From:	Baroni Limited [baroni-limited@tiscali.it]
Sent:	05 May 2007 22:20
Subject:	Baroni Limited - Offshoring Newsletter' - 15/07

Importance:	High
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Europe bucks outsourcing trend- TPI reports
The number and value of outsourcing contracts awarded in Europe rose in the first quarter of 2007, despite a global decline, according to research.  The total value of outsourcing deals in Europe increased by 67% to $9.7bn (£5.2bn) compared with the same period last year, according to outsourcing adviser TPI’s Quarterly Index report.  The total value of contracts awarded in Asia Pacific also increased from $2.1bn in 1Q 2006 to $2.7bn in 1Q 2007.
But on a worldwide scale it has been the weakest first quarter in five years.  Just 66 contracts were signed in the first quarter this year compared with 99 last year, a fall of 31%, while total contract value of $14bn (£9.5bn) was down on the USD17bn (£11.5bn) achieved last year.  ‘The year is off to a slow start and we see little reason to be bullish about prospects for 2007,’ said Duncan Aitchison, European managing director of TPI.
But in Europe, 33 new outsourcing contracts were awarded. Although this is fewer than last year, the total contract value is significantly higher.  Contracts valued at $2.2bn were restructured in Europe in 1Q 2007, reflecting a 21% increase over 1Q 2006.  ‘This represents one of the strongest first-quarter performances in the past five years, bettered only by the extraordinary performance seen in the first quarter of 2005,’ said Aitchison.  ‘That year went on to yield Europe’s highest total contract value ever.’
Europe is outperforming the Americas because it has only recently woken up to the benefits of outsourcing, says Martyn Hart, chairman of the National Outsourcing Association.  ‘Europe previously lagged behind the US, but companies are starting to see the opportunities,’ he said.
'This shift in market activity from the Americas to Europe can principally be explained by the US' far greater maturity as an outsourcing market. Europe and Asia-Pacific are newer to outsourcing and their markets have more potential to grow,' said Duncan Aitchison, the managing director of TPI.	

 	
 Top Stories	
 	
KPO Growth Trends Mirror IT’s Move Toward Vendors
According to a white paper published by Evalueserve, the Indian KPO industry is expected to generate employment for about 280,000 professionals and earn revenues of $11-12bn by 2010.  The increasing demand for KPO services from small- and medium-sized enterprise (SME) segment and the acceptance of the KPO model are major forces driving this growth.  Among the key findings, the number of SMEs depending on captives or third-party KPO service providers is likely to increase from 900 in 2006 to 5,000 by 2010.  In addition, vendor model (buy model) is likely to outgrow the captive model (make model) by 2010.  The cost and time involved in implementing a third-party vendor solution is less as compared to the time and cost involved in establishing captives, which is encouraging SMEs and other big companies to opt for the buy model as compared to make model; about 90% of centres are expected to be built on the buy model by 2010.  Also, KPO vendors have been expanding their operations in Latin America and China to offer their services in multiple languages.  Dual-sourcing will be an emerging trend among large companies having captives.
Outsourcing Market Reshaping, Not Facing Activity Downtrend, According to EquaTerra’s
According to EquaTerra's 1Q 2007 Pulse Surveys, about 88% of EquaTerra's advisors and about 99% of services providers agreed that the demand for outsourcing witnessed an increase in 1Q 2007 and it will continue to grow in 2007, although at a slower rate as compared to the previous years. About 86% of EquaTerra advisors and about 63% of service providers agreed that the scope of the deals has either remained the same or reduced during the quarter.  In addition, the number of outsourcing deals pertaining to smaller value/scope and emerging areas, such as knowledge process outsourcing, pharmacovigilance, etc., has been increasing.
Barclays wins five year BT cash management mandate
BT, one of the world's largest telecommunications providers, has awarded Barclays the cash management mandate for all its UK Group operations.  The mandate, which will see Barclays managing the electronic payments of BT's 20M UK customers, represents one of the largest domestic UK cash management deals ever awarded.
Philips IT opens new centre in Bangalore
Philips IT, the technology wing of electronics major Philips, opened its Business Application Services (P-BAS) centre in Bangalore that would focus on growth in technical and functional SAP competencies.  The P-BAS centre in Bangalore would have 150 employees by the end of the year.
Cisco sets up excellence centre in Bangalore
After setting up its second globalisation centre in India, the $31bn technology major Cisco is establishing its centre of excellence (CoE) for its unified communication application business in Bangalore.
US Air Force awards BearingPoint Smart Ops support work
BearingPoint has won a $99M program management deal with the US Air Force to provide support services including advisory and assistance services for the US Air Force's Smart Operations 21 program.  The deal was awarded by the Air Force District of Washington.
LA County extends Leader deal with Unisys
Los Angeles County will continue to receive outsourced application and technology services to support its public assistance programs through a four-year contract extension with Unisys Corp.  The $108M award is for work on the Los Angeles Eligibility, Automated Determination, Evaluation and Reporting system, known as Leader, which provides an online, real-time method for determining eligibility and benefits for the Public Social Services Department’s assistance programs.	
 	
 Service Provider News	
 	
IT firms should set up centres at other regions: study
According to a study conducted jointly by NASSCOM and KPMG, Indian companies are advised to establish/expand their operations in regions, such as Central and Eastern Europe, North America, and Asia Pacific.  China, Vietnam, Malaysia, and the Philippines were identified as the emerging offshore destinations in the Asia Pacific region, while in Eastern and Central Europe countries, such as Hungary, the Czech Republic, and Romania, were the emerging offshore destinations.  The study also cited Canada, Mexico, and Brazil as emerging offshore/outsourcing destinations in the Americas.
India IT exports to UAE to touch $850M
India's IT exports to the UAE is expected to soar by 56.74% to $850M from $542M during 2005-06, an official of India's Electronics and Computer Software Export Promotion Council (ESC) said here.
CSC acquire application development and maintenance company Covansys
CSC has entered into a definitive agreement to buy Covansys for about $1.3bn in cash.  The transaction is approved by the Board of Directors of CSC and Covansys.  The acquisition is subject to customary approvals, such as expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.  Through the acquisition, CSC will nearly double its Indian headcount to about 14,000 employees, thereby strengthening its position in the Indian market.
CACI wins $48M Navy support contract
The US Navy has awarded a 5-year, $48M deal to CACI International to provide support for its Naval Supply Systems Command's (NAVSUP) Readiness-Based Sparing (RBS) Program.  Under the ID/IQ terms of the deal, CACI will provide technical and engineering support services including support for business processes as well as management techniques and support for information systems to NAVSUP for its RBS Program.
Capgemini wins large outsourcing deal from Rijkswaterstaat
Capgemini Netherlands has won a 7.5-year, Є230M IT infrastructure management deal from Rijkswaterstaat (the Dutch Directorate General for Public Works and Water Management) under which HP will work as the main subcontractor.  According to the deal, Capgemini along with its partners will implement as well as manage the entire IT infrastructure of Rijkswaterstaat.  Capgemini will provide servers and computer centre-related services to Rijkswaterstaat, while HP will provide managed desktop (for about 14,000 desktops) services as well as user support services, and technology to the authority.  As part of the deal, a new 2,000-seater centre will be opened at Westraven, the Netherlands, by October 2007.  CapGemini’s other partners include Sogeti, HP, British Telecom (BT), etc.
Serco to support US Postal Service in $51M contract
Serco has scored a $51M contract to provide engineering support to the US Postal Service and test mail-processing equipment.  The new Postal Service will run for two years and has four two-year options that could make the contract potentially worth up to $260M over a decade, the Vienna-based company says.
ATOS ORIGIN : Worldwide IT Partner for Beijing Paralympic Games
Atos Origin will be responsible for providing IT products and services, system customization, integration and operations services for the Beijing 2008 Paralympics Games.
ACS gets Colorado Medicaid renewal
Affiliated Computer Services Inc. of Dallas will continue operating Colorado’s Medicaid management information system through a three-year, $67M contract.	

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