Nelson-Hall’s BPO Index reported gains for the industry overall, with some good news for the F&A segment.

by Peggy Cope

Business Process Outsourcing analyst firm Nelson-Hall was enthusiastic about the overall outsourcing market in its BPO Index 2007, revealed earlier this year. According to CEO John Willmott, BPO was looking quite healthy during the year, with increased activity in several key areas.

Thanks to a couple of key defense contracts, BPO contract value in 2007 jumped an astonishing 147 percent (28 percent if you exclude those two military deals).

Willmott reported that BPO accounted for 36.3 percent of contract value in 2007, closing the gap with information technology outsourcing, which weighed in at 37.1 percent of contract value. That represents a 16 percent increase for BPO compared with its standing in 2006 contracts, when it garnered a comparatively meager 14.7 percent slice of the outsourcing pie.

He also noted that the North American market, which had been relatively quiet since 2004, found renewed vigor in 2007, with significant boosts in the level of signings in the first half of the year and a favorable trend in the second half. “All indicators are BPO is on the upswing and is likely to continue,” Willmott noted.

And what’s the F&A share of the outsourcing pie? Willmott said contract sizes were generally on the rise in F&A outsourcing. In addition, he anticipated that FAO holds the promise of increased transformational emphasis this year, moving beyond lift-and-shift models. Where F&A and HR functions fall under the same contract, IT is expected to play a larger role in the immediate future.

Globally, FAO contract values saw modest increases, from 0.8 to 1.0 (recorded in billions of dollars) in 2007 compared with 2006, while procurement dropped from 0.3 to 0.1. However, multi-process deals grew from 0.4 to 2.5, an impressive jump.

The survey showed that although deals varied a lot in North America, with the larger contracts taking place in Europe, both hemispheres were on the upswing. The biggest contracts appeared to be coming from government, financial services, and utilities sectors, with some of the largest contracts, such as the one between TCS and Nielsen, combining multiple processes of HR and F&A. Willmott also noted the contracts signed between Infosys and Philips Electronics, and Accenture and The BT Group. (See the FAOT cover stories for September/October 2007 and in this issue for more on both those deals.)

The one fly in the ointment, according to Willmott, is a lag in operational capability. “Providers have to know how their clients operate,” he said. “They have to retain a clients’ interest and promise change for the future.”

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