IT Outsourcing Drops to 9-Year Low

Research firm Ovum says a weak economy caused the decrease in IT services contracts.
Posted December 14, 2012

Cynthia Harvey

UK-based research firm Ovum has released a new report which finds IT outsourcing has fallen to its lowest level in nine years. The researchers believe the weak economy is responsible for the drop.

InformationWeek's Paul McDougall reported, "Sales of IT outsourcing services fell to their lowest level in nine-years in the third quarter, according to Ovum. The U.K.-based research group pegged the total contract value of deals signed worldwide during the period at $18.9 billion, down 33% from the same time a year ago. Deal volume also fell sharply. The third quarter saw a total of 332 deals signed, down 24% year over year."

In a press release, Ovum's Ed Thomas stated, "The signs of recovery in the IT services market apparent in the second quarter of 2012 were largely conspicuous by their absence in 3Q12. There will need to be a significant upturn in both TCV and deal volume if last year’s performance is to be matched in 2012. On current form, both annual TCV and the number of deals are set to hit 10-year lows, as the global economic crisis continues to impact the performance of the IT services industry."

Tech4Biz noted, "In the public sector global TCV in 3Q12 was $10.6 billion (€8.1 billion), down 43% on the same period the previous year, while the number of deals tracked by Ovum fell 22% to 195. Largely as a result of the lack of large projects, the average value of public sector contracts slipped to $54.6 million (€41.8 million), almost half the average public sector award in 2Q12."

The Hindu Business Line's Venkatesh Ganesh observed, "Europe dominated the few private sector contract deals that were signed in the third quarter, while outsourcing from North America dropped sharply, a market that contributes over 70 per cent to the Indian outsourcing sector."

Tags: services, IT, research, outsourcing

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