Tuesday, May 3, 2011

Outsourcing deal value shrinks the most in 10 years

Indian information technology (IT) services story remains intact despite the TPI global index showing that total contract value (TCV) of commercial outsourcing in the first quarter of this year slipped the most in a decade.

The index fell 25% sequentially to $17.4 billion from $23.1 billion in fourth quarter of 2010 and 28% from $24.3 billion in the first quarter last year.

Positively for Indian tech firms, however, the technology advisory firm’s index, which measures
commercial outsourcing contracts valued at $25 million or more, has been dragged down more by decline in restructuring contracts than new scope signings. Multinationals such as Accenture, IBM, HP and others have a bigger play in the restructuring segment, while Indian tech firms figure more prominently in the new scope deals space that was more or less stable.

The TPI index reveals restructuring contracts —- those that are renewed, renegotiated or restructured — fell 64% in the last quarter to $2.5 billion from $7 billion in the fourth quarter of 2010 and 73% from $9.4 billion last year. New scope TCV of $14.9 billion was unchanged year on year (yoy) and declined just 7% sequentially.

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