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This IDC study answers the following questions:
What are IDC's predictions and assumptions relating to market forces affecting the Western European business process outsourcing (BPO) services market, and what impact will they have on the market forecasts? What is the size of the opportunity for core BPO services (including human resources, finance and accounting, procurement, customer care, and industry-specific BPO services) in Western Europe in 2005 and for the next four years? What are the key recommendations from IDC for maintaining and growing BPO services revenues in the coming years?
The broadening appeal of global sourcing, offshoring, and shared services, and a growing awareness of the cost and efficiency savings to be gained through multiprocess outsourcing, has helped to fuel the interest in and take-up of BPO services. Despite a distinctly cooler attitude towards BPO in Central and Southern Europe, the Western European business process outsourcing (BPO) market has continued to enjoy rapid growth.
The key findings of this study show that:
Total spending on core BPO services, assuming constant currency, will grow from $20.9 billion to $39.8 billion at a five-year compound annual growth rate (CAGR) of 14.7% for the forecast period 2005-2010. The largest of these segments in 2005 was customer care (at $8 billion), followed by industry-specific BPO and human resources BPO. Industry-specific BPO services spend in Western Europe is set to rise at a CAGR of 16.7%, from current spending of $7.6 billion in 2005. Spending in this category is dominated by the U.K. market, which accounts for roughly 40% or $3.0 billion. Procurement BPO spending will grow from $245 million in 2005 to $716 million by 2010, at a five-year CAGR of 23.9%, making procurement BPO the fastest growing segment. Despite a noticeable dip in contract signings in 2005, HR BPO continues to demonstrate an attractive market, with growth projected at a CAGR of 15.5% over the forecast period 2005-2010.
"Both customers and services providers have demonstrated their belief in the model through the continuing development of new outsourcing opportunities," said IDC research manager, Mike Friend. "However, the race to build offshore factories and integrate delivery models with onshore capabilities has not been without its problems.
"For many service providers, the second-generation evolution of the market will entail as fundamental a change to their own delivery processes as they have managed to deliver for their own clients," added Friend. "This investment is critical, since without it, vendors will lack the scalable, integrated, and stable platform required with which to best serve their clients of the future."
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