Manufacturing, Government, Retail, and Financial Services Drive Majority of BPO Deals; Customer Care Dominates Activity, IDC Reveals

FRAMINGHAM, MA – MARCH 31, 2005 – In a recent study, IDC explored contract activity in the fast-evolving BPO market, and found that the manufacturing, government, and retail industries dominated deal activity in the U.S. during 2004.

"IDC has found that a handful of industries drove the lion's share of BPO contract activity in the United States during 2004," said Shruti Yadav, research analyst, BPO Services. "Responding to mounting pressures around cost reduction and greater operational flexibility, companies in the manufacturing, government, and retail sectors led the adoption of the BPO engagement model, accounting for close to 60% of all U.S. deals announced over the past year. IDC expects these drivers, in combination with other BPO goals such as technology access and regulatory compliance, to drive further growth in key verticals."

The customer care segment drove the greatest contract activity relative to other functions, such as human resources and finance and accounting, in the U.S. in 2004. Spending on customer care services was distributed across a wide variety of industries, including communications and media, financial services, manufacturing, government, retail, and services.

IDC believes the additional vertical industries poised for further BPO adoption in 2005 include utilities/energy, financial services, and communications and media.

"Each vertical is at a different stage of BPO adoption, creating the need for vendors to quickly adapt their client pursuit approaches to the BPO adoption maturity of different industries," added Yadav. "Successful BPO providers will be those that can effectively articulate an understanding of vertical-specific business climates, regulatory environments, and competitive landscapes, and then propose offerings that speak to these customer dynamics."

The IDC study, 2004 BPO Contracts for Key Vertical Horizontal Functions: A U.S. Market Analysis By Vertical Industry (IDC #32980), provides an overview and analysis of the major BPO contracts signed in 2004 in the U.S. market for the four key horizontal functions of customer care, human resources, finance and accounting, and procurement. Also presented is the vertical distribution of these BPO contracts and an investigation of the BPO adoption trends and drivers characterizing different industries.

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IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

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