Just one mega-deal as outsourcing contracts plummet

The value of outsourcing deals has dropped two-thirds in Europe as demand from the financial services sector remains flat.

The number of new contracts signed in Europe fell from 75 to 56 from the second to the third quarter, with total contract value decreasing from $18.5bn to $5.5bn, according to business advisory company TPI.

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The total contract value for IT outsourcing fell by more than half worldwide - nearly 56 per cent - from the $20bn signed in the second quarter of 2008.

TPI found that while third quarters are typically the weakest quarter of a year, the third quarter of 2008 was lower than the historical average by almost 20 per cent.

The third quarter has also seen the number of mega outsourcing deals, worth more than $1bn, worldwide fall to just one - its lowest level since 1996.

Despite this the firm remains positive about future prospects worldwide, with Peter Allen, partner and managing director at TPI saying in a statement: "We still believe that outsourcing relationships will be called upon to achieve near-term cost reductions, facilitate restructuring of the industry and ultimately provide for growth at the back end of the downturn.

"A recent announcement of a mega deal provides early momentum for the fourth quarter, and we see substantial activity that should allow 2008 to exceed 2007's total performance of $85bn."

Performance in 2008 is still exceeding that of 2007. Compared with last year at this point, the number of contracts awarded has risen almost five per cent, total contract value has grown nearly 19 per cent and actual contract value has climbed 27 per cent.