BPO contract TCV in Q1 2015 continued the improvement in contract activity seen in Q4 2014, with BPO TCV picking up and gaining momentum over the past two quarters following relatively low levels of BPO TCV awarded in Q2 and Q3 2014.

In particular, Q4 2014 showed a 6% improvement in BPO TCV year-on-year, with BPO accounting for 31% of total outsourcing TCV. Q1 2015 BPO TCV performance then improved further, up 12% year-on-year, accounting for 33% of BPO TCV. Nonetheless, while the last couple of quarters are an improvement, they are still underperforming relative to the seasonal average over the past five years and so there is continuing scope for improvement.

By geography, the focus on the major economies continues. There was a significant increase in BPO TCV in North America in Q1 2015 year-on-year. Within Continental Europe, for both Q1 2015 and for the last 12-months there was significant BPO contract activity in the Netherlands with Infosys winning a life BPO contract as well as a supply chain management BPO contract here in the past quarter. Overall though, the downturn in BPO TCV in Europe continues.

If we extrapolate this quarter’s level of BPO activity to the remainder of 2015, then BPO TCV across North America and Europe in 2015 will be 9% higher than that recorded in 2014.

At the sector level, the manufacturing sector is indeed showing progress, moving along the value chain from F&A outsourcing through procurement outsourcing and supply chain management. Within the manufacturing sector over the past 12-months, there was an increase in supply chain management BPO TCV alongside the increase in procurement outsourcing TCV. In Europe, the procurement outsourcing activity was in the pharmaceuticals and food & beverages sectors.

Within customer management services, the telecoms & media sector predictably dominated over the past 12-months with the manufacturing sector taking over second place from the retail sector. And within the manufacturing sector, CMS activity strengthened in both the high-tech sector and the pharmaceuticals sector.

At the global level, the last 12-months have shown a strengthening in HR outsourcing and procurement, with a strengthening in procurement outsourcing in Europe, and a significant strengthening in both HR outsourcing and F&A outsourcing in North America.

The top three places in the league table for BPO TCV over the past 12-months remain unchanged, with Serco and Capita at the top of the table. Behind these companies, Sopra Steria remains unchanged in 8th place, with the remainder of the top ten: Capgemini, State Street, Infosys, SAIC, WNS, and Wipro all moving up the table relative to the prior 12-month period.

Serco is continuing to do well in CMS in the retail industry, particularly in fashion, adding a contract with JD Williams, while in Q1 2015, Capita’s government business was back on song with contracts with Sheffield City Council and DEFRA while its acquisition of government assets continues. Capgemini had 12-months of solid F&A BPO contract wins announcing a contract expansion with Office Depot in Q1. Infosys has also had a very solid Q1, winning not just F&A BPO contracts, including a contract expansion with AkzoNobel, but also several insurance BPO contracts, and a supply chain management BPO contract.

The NelsonHall BPO Index is complemented by the NelsonHall Self-Service Market Forecast Tool, which covers 78 BPO service lines, 30 geographies, and 33 industry sectors. This gives highly accurate and granular views of the market, and complements the NelsonHall BPO Index which gives quarterly snapshots of big deal momentum. To use the NelsonHall Self-Service Market Forecast Tool, click here.

If you would like to register for the next BPO Index webcast, scheduled for the 2nd July, 2015, you can do so here.