European BPOs seen having lot more gravy

Offshoring of BPO services isn’t happening from the United States alone, but I guess you knew that already. The European Union, too, offshores a substantial portion of its work, to India and other countries, and this only set to grow in the next five years, according to a new "Trends" report by Forrester Research, Inc. Who would have thought this possible in "old" Europe?

The report by Somoko Takahashi says Forrester expects a CAGR of 11.5 per cent in BPO offshoring from the 25-member EU, plus Norway and Switzerland in the next five years. The forecast by Forrester Research, an independent market and technology research firm, tracks six service categories: human resources BPO, financial services back-offices BPO, procurement BPO, finance and accounting BPO, customer care BPO, and "other" BPO.

"Total spending will rise from euro 11 billion in 2006 to euro 18.9 billion in 2011. Relative to their size, firms in the United Kingdom and The Netherlands will spend the most," Ms. Takahashi says.

A third of the total European BPO spending in 2006 will go to BPO. "This service type has the biggest spending share both now and up to 2011. U.K. firms lead, spending euro 1.4 billion in 2006, followed by

German and French firms at euro 587 million, respectively. Demand for HR BPO has a visible impact on service providers. Arinso, for example, reported seeing a doubling of the number of client employees that it serves in one year—much earlier than expected," she says.

The Forrester report says spending on finance and accounting BPO has the highest CAGR of all BPO services, at 16.4 per cent.

"From 2006 to 2007, nearly all countries will raise their expenditures on F&A BPO—with growth rates ranging from eight per cent to 10 per cent. In the most outsourcing-experienced countries like The Netherlands and the United Kingdom, F&A BPO spending will seize about 13 per cent of the

total BPO spending in 2011. But other European countries will not match this growth in share of spending," the report says.

Similarly, spending on financial services back-office BPO will increase at a CAGR of 10.4 per cent from 2006-2011.

"Ongoing automation and standardisation within the financial services industry means firms here are likely to outsource the processing and administration that underpins financial services and insurance products.

Although use of external services is quite common across Europe, uptake is biased towards Western Europe - with the most IT-advanced countries like The Netherlands, the Nordics, and the U.K. all expected to have a steeper increase in spending than the others," Ms Takahashi says.

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