Outsourcing: middle market top source of growth.

• Author: Marshall, Jeffrey
• Position: BusinessBRIEFS

It's hardly surprising that the global outsourcing market is growing sharply, but the source of that growth isn't quite as predictable as you might think.

New research by independent market analyst Datamonitor and outsourcing advisory firm Everest Group reveals the global outsourcing sector is increasingly being driven by mid-size contracts--particularly in the fast-growing business process outsourcing (BPO) space. Datamonitor's IT Services Contract Tracker tracked 1,814 outsourcing deals in 2004, a 4.4 percent increase from 2003, with a combined value of $163 billion, up 37 percent from the $118.9 billion of 2003.

The survey also found a 39.8 percent drop in the average contract value for pure BPO deals. This decline in average value, Datamonitor says, was driven by a 51 percent rise in the total number of deals in the $20 million-$200 million range; there were almost six times as many deals in that range as the $200 million-plus range.

Michel Janssen, President of Supplier Solutions for Everest Group, also noted that for the first time, mid-to-large transactions and not large-to-very large businesses dominated human resources outsourcing. "2005 will be the year that BPO goes mainstream, and it will be driven by mid-size client organizations," companies with between 5,000-25,000 workers, Janssen said.

In other findings, there were fewer mega-billion-dollar deals in 2004 than in 2003 (25 versus 29). This seems to tally with the belief of many in the services sector that clients are adopting selective...