September 21, 2011 7:00 AM

Look for interesting news in the TPI Momentum 2011 review of outsourcing spending. We looked at outsourcing trends in 27 vertical and 68 sub-vertical industries throughout 2010 and found that, while overall outsourcing spending increased by five percent, conditions were highly variable across industries – with spending up or down by more than five percent in over half of the verticals.

Here are the TPI Top 5 highlights from this year’s report:

1. G2000 companies increase outsourcing spend. In 2010, G2000 companies spent over $72.1 billion on outsourcing services, a five percent increase when compared to the previous year. While Manufacturing and Financial Services spent the most, the Retail sector grew the fastest (with 37 percent growth) among the industries studied. New business models in Retail are driving IT investments, which is a boon to outsourcing.
   
   
2. First-timers join the outsourcing surge. A steady flow of G2000 companies signed their first outsourcing contracts in 2010 while, like the previous two years, overall outsourcing penetration increased by three percent. Twelve of the 27 vertical industries experienced at least 20 percent penetration growth.
   
   
3. Sub-verticals spearhead outsourcing momentum. While some industries showed declining or flat outsourcing activity, specific sub-verticals saw growth. For example, overall outsourcing spending plateaued in the Chemicals industry, but its Life Sciences sub-vertical grew by more than 30 percent. Similarly, the Finance Services sub-vertical grew almost 15 percent while the larger Business Service & Supplies industry remained flat.
   
   
4. Hunting-Farming dynamics shift as specific verticals boost outsourcing. The TPI Hunting-Farming Index measures opportunity across the 27 industries we track. In 2010, the Farming Index showed that both the Utilities and Retailing sectors bumped their ratings from medium to high due to recent increases in outsourcing spending among companies that already outsource.
   
   
5. Fastest growing portion of the market impacts vertical trends. In most industries, outsourcing penetration is significantly higher among larger companies than smaller ones. Much of the new outsourcing growth stems from companies ranked 501-1000 in the Forbes Global 2000.

By and large, 2010 was a year of recovery. The strength and shape of the recovery and its impact on outsourcing spending was far from consistent across industries. More importantly, the measurable activity tells us a great deal about which vertical markets offer the strongest new opportunities and which strategies will be most effective for winning in these markets.

Originally posted by Paul Reynolds, Chief Research Officer, TPI Momentum (+1 508 625 2194) on Consider the Source

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TPI is the leader in guiding organizations through effective, lasting transformation of their business support operations. Around the globe we have helped hundreds of clients reduce operating risks, streamline complex operations, improve the cost of support functions, achieve sustainable improvements and make competitive gains. Decisions to change and successful transition of existing operations to new service delivery models is hard — and replete with risks. While the decisions are never formulaic, the hard-earned lessons of hundreds of prior evaluations are invaluable.

Posted by Sue Ansell at September 21, 2011 7:00 AM

Categories: Outsourcing

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