The IT market in Europe is in a slump even as the BPO industry is emerging as the economic leader. Over a period of five years, 2013 saw the lowest number of ITO contracts signed. The total number of BPO contracts signed rose conversely by nearly 35 percent when compared to the number signed in 2011.
A fortune reversal For BPO In Europe
According to a research carried out, “ITO and BPO experienced a reversal of fortunes across Europe. The € 5.1 bn in ITO contracts awarded in the region in 2012 was the lowest in five years. Contract counts were also down compared with recent years.”
The total value of the ITO contracts in 2010 was € 7 bn. The decrease in value was significant enough to raise questions about how the BPO contracts that were hitherto minimal suddenly gained significance.
Most industry experts are of the opinion that cost cutting is no longer the major consideration for investments. John Keppel, President at TPI parent ISG was quoted as saying, “Whereas ITO has been the mainstay of organizations looking to cut costs in a challenging business climate, EMEA companies are now looking beyond it to BPO value propositions, which can deliver a more profound business change.”
Cost cutting vs. effective business
Cost cutting has been an integral part of the Business Process Outsourcing model since its inception. The latest technological developments have changed the dynamics of the business model. Alongside cost cutting, efficiency has also become integral to the running of the business.
Process automation software, social media platforms, business analytics software and cloud computing technologies to name a few, are revolutionizing the BPO domain. While the use of the technologies lowers running costs significantly, it also ensures a far higher degree of efficiency and speed.
There has been significant research into the extent to which the use of technologies alters the business model. Research conducted by Accenture recently, concluded that high performance BPO relationships rely on technologies to deliver better business value. According to the report, the use of technology affords a process of innovation instead of just delivering the infrastructure. Technology increases business value, thereby attracting more contracts.
While the BPO sector has been doing well in Europe, the overall picture is still bleak at best. The value of the total contracts in 2012 were significantly lower than the 2011 numbers. The value of the contracts fell by a sheer 12 percent. The total number of contracts in 2011 amounted to € 8.2 billion. The number of contracts that were worth € 4 million or more fell by 21 percent and there were only 434 such contracts.
The fact that the BPO industry had reclaimed lost traction has brought hope into the bleak European economy.