New Delhi, Aug. 4, 2010 -- Buoyed by rebound in the North America market and significant pick-up in BPO contracts, the number of global outsourcing deals in quarter ended June 2010 rose 6.6 per cent over the year ago period to touch 498.

On a sequential basis, too, the overall transaction activity mirrored the upbeat mood, as the number of deals were 12.1 per cent higher than the levels seen in March quarter (Q1 of calendar year 2010). The share of Indian service providers in transaction volumes stood at 21 per cent in Q2 2010.

The growth in transaction activity was spurred primarily by BPO contracts and pure-play IT contracts managed only a slight increase in volumes.

"This is because BPO operations tend to be more in sync with running day-to-day business (functions such as customer support and back-office), while in the case of IT, it is more discretionary and involves project-based work where clients are still cautious," said Mr Amneet Singh, Vice-President, Global Sourcing, Everest Group.

The BPO market in Q2 of 2010 saw 159 deals against 142 in March quarter and 112 in Q2 2009; the annualised contract value (ACV) – which is the total contract value divided by the duration of contracts – rose to $970 million ($738 million in March-quarter and $658 million in the year-ago period).

IT contracts

On the other hand, the number of deals in IT outsourcing were 319 (298 deals in the March-quarter and 336 in the year ago period). In terms of ACV, this added to $1,516 million in Q2 2010, down from $2,796 million in Q1 2010 and $2002 million in Q2 2009.

According to Everest, the decline in ACV in the case of IT outsourcing contracts is on account of clients staggering the IT outsourcing work into smaller deals, as also the fall in share of Government contracts in the overall transactions.

During the quarter under review, the transactions in the Banking, Financial Services and Insurance vertical were up 41 per cent over March quarter. Also, there was healthy growth in the captive market with 38 new announcements – bulk of them zeroing in on Asia, and sizeable chunk in India.

The quarter saw 14 new captive announcements in India as companies such as Shell (expansion of technology centre in Bangalore), China Wireless Technologies (R&D centre), Xerox (research facility in Chennai) and Microsoft (development centre in Bangalore) unveiled their plans.

During this period, 32 new offshore delivery centres were set up with more activity in Tier-2 locations, Everest said.

"Asia continued to capture the largest share in the number of established centres during Q2 this year, followed by Eastern Europe and Latin America," Mr Singh pointed out.

 Posted by Veronica Silva Cusi, news correspondent

Source: http://www.thehindubusinessline.com