East or West? A Profile of Delivery Footprint Expansion Plans of Service Providers

The global services market is poised to cross the US$100 billion mark for the first time in 2010. As buyers continue to expand their global services portfolio, service providers are also making investments to ensure that they have the appropriate delivery portfolio.

In this research brief, we assess expansion plans of service providers from a location footprint perspective. The findings presented in this paper are based on a survey conducted by Everest Group during early 2010, and represent a total of 186 responses.

Key takeaways:

Labor markets will start experiencing increased pressures as service providers ramp up operations. These pressures will be most evident in India.

China will see growth as a meaningful number of service providers plan to expand existing operations or set up new operations in the country. Much of this expansion will cater to increased requirements to support global companies operating in China, as opposed to supporting North American and European operations.

Latin America (specifically Argentina, Brazil, Costa Rica, Colombia, Mexico, and Nicaragua) witnessed considerable activity as service providers moved to diversify their portfolios and tap into special skills. Expansion in this geography will continue as buyer requirements for nearshore and language-specific services increase.

Exhibit: Expected change in offshore scale of suppliers over 2010-2012

The full viewpoint is complimentary for Market Vista subscribers and is also available for purchase.

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New additions to Market Vista

Market Vista has been expanded and now includes:

• Quarterly Market Vista reports providing details of trends in transactions, captives, locations and suppliers
• Quarterly Industry Trends reports contain key global sourcing-related data specific to a wide range of industries
• Six Global Location Insights e-newsletters
• Global Locations Database providing key data for 23 leading offshore destinations
• Up to six Breaking Viewpoint research briefings summarizing the impact and implications of key trends in global sourcing
• Four Market Vista Primer reports outlining perspectives on emerging market dynamics e.g., output-based pricing, F&A market characteristics

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Research

Other new research documents include:

• Market Vista Q3 2010
• India Captive Market Landscape: Challenging Common Myths and Charting Future Role

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Webinars

November 9, 2010 – Market Vista Q3-2010: Key Market Developments

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Industry news

• Capgemini launched its global innovation hub for energy, utilities, and chemicals in Navi Mumbai, India in September. It acquired Sonda Procwork’s BPO service center in Gaspar (Santa Catarina, Brazil) in August apart from a 55 percent stake in Brazilian IT services company CPM Braxis in September, thereby boosting its presence in the promising Brazilian IT services market. These centers are expected to serve the company’s existing clients in the region and Capgemini’s clients globally
• Convergys established a contact center in Metro Manila in September to provide contact center services. This follows the setup of a command center in Metro Manila in August to facilitate more capacity-efficient routing of incoming calls. Convergys also set up a contact center in Bogota, Colombia to serve the value-added services market in the U.S. and Canada. Operations in the Bogota center are expected to start in November 2010
• Nestle set up a back-office operation to handle processes related to accounting, and payroll and benefits in Lviv, Ukraine in September. This center is expected to cater to Nestle offices in over 20 countries in the region
• Accenture disclosed plans in October to hire around 2,000 personnel for its Philippines delivery center in 2011. With more than 18,000 employees, the Philippines is already Accenture’s second largest delivery location in the world
• As part of China’s efforts to boost the offshore outsourcing business, service outsourcing companies in 21 cities have been exempted from business tax effective through the end of 2013. The government also rolled out a set of policies to support the sector’s development; these include a lower threshold to allow more engagement and support listings of such companies to broaden their financing channels

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