BPO and ITO outsourcing demand is generally growing, but the first half of 2007 will see a slower rate of growth than in previous years, according to EquaTerra's 4Q06 Outsourcing Pulse Surveys. EquaTerra believes this is the beginning of a "multipronged readjustment" in the overall BPO/ITO outsourcing market

This is from the EquaTerra "4Q06 Outsourcing Pulse Surveys" were conducted among its own advisors and a wide variety of leading service providers to reveal in-the-field insights into ITO and BPO activity during October through December 2006.Some more excerpts from the same:

A major take-away from the 4Q06 Pulse Surveys is that, contrary to popular views and portrayals, the prevalence of outsourcing contract renegotiations, recompetes and restructurings are not a widespread sign of "deals gone bad" or the demise of the outsourcing industry. Rather, buyers, service providers and outsourcing advisors alike view them, in most cases, as a catalyst and opportunity for improving the deal.

Outsourcing of non-traditional functions such as document and imaging services, legal processing, "knowledge process" outsourcing, and logistics services is on the rise, which signals an increase in both supply and demand

A continuing increase in multi-provider sourcing that can benefit buyers if it allows them to engage the best service providers for each of the processes being outsourced, but can also be more complicated and expensive to manage than sole-sourcing

Most buyers continue to underestimate the cost and complexity associated with performing Outsourcing Management and Governance (OM/G) activities, and shortcomings in: 1) the staffing of the governance organization; 2) costs associated with the use of third-party services such as lawyers, advisors and benchmarking firms; and 3) the costs for software tools to support OM/G efforts are often one of the root causes for problems with outsourcing transitions and dissatisfaction with ongoing outsourcing.

Source: 1, 2

Prashanth Rai