EMEA - Multisourcing v Megadeals

Less of a trend and more of a confirmation, recent research illustrates that for Q2 year on year that there have been more multisourcing arrangements from buy side organisations and that these far outweigh the “megadeals” – deals with a value of more than €800m.

Demand for BPO increased in the substantially in the EMEA region, with the total value of BPO contracts signed during the quarter rising 132 per cent year-on-year to almost €6bn, while the total value of IT outsourcing deals fell.

Megadeals have been increasingly uncommon for the last few years, as buy side organisations of the scale required to enter into a megadeal simply have less of an appetite to do so for three key reasons:

• Varied capability: When exploring the different functions, there is no one provider that provides the leading capability across the traditional outsourced functions - namely IT, Finance, HR, Payroll and Procurement
• Change management: To be able to manage the change in an organisation the “pilot” approach is more popular. This enables an organisation to test the success of particular sub functions or function prior to sourcing further support. The benefits of the pilot approach are numerous, and enable the buy side organisation to prove the success on limited scope and obtain the organisational buy in, prior to expanded across sub functions (ie AP) or functions (ie Finance)
• Risk: The risk of utilising one provider for such a large amount of spend provides a significant risk (reputational, commercial and operational). Should there be issues with that provider on their reputation, performance or on the contract, walking away would be very expensive if not almost impossible