Europe has eclipsed the United States as the world's leading outsourcing market.
That's the analysis of TPI, which studies the global outsourcing market. According to the market researcher, Europe in 2004 represented 49 percent of the value of the major outsourcing deals awarded worldwide. TPI defines "major" as contracts worth more than 40 million EUR ($52 million).
The United States commanded a 44 percent share, with Asia/Pacific contributing 7 percent.
That trend may well continue this year if early January is any indication. Already, Accenture has inked an outsourcing pact with Spanish savings bank Caixa Catalunya. That project is valued at more than $290 million over the next decade. In addition, Computer Sciences Corp. captured a $70 million outsourcing pact with TDC, a communication solutions provider in Denmark. CSC's deal is a follow-on to a 2003 outsourcing agreement with TDC.
The United Kingdom and Germany were the two leading markets for new outsourcing contracts last year, said Duncan Aitchison, managing director of TPI's international business. The U.K. holds a 20 percent share. Germany's rise in outsourcing, meanwhile, has been particularly rapid. Over the past four years, it has grown its 1 percent share of the global outsourcing market value to 12 percent, Aitchison reported during a recent conference call.
Also, Aitchison identified Switzerland and The Netherlands as "up and coming" outsourcing economies.
Against this backdrop, Accenture cited Europe/Middle East/Africa as its fastest growing geographic region during the integrator's recent first-quarter conference call. The region saw a 24 percent revenue increase. Steve Rohleder, Accenture's chief operating officer, reported strong growth in the U.K. (50 percent) and continental Europe, which featured double-digit growth in Germany.
Accenture and other major outsourcing providers, however, face increased competition in Europe. TPI reports that Accenture, ACS, CSC, Electronic Data Systems, Hewlett-Packard and IBM—what the market researcher terms the Big Six—experienced market share declines last year in Europe. Information technology outsourcing share for the group dropped to 36 percent in 2004 compared with 73 percent in 2003, according to TPI.
The French Open-Source Connection
The eXo Platform, developed in Europe as an open-source corporate portal and content management system, is making its way stateside. Integrators are a conduit.
Advent Consulting LLC, an independent open-source consultant based in Cambridge, Mass., earlier this month announced a strategic partnership with eXo Platform SARL. The latter is a French company launched in 2003 to offer support and services for the eXo Platform.
The alliance is among eXo Platform SARL's first initiatives in the U.S. market, notes David Lee, CEO of Advent Consulting. The eXo Platform SARL Web site also lists ComFrame Software and Trinisys as U.S. integrators.
Last year, eXo Platform SARL joined ObjectWeb, an international consortium based in France that cultivates open-source infrastructure software. The eXo Platform source code is available via ObjectWeb's Web site.
The eXo Platform, for obvious reasons, has had its greatest impact in Europe. But Lee said North America and Asia Pacific "will become more aware of it." He said his company has eXo Platform-related projects under way in both locales.
Bucking the Trend
Equinix shows that Internet services and expansion aren't necessarily a contradiction in terms.
The Foster City, Calif., company recently purchased two data centers in Silicon Valley and expanded its original facility in the Washington, D.C., suburb of Ashburn, Va. Equinix offers "network-neutral" data centers and Internet exchange services.
Jay Adelson, Equinix's chief technology officer and founder, said the market for "hublike services and network interconnectivity" is growing. "We need more space in this market," he notes, adding that the company currently occupies 1.5 million square feet worldwide.
Among the customers driving that demand is Movielink LLC. A deal with Movielink, announced Monday, boosts Equinix's presence in the broadband video-on-demand market. Movielink offers movies for download and taps Equinix to directly connect with broadband nets offering end-user access.
Adelson said video-on-demand companies "have such a pressing need for direct connection to subscriber networks." Without direct connection, content traverses numerous hops on its way from the source drive or CPU to the end customer's viewing screen, he adds.
Consumer Focus
Distributors of late have been sniffing about the tempting consumer electronics market. Ingram Micro Inc. recently took the wraps off its CE/digital home push, an initiative that's been brewing for several months.
The distributor has been exploring a new customer base that includes residential installers, custom installers and specialty retailers. In this segment, end-user psychology is a departure from the business world.
Sally Stanton, vice president of category management at Ingram Micro, said the enterprise selling process revolves around a discussion of the customers' needs. But when the decision-making process surrounds a 42-inch plasma TV, "it's more of a want versus a need," she observed.
Ingram Micro's CE roster includes Alpine Electronics, Belkin Pure A/V, Byd:sign, Kenwood, Peerless, Samsung, Sharp CE, Sony and Viewsonic.
As it builds out in CE, Ingram Micro's task has been to identify its existing IT partners who are migrating into CE, Stanton said. Vendors such as Viewsonic have segued from desktop displays into LCD TVs and other entertainment products. At the same time, the distributor has been working with traditional CE manufacturers looking to expand their reach.
Ingram Micro also is helping IT resellers get a grip on the digital home market. That's a channel segment largely unfamiliar to the CE players and one in which Ingram Micro can make introductions.
Net Pursuit
Consumer electronics is an old standby for D&H Distributing. The company's 2005 strategy, however, calls for an expanded focus on business networking and wireless solutions.
Michael Schwab, vice president of purchasing at D&H, said that, for the most part, the company is adding new offerings from existing manufacturers rather than expanding the line card with entirely new vendors. Schwab said D&H's objective is to educate resellers on opportunities emerging in networking infrastructure.
In that space, Gigabit Ethernet has "evolved to where it is very price competitive today and becoming standard on a lot of networking equipment," Schwab said. The technology has become "much more affordable" for small and medium-sized businesses, he notes. "We want to evangelize the benefits of the speed."
Another trend Schwab sees is more wireless networking options for small businesses and, therefore, more sales opportunities for resellers. He said enterprise networking vendors such as Cisco Systems are coming to market with products at the "lower end of the scale for them" selling at price points smaller businesses can afford. Conversely, vendors that have focused on the small-office/home-office market are moving upstream "to meet the gap in the middle," Schwab said.
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