View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Technology
October 8, 2006

Defense deals drive Q3 services contract signings

A flurry of signings in the US defense sector and a sharp upturn in the number of clients opting for multi-sourced deals were the highlights of the IT services and BPO contracts tracked by Computer Business Review during the third quarter.

By CBR Staff Writer

The IT Services Contracts Database, which tracks all publicly disclosed outsourcing, systems integration, and consulting deals, logged 402 deals in the three months ended September 30, down 13% from the year-ago quarter, although their combined value soared 74% to $46.4bn.

The numbers were skewed by the US Army announcing the winners of its $20bn ITES-2S IT services and products procurement program, which accounted for eight deals each worth an estimated $2bn apiece, and two further deals worth $1bn each. However, if these numbers are stripped out, the value of total contract signings in the third quarter still rose by a less impressive, but still healthy 6% over the year-ago period.

The eight major winning vendors under ITES-2S were: Booz Allen Hamilton, CACI International, CSC, EDS, General Dynamics, IBM, Lockheed Martin, and Science Applications International. The three small business contractors are: Apptis, STG, and QSS Group. All these companies will compete for a share of work to support the Army, the Department of Defense, and other federal agencies with services including business process re-engineering, IT and security services, network support, systems operations and maintenance, systems integration, and training.

Outside of the ITES-2S awards, there were major contract wins for CSC, T-Systems and Northrop Grumman, which helped to increase the number of deals worth $1bn to 15 from just two in the third quarter of 2005. However, the overall number of contracts worth between $100m to $999m fell by 20% to 48 from 60, which reflected cautions from some second-tier services vendors that clients were lengthening sales cycles on major contracts.

Atos Origin complained in July that some clients particularly in the UK government sector were taking longer than usual to sign off deals, due in part to the growing influence of advisory firms. However, since then, Atos Origin has confirmed that it had been given preferred-bidder status on 900m euros ($1.2bn) worth of deals, and announced that it is negotiating a big contract with insurance company NFU Mutual, which will see the supplier take on 80 of the client’s staff.

There are several other big awards expected in the next three months. Before the end of the year, Swindon Council in the UK is expected to announce the winner of a $350m IT and business process outsourcing contract, and Dutch bank ING is set to rubber-stamp a $1bn, five-year desktop management deal with a consortium led by Accenture. Meanwhile, Vodafone is negotiating a large applications outsourcing deal with IBM and EDS.

Content from our partners
Incumbent banks must transform at speed, or miss the benefits of open banking
Leverage cloud and expertise to optimise engagements from onboarding to conclusion
How enterprises can best prepare for finance digitalisation

In total, the 402 contracts were shared out among 165 different vendors. CSC’s deal with the NHS gave it the largest individual share of the $46.4bn of contracts, with 15%. IBM Global Services followed in second place with a 9% slice, and SAIC came in third with 8.6%. T-Systems, the struggling network and data services arm of Deutsche Telekom made a rare appearance in the top 10 vendor share list on the back of its $2.3bn deal with sister organization T-Mobile.

As usual, there were few deals publicly disclosed by India’s fast-growing services vendors. Although the likes of TCS, Infosys, Wipro, and Satyam all continue to sign broader and bigger deals, they remain slightly hamstrung by their clients’ unwillingness to disclose details of their offshore sourcing strategies.

One of the most interesting deals tracked during the quarter was announced by Chinese software services firm Chinasoft, which announced an $86m, five-year contract to provide low-cost development services to Microsoft. The contract gives further credibility to China’s push to establish itself as a premier offshore sourcing center.

Websites in our network
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy