According to a new IDC study, the business-outsourcing market progressed positively in 2005, experiencing a 33% increase in the volume of deals signed. The IDC study finds market adoption expanding and becoming more mainstream, as large, midsize and small companies from a variety of industries embrace the business-outsourcing model.

“The business-outsourcing market saw a healthy growth in 2005,” said Romala Ravi, Director, BPO Services research, IDC. “While the small number of mega deals signed caused overall contract values to slightly decline, the rest of the market pushed forward strongly. Mega deals can cause wild swings in the total contract values each year, but the reality is that these deals only represent a mere three percent of business-outsourcing deal activity. The majority of this market — comprising deals under $1 billion in value — continued to see vibrant activity with adoption spread out across a wide range of company sizes, industries and geographies,” says Ravi.

Other key findings of the study are that small and midsize deals are fueling growth. Underlying this trend is an increase in the share of new deals versus extensions and renewals, which indicates that a growing number of new organizations are buying into the business-outsourcing model.

The study finds that while horizontal business processes continued to dominate deal activity, 2005 also saw an increase in the number of vertical-industry specific deals, particularly in the financial services and government verticals. Manufacturing, financial services and government verticals registered the strongest adoption of business outsourcing overall.