According to Forrester Research, the total value of outsourcing deals struck in the second half of 2007 increased by £724.2m from the same period in the previous year and forecasts suggest that this level of outsourcing activity will continue in 2008, with Gartner predicting global outsourcing market growth of 8.1%. Experience says that while a major driver in many recent outsourcing transactions has been the quest for improved quality, cost pressures will make a return in 2008 as the most significant outsourcing driver, as the sub-prime credit crunch bites and other factors of globalisation – such as currency movements and relentless increases in energy and other fixed costs – come into play. Credit meltdown and resultant write-off losses will put ‘cost’ firmly back at the top of the boardroom agenda and decreased cost will become one of the major drivers for outsourcing, displacing to some degree other drivers, such as service improvement and quality. Sectors to watch include financial services, which is likely to be more strongly affected by losses resulting from the credit crunch.
In addition, within business transformation outsourcing (BTO), 2008 will experience movement away from the high up-front investments seen in recent deals, with customers looking to smooth significant transformation charges over the life of the deal. On the supplier side, a slowdown could drive increased M&A activity with providers divesting underperforming business units and further consolidation by the more aggressive players who see the opportunity to buy increased market share.
