Offshore IT services vendors have scored major contract wins in Q3 2005.

Datamonitor’s IT services contracts database found that Indian suppliers Tata Consultancy Services and Infosys Technologies, and second-tier international vendors including Keane and Pomeroy Computer Resources all secured their largest-ever contract wins during the quarter. This reflects the growing trend for client organizations to work with best-of-breed, specialist suppliers to manage specific areas of their IT infrastructure.

A total of 432 deals were tracked during Q3 2005, a 1% decline from the year-ago period. However, the value of deals fell by 32% from $41.9 billion in Q3 2004 to $28.5 billion in Q3 2005, with the average contract size declining from $95.7 million in Q3 2004 to $66 million in Q3 2005. The main reason for this was that the number of billion-dollar deals announced over Q3 2005 was half that tracked during Q3 2004.

Overall, this has been a major quarter for offshore sourcing. Large corporations such as ABN Amro are dealing directly with offshore services vendors, signing deals worth hundreds of millions of dollars. Global IT sourcing models are gaining mainstream acceptance.

One of the other areas of outsourcing tipped for strong growth is finance and accounting (F&A) outsourcing, in which a couple of interesting deals were signed during Q3 2005 – notably Accenture’s contract with National Australia Bank.

However, Everest Group notes that, while IT giants such as Accenture and IBM currently dominate the F&A outsourcing market (FAO), they are increasingly being challenged by Indian offshore providers. While Accenture and IBM have 32% and 29% of the total number of deals signed in the last six quarters, respectively, Genpact and WNS Global Services are gaining market share, having won 12% and 5% of deals, respectively.

According to Michel Janssen, president of supplier solutions at Everest, FAO plays to the strengths of Indian companies as it does not revolve around technology issues, but is mainly a labor arbitrage play. India has a higher quality, more educated workforce. They are not just offering clerks, but college graduates, who can not only do processing, but superior analytic work, he said.