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April 23, 2009

Services outsourcing up 20% in some business verticals

Media, retail, utilities and telco make up 30% all deals

By CBR Staff Writer

The number of outsourcing contracts signed by businesses in media, retail, utilities and telecoms is up by 20% on year-ago levels according to market watchers.

Media has shown fairly consistent growth during the past five years, with a slight uptick in number of contracts and average contract value (ACV) in the first quarter, the TPI outsourcing services advisory firm has claimed.

Retail accounted for 30 contracts in the first quarter, up 40% from the previous year, but average and total values of deals signed in that vertical actually dropped to their lowest levels in five years.

TPI said it had tracked some robust activity in the utilities sector, especially in the Americas. It counted 30 contracts during the period, lower than the 99 that it tallied in the telco sector, where the total contract value (TCV) has reached an all-time high in the past year

Taken together, the four represent about one-third of recently awarded contracts, the firm said.

“Each sector accelerated the number of outsourcing contracts it awarded by at least 20% over historical levels during the past 12 months.”

Citing its sourcing database, TPI has said its first-quarter market data shows a general softness against previous first quarters.

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The total contract value of $19 billion was down 21% quarter-on-quarter and 22% year-on-year, according to latest TPI Index. 

The index measures commercial contracts greater than $25 million, and includes data on 141 contracts signed during the latest quarter.

The IT outsourcing market accounted for 101 of the 141 total contract awards valued at $15 billion. 

The TCV for the first quarter of 2009 was the lowest first quarter since the first quarter of 2001, and the ACV was the lowest first quarter since the first quarter of 2003.

Overall, there’s no appreciable upward movement in outsourcing awards, and the underlying flow of smaller outsourcing contracts appears healthy as the industry weathers the Satyam situation.”  


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