Sunday, 16 March 2008

Outsourcing - Boring, Boring, Boring!

I hosted a really pleasant dinner at Mosimanns last week for some pretty important CEOs from the software sector. I thought, as I was paying for the evening, they would be ‘nice to me’. Have none of it!

Basically I was severely criticised for banging on about outsourcing – ITO and BPO and Capita in particular. Unlike the really exciting software sectors that these CEOs represented – and had all made multimillions from – outsourcing was truly boring...and that’s not in the complimentary way that Holway normally uses the word!

Of course, they were right. Even I cannot get excited about the detail of an insurance back office outsourcing deal anymore. I can however get distinctly excited about the share price performance of the outsourcers. Capita is still the best performing share in my – or probably anyone else’s – tech portfolio. Up an amazing 174xtimes since their 1989 IPO. That is twice the 82xtimes that the second best performer – Sage – has achieved.

But, as they say, ‘past performance is no guide to the future’. However, in a period when almost every software (indeed every SITS) company has showed massive share price falls (the UK FTSE SCS Index is well over 20% off its 2007 high), the outsourcers have held up very well. Capita, Serco and Xchanging are pretty much where they started 2008 compared with a 12% decline in both the FTSE100 and the FTSE SCS Indices. I can tell you, that’s pretty good!

For further reading see Lex on the UK outsourcers in the Financial Times on 14th Mar 08. It quotes Ovum Holway research too.

1 comment:

Ravi Kumar said...

well... it depends on what is being outsourced!!... if one outsources the routine backoffice functions... what do you expect?

on the other hand.. it can get pretty exciting, interesting and even more rewarding, if core parts of the business are outsourced.. would love to hear more about this...