[OUTLOOK 2011] Rising from the Bottom, Steady Recovery OnwardEd Nair, Editor, Global Services
The worst seems to be behind us and 2011 would see the beginning of slow and steady recovery.
The overall outlook for 2011 is that of steady recovery. But the year began with weak performance. It was expected that there would be a lot of spillover from 4Q2010 (OND 2010), but it was not quite discernible.
As of this time, there is insufficient prognosis or data on 2Q2011. Vendors have informally reported a positive outlook after an exceedingly difficult previous quarter. Indications are that volumes would rise, but there would be pricing pressure.
Even in the first quarter, there were signs of a reversal in course. Restructurings, which were at an all-time high in 2010, saw a remarkable dip earlier this year. Though this showed up as a headwind for ITO TCV, the concurrent effect of increase in new scope was a welcome sign.
There is a resurgence in BPO activity this year with a 66% rise in TCV, with activity levels near a 5-year high, again according to TPI. It shows that BPO had clearly bottomed out last quarter.
Fears of a double-dip recession have been doing the rounds recently. Economists are divided on their opinion. Providers have not reported any material impact of this on their business. Telecom, media, and manufacturing had a strong performance in the first quarter. More business segments are expected to follow the good performance.
Organizations are seeking more value out of their service providers. Sourcing strategies are an important lever and organizations are re-looking at the mix of in-sourcing, shared services, and third-party outsourcing. There is an awful lot of new development work pending in technology. The specter of cloud computing and its impact on infrastructure, applications, and services; the increased need for analytics; and the consumerization of IT are also the driving factors for more technology work. Similarly, business processes optimized using BPO, can have direct impact on costs and profitability. This is true of both generic SG&A-related processes and industry-specific processes. Even mid-size organizations are looking to embrace new trends in IT and BPO. These would translate into new demand for IT services and BPO.
1Q2011 was the lowest first quarter ever in the past 10 years and the global TCV was down by 25%, according to TPI. Global Services believes that this is the last squeeze out of the tube for outsourcing and it is the beginning of a slow steady recovery.
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