2007 in review: India shines as a buyer

Much like last year, after returning from a long break during which the dust has settled on the data from 2007, it seems useful to review the sourcing market in the Asia-Pacific region last year.

Overall, 2007 showed growth in both TCV (Total Contract Value) and the number of contracts for the region--a significant difference compared to previous volatile year-on-year patterns. Some of the key growth numbers for the year in terms of commercial contracts--including both IT and business process--with a TCV of more than US$25 million were:

• Total Contract Value (TCV) in the region increased 30 percent year-on-year; and
  
• Annualised Contract Values (ACV) in the region also increased by 30 percent in the same period
  

Breaking this data down by country shows that three countries continued to be dominant in the region: Australia, India and Japan. However, some interesting details underline these numbers:

• Australia and Japan were essentially flat as buyer markets in 2007, compared to 2006;
  
• The growth this year came from India, which almost doubled its purchases of outsourcing services (by the TCV measure), while China also expanded dramatically; and
  
• In fact, China slipped past Japan into the No. 3 slot as a buyer of outsourcing services--however, that was primarily through a single mega-deal. So, 2008 should help highlight whether this is really the beginning of the emergence of China as a buyer of outsourcing services.
  

So, what does this tell us overall? I would suggest that:

• While the market in the region is still maturing, the greater diversity of countries and the successive year-on-year growth suggests a degree of stability is forming;
  
• Service providers will continue to focus on the major markets of Australia, Japan and India, in addition to paying attention to the Chinese buyer market. Long term, if they are not present in all these markets, service providers will struggle to maintain a sustainable presence in the region; and
  
• Cross-fertilization of ideas has continued to struggle, given both the language and cultural differences of the key markets within the region, and that is unlikely to abate too much in 2008.
  

For full details of the 2007 data, see TPI's Web site.

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Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.