IT Outsourcing Deals in the First Half of 2008 Highest in decade
Date: Friday , August 01, 2008
For the last few months we have been hearing news about several retrenchment measures taken by the IT industry due to the shrinking of margins caused by the so called global slow down. However, a report says that the first half of the current calendar year has seen the IT outsourcing industry posting its strongest performance in a decade.
The industry saw 282 outsourcing contracts valued at $49 billion in total contract value (TCV) and $10 billion in annualized contract value (ACV) during the first two quarters of the current calendar year. It was a year on year (Y-o-Y) increase of 24 percent in TCV and 36 percent in ACV, says TPI, a global sourcing data and advisory firm.
In the second quarter, 146 contracts were awarded in the global outsourcing industry, valued at $25.6 billion in TCV, and almost $5 billion in ACV.
All the measures indicate a noteworthy market strength, as this was the strongest second quarter performance since 2000. Additionally, each of the past three quarters has topped the $20 billion TCV mark. This series also represents the best three-consecutive quarter performance ever.
“The industry has seen the highest number of outsourcing contracts, TCV, and ACV during the first half of 2008 in more than 10 years. At the midpoint of the year, TCV in the broader market is on a trajectory to eclipse the TCV record of 2004, which has been the most prolific full year to date,” says an analysis by TPI.
According to TPI, a major factor contributing to the record performance is the high number of ‘new scope’ contract awards ? awards that factor out restructurings, reflecting adjustments to existing relationships. Such contracts increased in TCV and ACV by roughly 26 percent and 43 percent respectively the greatest Y-o-Y increase in the past four years.
While the Americas and the Asia Pacific region did not have an appreciable increase in market activity, Europe, the Middle East, and Africa (EMEA), by contrast, experienced 58 percent more TCV in the first half of 2008 in comparison to the same period in 2007, significantly contributing to the global TCV record.