly 10 percent of both EquaTerra advisors and service providers see some buyers are preparing for an upturn with selective investments in new technology.”
The key findings from EquaTerra’s Q309 Pulse:
• Demand for outsourcing up – Pipeline growth, one of the strongest indicators of market demand, has been increasing by eight to ten percent per quarter since the first of the year, fuelled by the worldwide economic recession. Service providers (75 percent) continue to cite growth in their new-deal pipeline and over two-thirds of them (68 percent) predict demand will continue through the end of the year. Forty-eight percent of EquaTerra’s advisors cite growth remains steady, up two percent from last quarter.
• Buyer base growing – The severe economic downturn has made outsourcing more attractive to a broader base of clients, and business process outsourcing is often the lever. EquaTerra advisors report that offshoring is an increasingly compelling option for first-time buyers looking for short-term cost savings with little upfront investment, an approach well suited to the labour arbitrage model.
• Price competitiveness stabilizing – Service providers continue to indicate they are seeing less pricing pressure. The number of service providers citing increased levels of contract re-compete or renegotiations fell for the third straight quarter to 21 percent, indicating buyers are weighing quality against lower cost and/or service providers experiencing their own margin pressures are unwilling to make further cuts.
If readers want to find out more they can register for EquaTerra’s regular pulse update webinar here. The event takes place on the 15th of October at 11am.
