Europe takes outsourcing lead

Increase in European contracts has seen the market overtake the US as global leader for the first time

The American business community signed fewer outsourcing deals than its European counterparts last year

Europe has overtaken the Americas as the world’s biggest IT outsourcing market, in the number of contracts signed and their total value.

In 2007, 220 major contracts were signed in Europe, compared with 194 in the Americas. The total value was €32.7bn (£24.5bn) and €21.3bn (£16bn) respectively, according to outsourcing adviser TPI.

The rise is due to the expanding use of outsourcing in countries traditionally reluctant to pursue the model, said TPI Europe president Duncan Aitchison.

“As well as the established UK market, there is increased activity across northern Europe, especially in Germany, the Netherlands, Sweden, Switzerland and France,” he said.

Europe’s particular strength was the number of new contracts, up almost 31 per cent on 2006 levels, compared with an increase of 13 per cent worldwide.

Globally, the market continues to grow. The last quarter of 2007 was the strongest in total value in 11 years, with more than €12bn (£9bn) worth of contracts awarded.

And the trend is likely to continue, according to Aitchison.

“Given the sustained growth rate and the level of activity, particularly in Europe and Asia-Pacific, we expect similar strength in the market going forward,” he said.

Increased outsourcing is one of the ripple effects from the global credit crunch, said Mark Kobayashi-Hillary, director of the National Outsourcing Association.

“People are looking at outsourcing again as a way of saving money, rather than just being a strategic partnership,” he said.

But even as the number of contracts goes up, the success of European suppliers is dwindling. The lion’s share of the business will be non-European suppliers ­ India’s share of the market rose 42 per cent, while Europe’s fell 17 per cent.

Developing economies are also seeing significant market growth. India’s total contract values grew from €2.2bn (£1.6bn) to €3.9bn (£2.9bn), while China‘s rose from €400m (£300m) to €1.52bn (£1.14bn).