Given the poor global economic predictions, weak consumer demand, and continuing corporate uncertainty continue to impact outsourcing demand and consulting growth, according to the KPMG 4Q11 Sourcing Advisory Pulse Survey, which interviewed KPMG field advisers and global business and IT service providers.
Of the employers that are outsourcing, the study finds that they understand the necessity to invest in IT-enabled solutions but must change business and operating models to fully exploit the technologies' potential.
"Buyers are placing great emphasis on investing in IT, but given the economic uncertainty, all efforts undertaken will occur under watchful, cost conscious eyes," says Stan Lepeak, global research director in KPMG's management consulting group. "Buyers and providers are smarter, more experienced and less likely to enter into larger and more risky deals, and evolutionary innovations, such as cloud computing and targeted BPO, are changing the nature of what constitutes outsourcing."
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Still, there are signals of an improving economy in some Western markets, such as North America, and emerging market growth is believed to be strong. In fact, 53 percent of surveyed advisers and 45 percent of surveyed service providers say improving global economic conditions would have the largest positive effect on their clients' businesses in 2012. This could mean large-scale outsourcing deals will grow as the economy improves.
Confidence in customer demand, however, is slipping as only 45 percent of providers expect the pace of customer demand for business and IT services to increase over the next one to two quarters. This is a 14 percent drop from the third quarter and a 29 percent decline from the second quarter. While demand for other types of third-party services, such as cloud or more specialized business process outsourcing is growing, it represents an overall smaller market regarding the total size.
Regarding expanding global business services, the most growth is expected for shared services efforts, 56 percent of advisers say, which is the same percentage from the third quarter results. Buyer demand for shared services and outsourcing outside of local markets in near-shore or offshore locations remain strong.
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