NelsonHall Forecasts Global Business Process Outsourcing Market Will Reach $450Bn by 2012

NelsonHall, the BPO analyst firm, today announced the availability of its latest forecast of the global business process outsourcing market entitled ìGlobal BPO Market Forecast: 2008 ñ 2012.î Authored by NelsonHall analyst Helen Neale, this 243-page report provides a comprehensive forecast of business process outsourcing (BPO) services globally by service line and geography.

The BPO market continues to strengthen relative to the more mature IT outsourcing market and is forecast to reach $450Bn by 2012. The BPO market has continued to mature in terms of supplier capability and this increased supply-side maturity was matched by growth in BPO TCV awarded during 2007 across all major geographic regions.

This underlying strength in the BPO market is being amplified by the current economic slowdown, placing pressure on organizations across all sectors to review their efficiency in mature markets. NelsonHall believes the economic climate will hasten globalization, with organizations not only using offshore outsourcing to reduce their cost base but also hastening the development of their capability in emerging markets to take advantage of the growth opportunities there. This will lead to an increased requirement for BPO services to support new market entry, with this need particularly evident in the financial services and telecommunication sectors. As a result, services such as customer management services, payments and other industry-specific financial sector services, and recruitment process outsourcing will benefit. As organizations increasingly focus on establishing themselves in the emerging economies of Asia and Latin America, they will look to locate support functions such as finance and accounting services and procurement within these geographies, leading to opportunities in the outsourcing and relocation of existing shared services centers.

By service line: strong growth will continue in industry-specific (middle-office) BPO; F&A outsourcing is strengthening; as are individual HR service lines such as benefits administration, learning services, and occupational health. Recruitment process outsourcing - though showing lower growth than in the heady days of 2007 - remains a key opportunity to support companies entering new markets. Customer management services (CMS) is showing an upturn, and is also important in supporting new market entry as well as taking on increased role in assisting organizations in customer retention.

One area showing lower growth than previously is multi-process HR outsourcing although new entrants here will give the market a boost in activity relative to the past 12-months.

Economically, the most impacted geography is North America. This should lead to increased BPO activity, but there is always a possibility, especially as the presidential election gathers pace, that this will result in greater protectionism in the U.S. and a reaction against both outsourcing and offshoring. Currently, rather than a backlash, there are signs of increased BPO evaluation but it is possible that a downturn in BPO contract activity could take place in the U.S. in Q4 2008 and during the first half of 2009.

By sector, the financial services and government sectors remain the dominant sectors for BPO, with industry-specific activity in the financial services and state and local government sectors remaining key growth opportunities. The defense sector has also emerged as a major source of white-collar BPO activity within government in the U.S. and there remains scope for enhanced growth in areas such as HR outsourcing and supply chain management services in the defense sector in both North America and Europe.

Other growth sectors globally include the healthcare and pharmaceuticals sectors along with the transportation sector.

NelsonHallís ìGlobal BPO Market Forecast: 2008 - 2012î report is available now.