Outsourcing levels out after 2008 "anomaly"

Balancing act: the steady flow of deals is "evidence of stability", according to TPI

The EMEA market for €20m-plus outsourcing deals shrank 45 per cent during the first half of 2008, with annual value plummeting by three fifths.

The EMEA Index from data and advisory monolith TPI tracks all outsourcing deals worth €20m (£17m) and upwards. The total contract value (TCV) of such deals during 2009's first half stood at a little over €7bn, a 45 per cent drop on last year. TCV for Q2 fell 70 per cent annually.

The number of contracts awarded across EMEA in 2009's opening six months fell 19 per cent year on year, while their combined annual value fell 60 per cent to €1.2bn. With total and annual worth plummeting at up to triple the rate of overall contract volume, firms are looking for cheaper, longer term deals.

Business process outsourcing has been badly hit, although IT outsourcing (ITO) is holding up better. However, the UK, alongside the Benelux and Nordic countries, experienced the steepest drop in ITO activity.

TPI reports that the oil and gas, aerospace and defence, alcohol and tobacco, food and banking sectors have all drastically scaled back outsourcing activity. But businesses in the diversified financials, consumer durables, utilities and telecoms markets are still increasing their outsourcing spend.

Duncan Aitchison, EMEA president of TPI, described the outsourcing market's explosion during the first half of last year as "an anomaly".

He added: "We are now seeing a slower yet reasonably consistent pace of contract awards that provides some evidence of stability in the buying and selling flow.”

“The performance that we are seeing in the outsourcing market today is a clear reflection of the uncertainty and delay in decision-making that we first noted in the third quarter of last year.

"Although we do not anticipate a surge in activity in the very near future, we do expect to see a steady pace of contract awards through the remainder of 2009 as businesses look to keep a tight rein on their costs against the backdrop of a very challenging global economic picture."