Said Stan Lepeak, EquaTerra's Managing Director of Research, "While the current state of the economy is forcing Western commercial enterprises to cut budgets for capital investments and many types of discretionary business and IT services, the projection for outsourcing investments remains positive and is improving. This highlights the importance of outsourcing as a tool for cost reduction and avoidance, as well as the ongoing broadening of the outsourcing footprint beyond traditional BPO and ITO areas. Although the outsourcing market will remain choppy over the next two to three quarters at the individual buyer and service provider level, demand growth will increase at the macro level. It is important to note, however, that the outsourcing demand improvements we saw in 4Q07 will for the most part not result in new deal closings until late 2008 and into 2009."

Based on the 4Q07 Pulse Surveys, several EquaTerra research studies and client interaction, following are some anticipated 2008 trends: Outsourcing will continue to be recession-proof; Public sector demand will continue to grow, and shared services and internal transformation in this sector will get stronger; Recent turmoil in credit markets will selectively slow outsourcing in the financial services sector in the short term but drive more ITO in the long term. Financial services firms will also continue to pursue offshore captives but often within the region rather than in India or China for various regulatory and risk reasons; Global multi-shore and multi-provider outsourcing will become more the norm than the exception; Indian service providers will set up more local delivery services centers in the U.S. and EMEA, and will also expand offerings into new areas of ITO and BPO; Canada's appeal as a near-shore destination will lessen due to currency appreciation; A confluence of factors will lead to the expansion of service delivery capabilities beyond India to regions like Central/South America, Central/Eastern Europe and China; Governance of outsourcing deals will become paramount as buyers seek to maximize value and minimize value leakage; Capital expenditure avoidance (e.g., enterprise software upgrades, migrations) will become a key driver for increased ITO and BPO, as will the continuing challenges of appropriately skilled talent and workforce shortages. For more information, visit www.equaterra.com.