Outsourcing contracts down by 19%, says researcher
The reasons for the fewer contracts are both economic and political, Everest said
IDG News Service - The number of new IT and business process outsourcing contracts worldwide dropped year-on-year in the third quarter, with contract values also decreasing, a research firm said.
Everest Group, which had reported a drop of 20% year-on-year in the second quarter, said the number of contracts was down to 381 in the third quarter from 472 in the same quarter last year.
The dip in number of contracts in the third quarter is more worrying than the slowdown reported in the second quarter, because the third quarter is usually the busiest period in the outsourcing industry, said Salil Dani, practice director for global sourcing at Everest, on Tuesday.
The drop came largely because of economic problems in key markets like the U.S. and Europe, but there was also uncertainty about offshoring among U.S. customers, as keeping jobs in the country became a key issue in the U.S. presidential election campaign, Dani said.
Banks in the U.S. in particular delayed decisions relating to offshoring to locations like India and the Philippines because a number of them have taken funding from the government, and didn't want to be seen as offshoring while the political rhetoric was at its hottest, Dani said.
Offshoring is a key part of outsourcing, and about 47% of the contracts in the quarter had an element of offshoring. About 38% of the contracts were for delivery from India and other locations in Asia, he added.
Everest said its estimate of outsourcing contracts is based on publicly disclosed data, and included entirely new transactions as well as some renewals of earlier deals. Dani said that if estimates of contracts that were not made public were included, the numbers of new contracts were still lower in the third quarter than from the same quarter a year earlier.
The total annualized value of new reported contracts has also been falling, particularly in business process outsourcing, and was down to US$1.5 billion in the third quarter from $2.7 billion in the same quarter last year, Dani said. Annual contract value is the value of a contract divided by its duration. The deal sizes are getting smaller across most industry verticals, he added.
- Best iPhone, iPad Business Apps for 2014
- 14 Tech Conventions You Should Attend in 2014
- 10 Desktop Apps to Power Your Windows PC
- How to Add New Job Skills Without Going Back to School
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- Omnichannel: From Buzzword to Strategy Customers demand a seamless experience across channels, especially mobile. Read this whitepaper for a research-based framework for using omnichannel for higher customer engagement.
- The 5 Big Lies About Going Mobile You've heard about the power of mobile to change your business. But have you realized your mobile potential? It's about much more than...
- Developing a Winning Mobile Strategy: Playing Offense vs Defense Don't lose time and money with a "throw an app against a wall to see if sticks" approach to mobile. You need a...
Red Hat Enterprise Linux - The Original Cloud Operating System
Linux adoption is growing against a number of measures, such as the
number of supercomputers that run Linux and the size of the contributing...
- Live Webcast Increasing the Value of Your Reports and Dashboards Learn how incorporating other analytical capabilities such as predictive modeling and visualization can increase the value of your reports and dashboards by providing...
- Testimonial: Cystic Fibrosis Trust Peter Hawkins, the Head of IT for Cystic Fibrosis Trust, discusses the role CommVault's Simpana software platform plays in improving the company's information...
- Increasing the Value of Your Reports and Dashboards Learn how incorporating other analytical capabilities such as predictive modeling and visualization can increase the value of your reports and dashboards by providing... All Management White Papers | Webcasts