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Bradley associates mega it outsourcing deals move offshore
Bradley Associates: Mega IT
  outsourcing deals move offshore
    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.” “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.”

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Bradley associates mega it outsourcing deals move offshore

  • 2. Bradley Associates: Mega IT outsourcing deals move offshore 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.
  • 3. 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.
  • 4. 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.
  • 5. “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.
  • 6. “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.” “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.”