January 12, 2006 7:33 AM PST

Can offshore outsourcers end reign of Big Six?

Almost $100 billion in outsourcing contracts will be up for grabs in the next two years, and big players including Accenture, Electronic Data Systems and IBM could feel their grip on the market weaken due to more competition from offshore companies.

The "Big Six" of outsourcing--Accenture, Affiliated Computer Services, Computer Sciences Corp., Electronic Data Systems, Hewlett-Packard and IBM--are the incumbent service providers on 72 percent of the contract value to be renewed over the next two years, and could see their "dominance challenged," according to outsourcing advisory firm TPI.

TPI said 325 contracts are due for renewal during 2006 and 2007--one in five of all outsourcing deals. IBM and EDS alone have a combined total of $50 billion in contracts coming up for renewal.

Although incumbent providers usually win contract renewals, increasing competition means providers cannot rest on their laurels, said TPI managing director Duncan Aitchison.

"Client retention will increasingly depend on an incumbent's ability to offer a competitive proposition. This could mean significant changes in price and scope from the original contract," he said.

About half of all new contracts include some sort of offshore element.

There is also a trend toward smaller deals, which could challenge the dominance of the big players and help Indian outsourcing companies.

Of the 293 contracts signed in 2005, nearly three-quarters were small- to medium-size contracts. And while Indian companies rarely win deals valued at more than $200 million, last year they were invited to pitch for 30 percent of contracts below this threshold and won 70 percent of them.

As both big outsourcing companies and Indian outsourcers expand their operations around the world, Aitchison "the intense competition in this market looks set to continue."

Steve Ranger of Silicon.com reported from London.

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Outsourcing
I am a small business owner and have felt the move of technicial support more than most to foreign countries. Even though support organizations in other countries may have the expertise to handle most problems, I find it very difficult to deal with the language barier. As a businessman, time is money. When a problem solution is delayed due to communication problems, it is a major issue. Therefore, I feel US companies have lost the need to provide good customer service and it will cost them in the long run. I personally seek out US provided customer support if at all possible.
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Outsourcing
I am currently employed for a BPO which is contracted by more than one major PC manufacturer and multiple major software copanies. The reach of this company extends to multiple shores inclusive of India as well as the US (well, pretty much all of N. America.) Using this strategy it is possible to provide service from a region and employee pool that would prevent a language barrier and provide positive service delivery to its clients. A resposible BPO will take into account the demographics of the area its client caters to and build a team around those demographics to prevent such simple (yet prevelent) issues from occurring.
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