Bradley Associates: Mega IT  outsourcing deals move offshore    Mega-deal outsourcing deals–those contractswith a value of...
But the location of the awards is worthnoting. “In the future we expect most newscope growth to come from emergingmarkets,...
Additionally, 11 mega-relationships-those with anannual contract value of $100 million or more–were initiated in the quart...
“We expect mega-deals and mega-relationships will continue to make up animportant part of the market,” said Keppel.“We als...
“Historically, third quarters have been softer thanother quarters, and current industry pipelinessuggest this will hold tr...
Bradley associates mega it outsourcing deals move offshore
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Bradley associates mega it outsourcing deals move offshore

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Mega-deal outsourcing deals–those contracts with a value of $1 billion or more-picked up in the second quarter of 2012, according to the quarterly Global TPI Index. Five mega-deals were signed during the quarter compared with just one each in the second quarter of 2011 and the first quarter of 2012. All five were awarded outside of the mature U.S. and Western European markets-three of them in India and Brazil. Mega-deal activity is always fairly uneven quarter to quarter, said John Keppel, partner and president of research and managed services for outsourcing consultancy ISG, which produces the index. But the location of the awards is worth noting. “In the future we expect most new scope growth to come from emerging markets,” said Keppel, “while the U.S. and Western Europe will generate the bulk of restructuring activity.” The mega-deals awarded by companies in the telecom, banking and consumer goods industries with a combined value of $6.3 billion, accounted for nearly 30% of global contract value signed during the second quarter. Four of them were entirely new deals, while one was a restructuring. Additionally, 11 mega-relationships-those with an annual contract value of $100 million or more–were initiated in the quarter, the most since 2009 and an increase of four signed the year prior and seven in the previous quarter. Keppel doesn’t expect the mega-deal activity to return to decade-ago levels of robustness. “Some mega deals in the past year, especially those that are restructuring-related, are being broken up and returning to the market in the form of multiple smaller contracts with shorter durations,” said Keppel. And the bellwether for large outsourcing deal affairs is likely to be the mega-relationship category of deals as contract durations continues to get shorter. The average deal length so far this year is 4.85 years, compared to 6.48 back in 2000. “We expect mega-deals and mega-relationships will continue to make up an important part of the market,” said Keppel. “We also expect more mega-deals to be awarded in less mature regions but mega-relationships to continue in mature and less mature regions.” Taking into account all outsourcing contracts worth $25 million or more, $13.1 billion in IT outsourcing business took place in the second quarter, up six percent year over year but down five percent over last quarter due to light contracting activity. TPI is predicting a softer outsourcing market in the third quarter. “Historically, third quarters have been softer than other quarters, and current industry pipelines suggest this will hold true in 2012,” Keppel said. “The fourth quarter will likely pick up, with some help from larger deals in the pipeline ready to go to award.” Meanwhile global outsourcing vendors continue to battle it out for business. American multi-national service providers have held 53% of total market share since 2010, down 10% from the 2007 to 2009 period, Bradley Associates report. European, Middle Eastern and Asia

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Bradley associates mega it outsourcing deals move offshore

  1. 1. Bradley Associates: Mega IT outsourcing deals move offshore Mega-deal outsourcing deals–those contractswith a value of $1 billion or more-picked up in thesecond quarter of 2012, according to the quarterlyGlobal TPI Index. Five mega-deals were signedduring the quarter compared with just one each inthe second quarter of 2011 and the first quarter of2012. All five were awarded outside of the matureU.S. and Western European markets-three of themin India and Brazil. Mega-deal activity is alwaysfairly uneven quarter to quarter, said John Keppel,partner and president of research and managedservices for outsourcing consultancy ISG, whichproduces the index.
  2. 2. But the location of the awards is worthnoting. “In the future we expect most newscope growth to come from emergingmarkets,” said Keppel, “while the U.S. andWestern Europe will generate the bulk ofrestructuring activity.” The mega-dealsawarded by companies in the telecom,banking and consumer goods industrieswith a combined value of $6.3 billion,accounted for nearly 30% of global contractvalue signed during the second quarter.Four of them were entirely new deals, whileone was a restructuring.
  3. 3. Additionally, 11 mega-relationships-those with anannual contract value of $100 million or more–were initiated in the quarter, the most since 2009and an increase of four signed the year prior andseven in the previous quarter. . Keppel doesn’texpect the mega-deal activity to return to decade-ago levels of robustness. “Some mega deals in thepast year, especially those that are restructuring-related, are being broken up and returning to themarket in the form of multiple smaller contractswith shorter durations,” said Keppel. And thebellwether for large outsourcing deal affairs islikely to be the mega-relationship category ofdeals as contract durations continues to getshorter. The average deal length so far this year is4.85 years, compared to 6.48 back in 2000.
  4. 4. “We expect mega-deals and mega-relationships will continue to make up animportant part of the market,” said Keppel.“We also expect more mega-deals to beawarded in less mature regions but mega-relationships to continue in mature and lessmature regions.” Taking into account alloutsourcing contracts worth $25 million ormore, $13.1 billion in IT outsourcingbusiness took place in the second quarter,up six percent year over year but down fivepercent over last quarter due to lightcontracting activity. TPI is predicting asofter outsourcing market in the thirdquarter.
  5. 5. “Historically, third quarters have been softer thanother quarters, and current industry pipelinessuggest this will hold true in 2012,” Keppel said.“The fourth quarter will likely pick up, with somehelp from larger deals in the pipeline ready to go toaward.” “Historically, third quarters have beensofter than other quarters, and current industrypipelines suggest this will hold true in 2012,”Keppel said. “The fourth quarter will likely pick up,with some help from larger deals in the pipelineready to go to award.”

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