UK IT outsourcing market shrivels

UK market halves in size as major IT deals dry up

Half cut: UK outsourcing deal values for the first nine months of 2010 are half what they were last year

The UK was the biggest laggard as the European outsourcing market remained in the doldrums in 2010's third quarter.

Figures from research and advisory firm TPI reveal that 57 outsourcing contracts worth €20m (£17.5m) or more were awarded across EMEA during Q3. Total contract value stood at €5bn, down 10 per cent on 2009. Global TCV slumped more than 20 per cent to €11.3bn. European contract values sunk to their lowest level in five years and, in the UK, TCV for the year to date is half what it was last year.

Restructuring contracts have been one of the bright spots of 2010 and remained so in Q3. Deal volumes in EMEA rose 80 per cent sequentially and almost 500 per cent annually.

IT outsourcing deals took a battering during the quarter, with EMEA-wide TCV plummeting 35 per cent annually to a little more than €3bn. In contrast, business process outsourcing has enjoyed a strong year to date. EMEA contract values for 2010's first nine months have risen 19 per cent on last year to €4.3bn.

Duncan Aitchison, EMEA president of TPI, said the market for restructuring deals would continue to perform well next year, but cautioned that the rest of the market could be far more volatile. The market will pick up somewhat in this year's closing quarter, he predicted, but stressed that 2010 has been a year to forget overall.

“While we foresee a more robust fourth quarter for outsourcing awards in general, we do not believe it will be as strong as the fourth quarter in 2009 and do not expect it to compensate for the third-quarter doldrums," he said. " It is highly unlikely that full-year TCV in 2010 will measure up to last year’s results."