Ovum reveals upsurge of Shared Services over Outsourcing

In a new report, Ovum has predicted that global outsourcing market revenue will grow just 4 per cent by 2014. The report further suggests that renegotiations and restructurings will be a key characteristic of the future of the global outsourcing market, which will see US$146 billion worth of contracts expire by the end of 2014. The industry analysts expect to see an acceleration of multi-sourcing and smaller contract sizes.

In the US, Ovum expects the combination of US$92.3 billion worth of expiring contracts and demand moving to more lead generation projects to provide a strong stimulus for the outsourcing sector. This scenario will be a litmus test for the legacy providers which, given the increasing adoption of multi-sourcing and lower barriers to entry, are clearly exposed.
Meanwhile, demand in Europe will remain subdued as the key UK public sector undergoes reform of its procurement processes and the Eurozone remains volatile.

Thomas Reuner, Principal Analyst, Ovum, stated, Despite all the negative headlines around the sharply declining total contract value (TCV) of publicly announced contracts, culminating in some commentators insinuating the death of outsourcing, we believe that outsourcing will continue to remain a strategic management tool. However, there are fundamental challenges ahead especially in the US and UK public sector after the upheaval brought about by the financial crisis.

It was further added that Cloud services will lead to an extension of the market in terms of activity, but this will put pressure on provider earnings.