European outsourcing deals almost halve in value

Businesses in Europe, the Middle East and Africa have nearly halved the value of outsourcing deals they signed, in the space of only one year, according to a new report.

Total contract value for deals signed in the first quarter of 2009 fell 44 percent from the previous year, said researchers TPI. The TCV slid 14 percent from the previous quarter, as IT services providers struggled to turn contract discussions into firm agreements.

The latest TPI Index, which tracks commercial outsourcing contracts valued above €20 million (£18 million), found that the TCV awarded in EMEA in the first quarter of 2009 value was just over €7 billion (£6.3 billion).

Businesses were moving to smaller contracts, TPI said. The number of smaller contracts signed increased, but the average value of each contract declined 29 percent, from €148 million to €105 million.

“We are seeing a growing tendency for companies to award more outsourcing contracts, though of smaller value,” said Duncan Aitchison, president at TPI EMEA. “This is primarily the result of tactical initiatives meant to address a specific challenge, typically around cost reduction.”

Data released by TPI last week showed that TCV had fallen globally, as with Europe. But the decline was much less, at 20 percent compared to 44 percent for Europe. Global TCV was $19 billion (£13 billion) in the first quarter.

Copyright © 2009 IDG Communications, Inc.

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