Outsourcing mega-deals dry up

Number of IT outsourcing deals being awarded continues to grow but market value shrinks in Q1

Splashing the cash: Hefty outsourcing contracts are a thing of the past

The EMEA market for outsourcing shrank during 2009's first quarter as firms shied away from mammoth contracts, research has found.

Outsourcing advisory firm TPI's Index report tracks commercial contracts with a value exceeding €20m (£17.8m). Total contract value in EMEA during Q1 was a little more than €7bn, a slump of 14 per cent sequentially and a massive 44 per cent year on year.

Despite this, the number of deals being won continues to rise as companies opt for smaller, more targeted contracts. The average contract value in EMEA shrank 29 per cent on an annual basis to €105m.

Duncan Aitchison, president of TPI EMEA, said: “We are seeing a growing tendency for companies to award more outsourcing contracts, though of smaller value.

“This is primarily the result of tactical initiatives meant to address a specific challenge, typically around cost reduction. When the economic outlook improves, we anticipate some resurgence of bigger deals across EMEA, especially in the relatively less mature markets in continental Europe.”

He added: “Although outsourcing service providers tell us that their pipelines are robust, more recent experience suggests that it is taking longer to convert the pipeline into contract awards. Over the next few quarters we expect both the popularity of smaller contract sizes that we have identified to continue and the EMEA market demand to stabilise at about the levels seen prior to the EMEA-led surge of a year ago."