| GS100: The Global Outsourcing Compendium | |||||||||||||||||||||||||
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The 2010 GS100 survey participants represents about $73 B in revenues. This is a significant measure though it is the aggregate of companies of different sizes and therefore diverse customer types. According to a recent report by TPI, the Forbes Global2000 companies collectively spent $71B in annualized contract value on outsourcing in 2009.
Since the companies in the GS100 survey represents a diverse set of companies, it would be useful to look at growth patterns across different categories of company sizes. The average industry revenue growth rate is 15.7 % over 2008.
| Revenue Growth | |||
|
Category |
2008 (in$M) | 2009 (in$M) | Growth % |
| 1M-10M | 48 | 55 | 14 |
| 10M-100M | 1237 | 1393 | 12.6 |
| 100M-1B | 12298 | 12917 | 5 |
| 1B+ | 49810 | 58999 | 18.4* |
| Total | 63393 | 73364 | 15.7 |
*due to merger between Stream and eTelecare. Leaving this outlier, the growth rate is 3.5%
It was decidedly a bad year for upstarts in the outsourcing industry represented by companies with annual revenues of less than $ 10M. Many of these companies have very narrow specializations or they offer undifferentiated services like staff augmentation on projects, subcontracted programming and others. Clearly, this was neither the year for such companies to get work from companies with mature outsourcing practices nor it was the year to get work from companies who were venturing out to outsource the first time.
There are many bright spots of excellence amongst companies in the revenue range of $10M to $100M. Such companies have the critical mass and the ability to aggregate resources into one or more areas of specialization- often in areas like application development, product development, low footprint infrastructure services like desktop management, and others. These companies often look for opportunities to scale up. In 2009, this group of companies that traditionally enjoyed high growth levels had to settle in for tapered down growth of 12.6 %.
Companies in the revenue range of $100M to $1B, a wide swath of revenue, make the most promising group. These service providers are large enough to handle almost two-thirds of the market opportunities (in terms of scope, contract sizes, etc.) and they are small enough to concentrate their efforts, seek leadership, and innovate. While these companies have the ambition to scale up to $1B and are constantly seeking growth new opportunities, they also go through the excruciating pains of growing up. Unfortunately, these are also the companies who get stuck in the ‘mid-tier conundrum’. The year was the toughest for this group: a growth rate of 5 % due extreme price pressure, unwillingness from companies to hand out projects with new scope, clients rationalizing their vendor portfolio, and a depressed demand from verticals like financial services, telecom, retail, and CPG amongst others that were the mainstay verticals for companies in this category.
Continued...
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