Channel News and Analysis: Outsourcing on the Way Out?
Figures released by a number of sources show a definite slowdown in number of contracts and the amount of money spent by IT organizations on outsourcing and offshoring deals.
The TPI Index, developed by the TPI sourcing data and advisory arm of Information Services Group, found that the number of Q2 contract awards valued at $25 million or more fell by 7.5%.
Annualized contract value (total contract value divided by duration of the contracts) fell 5% from Q1 to $3.6 billion. Compared to the first half of 2008, the previous six months saw 11% fewer contracts, 22% lower total contract values and 28% lower annualized contract values for outsourcing.
If 2009 were to equal 2008 performance, outsourcing vendors would need to sign up $53 billion in total contract value during the next six months. As it stands, contract values are on track to fall to 2001 levels.
India’s largest outsourcing company, Wipro, reported a 3.3% decline in U.S. dollar revenue for IT services last quarter.
Meanwhile, Infosys Technologies reported that its fiscal year ending March 2010 is on track to drop by up to 4.6% over the previous year.
Recent figures from the National Association of Software and Service Companies show revenue growth from offshoring will still hit 10% this year. That’s still far below 29% growth in 2007.
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