422 outsourcing deals valued at $15bn are expected to expire in 2010
Number of outsourcing contracts awarded globally are expected to rise in 2010 as organisations look for new ways to optimise business operations in an improving economy, according to a research by sourcing data and advisory firm TPI.
According to the new TPI Momentum Market Trends & Insights 4Q09 Annual Report, the growing acceptance of cloud computing, increasing interest in multi-sourcing, and emerging focus on governance and risk management will fuel outsourcing contract volume this year.
However, the report also notes that the same factors will narrow the scope of individual outsourcing projects, driving down their value and duration and intensifying competition among service providers.
The report also notes that 422 outsourcing contracts valued at $15bn are expected to expire in 2010, a 40% increase over the total contract value of last year’s expiring awards and the highest level in five years, out of which many are large contracts signed when the global economy was stronger that will be broken up and awarded in smaller transactions, providing another boost to contract volume this year.
TPI also found that only slightly more than one-third of outsourcing proposals directly met buyers’ objectives in 2009, down from nearly half the year before and no service provider would intentionally fail to respond to a prospective client’s needs, proposals frequently fall short or reflect misguided attempts to fit an existing solution into the buyer’s problem.
The firm said that the big five Americas firms increased their share of the overall market during 2009 by 9%. Americas ITO market has been fairly consistent for the last three years, though Europe has now surpassed it, setting a record for the highest spending in one year, and Asia Pacific recorded its fifth consecutive year of growth.
John Keppel, partner and managing director of TPI Research, said: The question on many outsourcing professionals’ minds entering 2010 was whether the fourth quarter of last year was the typical end-of-year bounce or the beginning of a recovery in the industry.
“We believe it was both. With the outlook of the global economy still uncertain, clients are clearly turning toward smaller, lower-risk transactions that focus on short-term cost savings.