European BPO Market Is High-Potential But High-Risk, Says IDC

LONDON -AUGUST 9, 2002 – The European market for outsourcing business processes such as logistics, facility operations, human resources, and finance and accounting has a strong outlook for growth. However, some emerging and typically highly IT-enabled BPO (business process outsourcing) segments are still in an embryonic phase and new entrants in these markets will be exposed to significant business risk, a new study from IDC reveals. The study forecasts the European BPO market to grow from $132.5 billion in 2001 to $231 billion in 2006 at a compound annual growth rate (CAGR) of 11.8%.

 

"To a large extent, Europe is at the start of the BPO learning curve," said Jamie Snowdon, Director of IDC's European Services research. "User sourcing strategies as well as competition still have to crystallize. IDC believes it is very likely that we are going to see some 'bumpy rides' in BPO in the coming years. User organizations will have to find a proper balance between what to keep in-house and what to outsource and will have to build up deeper supplier management skills. Service providers, on the other hand, will have to create economies of scale and manage the complex risk and profitability of large outsourcing engagements that undoubtedly require a strong capital position and a long-term view."

Based on major BPO contracts identified over the past five years, IDC currently is recording an acceleration of BPO activity in Western Europe, most notably in the UK, followed by countries in northern Europe. In the current economic climate, cost savings and liberating capital are key drivers for BPO, but IDC also recognizes a structural trend towards strategic outsourcing with public and private organizations striving to focus more on core competencies.

The BPO segments IDC has analyzed include logistics, facility operations and management, human resources, finance and accounting, sales/marketing, engineering and R&D, administration, procurement and legal. All these segments are showing healthy growth rates, but human resources, sales (including customer care) and procurement stand out as areas with the highest growth projections.

IDC's study, European Business Process Outsourcing Forecast and Analysis, 2001-2006 (IDC #BP01J) presents IDC's market analysis and forecast for the European business process outsourcing market between 2001 and 2006 by 10 key BPO segments. IDC analyzes BPO spending patterns by country and by industry and discusses the competitive landscape. It also includes strategic guidance for players planning to enter or expand into this market.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community.

Additional information can be found at http://www.idc.com.

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