Europe bucks outsourcing trend

Hart: Europe has only recently woken up to the benefits of outsourcing

The number and value of outsourcing contracts awarded in Europe rose in the first quarter of 2007, despite a global decline, according to research.

The total value of outsourcing deals in Europe increased by 67 per cent to ¤7.7bn (£5.2bn) compared with the same period last year, according to outsourcing adviser TPI’s Quarterly Index report.

But on a worldwide scale it has been the weakest first quarter in five years.

‘The year is off to a slow start and we see little reason to be bullish about prospects for 2007,’ said Duncan Aitchison, European managing director of TPI.

‘There has been a steady decline in the number and value of contracts awarded since the first quarter of 2006, particularly in the Americas, and early projections are that we will experience a very soft year in 2007,’ he said.

Just 66 contracts were signed in the first quarter this year compared with 99 last year, a fall of 31 per cent, while total contract value of ¤14bn (£9.5bn) was down on the ¤17bn (£11.5bn) achieved last year.

But in Europe, 33 new outsourcing contracts were awarded. Although this is fewer than last year, the total contract value is significantly higher.

‘This represents one of the strongest first-quarter performances in the past five years, bettered only by the extraordinary performance seen in the first quarter of 2005,’ said Aitchison.

‘That year went on to yield Europe’s highest total contract value ever.’

The pace of contract restructuring also increased in Europe, despite slowing globally, with a rise of 21 per cent on last year. ‘Incumbent service providers are positioning to adjust the terms of their contracts in advance of their natural end,’ he said.

Europe is outperforming the Americas because it has only recently woken up to the benefits of outsourcing, says Martyn Hart, chairman of the National Outsourcing Association.

‘Europe previously lagged behind the US, but companies are starting to see the opportunities,’ he said.