Vive la Difference!

Today's guest blog on the demand for outsourcing comes from Duncan Aitchison, Partner & President, TPI EMEA.

Duncan_aitchson With the data now in for the global outsourcing market in the first half of 2008, two facts stand tall above all others: demand for outsourcing has never been healthier and Europe's love affair with outsourcing is the reason why.

The last nine months have witnessed the largest volume of total outsourcing contract value ever signed during three successive quarters and the first half of the year has been the best for the last ten years. By any measure - Total Contract Value (TCV), Annual Contract Value (ACV), number of contracts signed, number of mega deals - the outsourcing market is now at its most vibrant.

What makes today so different from the boom outsourcing markets of yesteryear is where demand is coming from. So far this year Europe has accounted for 65 percent of the contract value awarded around the world. Indeed, in each of the last six quarters, Europe has led the markets in terms of TCV signed. It also now leads the way in terms of numbers of contracts, ACV and big deals awarded. In fact, nearly 80 percent of the $1 billion contracts signed so far this year have been in Europe.

The billion dollar question is: how long will Europe's current love affair with outsourcing last? When will we see demand in this region begin to emulate the recent buying patterns in the U.S.?

If we are to detect any early warning signals of a change of heart towards outsourcing in Europe, the logical place to look is in the U.K., as it's the  most mature European market and the most similar one to North America.

Although the U.K. showed some initial signs of weakening in demand particularly for IT outsourcing during the first quarter of 2008, activity surged again in Q2 to produce a strong first half performance. There seems little to suggest that this picture will change dramatically during the remainder of the year, especially given the increasingly gloomy macroeconomic outlook.

Even if the U.K. were to follow suite,  there remains the burgeoning appetite for outsourcing services in Continental Europe to help sustain demand in the region. With good levels of buying activity in the Nordics and The Netherlands, and the increasing adoption of outsourcing by large corporations in Germany, Europe is no longer wholly dependent on the U.K. to anchor demand. With the prospect of France, Southern and Eastern Europe increasingly opening doors to outsourcing, it is reasonable to conclude that this region still has plenty of room left for growth.

For now, at least, it would appear to be a case of "vive la difference"!