$88bn of outsourcing deals up for renewal

Outsourcing deals worth a total of $88bn per year globally are up for renewal in the next two years, with a large share of those contracts at risk of being given to new suppliers or lower cost offshore players, according to new research.

The Everest Research Institute (ERI) estimates that first generation outsourcing deals worth $118bn in annualised contract value are set to expire between 2006 and 2008, with a quarter of these having already been renewed during the first quarter of this year.

These newcomers now have the experience, cost advantages and critical mass to be serious contenders.

That leaves the majority of contracts, worth around $88bn per year potentially, still up for grabs. ERI claims more than 40 per cent of these deals face a "medium to high risk" of being restructured, which opens the doors for new suppliers and the offshore outsourcing companies.

The so-called "big six" traditional outsourcers are expected to be hardest hit as buyers look to unbundle contracts among multiple suppliers as they increasingly move away from awarding IT infrastructure and application maintenance and development under a single big deal.

Kara Wyatt, COO at ERI, said in a statement: "We see competition only heating up as the offshore players step into the fray. These newcomers now have the experience, cost advantages and critical mass to be serious contenders, and today's buyers can no longer afford to overlook their offshore offerings as an option."