NelsonHall, the leading BPO analyst firm, today announced the results ofits "BPO Index" market monitor for the period ending June 2008.NelsonHall's BPO Index shows that the BPO market has been impacted by thecredit crunch with a decline in contract signings as organizations rethinktheir business and sourcing strategies.

While the value of global BPO contract signings in the commercial and civilgovernment sectors increased by 29% in H2 2007, BPO contract signings inthese sectors have more recently been impacted by the credit crunch and/oreconomic downturn in North America and the U.K. with the result that BPOTCV increased by just two percent in H1 2008.

Indeed the short-term pattern is of a downturn in BPO contract activitytaking place in Q2 2008. While the quarter-on-quarter decrease in globalBPO TCV between Q1 2008 and Q2 2008 was only 8%, the effect has been tomake Q2 2008 the lowest Q2 for global BPO TCV since 2003, with Q2 2008being a below par quarter for signings in both North America and Europe.

This single quarter may not be the start of a trend but there are signs ofa short-term pause in activity while organizations reappraise theirlonger-term plans. The broad conclusion seems to be that there is a pausebefore the storm with organizations reappraising both their broaderbusiness strategies and sourcing strategies in the light of the currenteconomic reality. This will almost certainly lead to an increase in BPOcontract activity in the future and mean that organizations need to be moreambitious and transformational in their sourcing strategies, though lookingfor a rapid return from these strategies.

So, in the longer-term, there remains an ongoing and even enhanced need touse BPO to transform mature operations and to support entry into newmarkets. This use of BPO to support entry into new markets is alreadyapparent. Although emerging markets still only account for approximately 3%of global BPO TCV, BPO TCV grew 26% in these economies over the past 12months.

By sector, the government and financial services sectors strengthened theirshare of BPO TCV from 60% in the 12 months ending June 2007 to 63% in the12 months ending June 2008.

However, at this point, the story differs from the usual one. While BPOcontract TCV more than doubled in the civil government sector over the past12 months, BPO TCV declined by 30% in the financial services sector. Indeedthis slowdown in contract signings wasn't limited to the financial servicessector but was broadly apparent across a broad range of commercial sectorsincluding the manufacturing and retail sectors. These declines weretypically more pronounced in North America than in Europe.

The pattern of BPO service adoption has also continued to evolve with anincreased emphasis on key operational processes which can have a materialimpact on both an organization's effectiveness and its efficiency. This isdemonstrated by the considerable growth in activity in industry-specificand front-office BPO over the past 12 months. BPO TCV has grown by morethan 50% in these areas, which now account for 85% of BPO TCV, with aparticularly marked increase in the level of customer management servicesactivity. Customer management services is a key part of the BPO market asorganizations address the key elements of their cost base and look formechanisms to support them in new market entry.

The pattern of back-office outsourcing has also continued to change. F&Aoutsourcing has been coming into its own and growing strongly in both NorthAmerica and Europe as well as increasing in importance in support of marketdevelopment in emerging geographies such as Latin America. In terms oftrackable contract value, F&A outsourcing now accounts for 8% of globalcontract value.

At the same time, single service activity in HR outsourcing remains strongwith for example in the last quarter both Hewitt and Serco strengtheningtheir absence management capability.

NelsonHall's quarterly BPO Index reports are available as part ofNelsonHall's BPO subscription services. For more information aboutaccessing this report and NelsonHall's BPO subject matter experts, pleasecontact the following NelsonHall representative:

Paul Connolly at paul.connolly@nelson-hall.com

About NelsonHall

Founded in 1998, NelsonHall is the leading global independent analyst firmin Business Process Outsourcing (BPO). The company provides buy-side andsell-side organizations with deeper research and analyses in major BPOdisciplines than any other research firm in the world. These includeFinance and Accounting, Human Resources, Procurement, Banking, Insurance,Government and Customer Management Services. The company'ssubscription-based model provides subscribers with robust market analyses,case studies, vendor assessments, contract analyses, market reports andaccess to a content-rich BPO contracts database. The firm covers a widerange of industries, including financial services, government and utilitiessectors, and tracks worldwide and regional BPO activity. For moreinformation on NelsonHall, please visit www.nelson-hall.com.