India continues to capture large share of new offshore centers being established in Asia. More delivery centers set-up in tier-1 and tier-2 locations during Q2 2009 as compared to Q1 2009, said Vista report of the Everest Research Institute, a leading research agency on the IT, ITES and BPO sector. Outsourcing transaction volume increased 10% globally in Q2, compared to the Q1 this year, led by contracts signed by financial services and manufacturing firms, according to the `Market Vista – Q2 2009 report on global outsourcing and offshoring activity’ by the Institute.
While Asia continued to capture the largest share of offshore centers established in Q2 2009, India maintained its leadership by attracting investments in tier-1 and tier-2 cities such as Coimbatore, Mumbai and Chennai.
Global suppliers announced a total of 161 new transactions in Q2 2009 versus 140 in Q1 2009. The share of ITO transaction announcements increased in the quarter while the share of BPO transaction announcements declined marginally. Here too, despite multiple margin pressures, operating margins of Indian IT suppliers remained significantly higher than that of traditional global majors.
As compared to Q2 2009 to Q1, the study found that out of 30, 13 offshore centres were established in Asia. Transaction volume in Asia-Pacific, Middle East, Africa and Latin America increased by 25% and the global transaction volume in the financial services sector grew by 25%, dominated by European engagements. Transaction signings increased 8% in the MDR vertical, driven by manufacturing and the BPO activity rebounded strongly with a 27% increase in transaction volume. ?There has been significant increase in the market activity as compared to Q1 2009 in terms of transaction signings and captive setups. The offshore suppliers are witnessing some stability in the financial services sector and expect demand to pick up later this year, provided economic conditions do not deteriorate any further,? said Nikhil Rajpal, Principal, Global Services, Everest Group. ?India-based suppliers are enhancing focus on the domestic market to de-risk business and tap into the local growth opportunities,? he added.
According to the study, of 27 new captives established in Q2, 9 new captive announcements were in India. Supplier M&As increased in Q2 with six acquisitions while the number of alliances increased marginally. Offshore suppliers saw an increase in demand for fixed price contracts and share of ITO transactions increased in this quarter while the share of BPO transaction announcements declined marginally, the study added.
Suppliers announced 161 new transactions in Q2 2009, accounting for US$9 billion in TCV terms (versus US$7 billion in Q1 2009). Nearly 88 new transactions were signed in the BFSI vertical, with growth of 25% and 10% in terms of transaction volumes and ACV respectively.