Outsourcing - more, smaller deals being made

Companies are spending less on outsourcing as global contract values have shrunk by a quarter this year.

The average value of international contracts in 2005 hit €183m, down 24 per cent from €240m last year, according to TPI, an outsourcing advisory firm. The trend is particularly apparent in Europe, where the average contract value fell by 37 per cent.

At the same time, the number of contracts has increased by 11 per cent, which shows there have been a larger number of smaller deals.

Duncan Aitchison, MD of TPI, said this is driving competition and benefiting the Indian services providers in particular.

More than two-thirds of the larger contracts signed this year have been enterprise restructuring deals, due to increased availability of offshore resources and lower labour costs, according to the research.

TPI said 128 contracts worth €32bn (70 per cent of which belong to CSC, EDS and IBM) are due to expire next year.

A study of 103 IT managers from private sector organisations found a quarter of outsourcing contracts are based on a joint decision between IT and business managers.