Feeds

Outsourcing firms squeezed till their pips squeak

More bang, less buck

Internet Security Threat Report 2014

IT outsourcers are facing a torrid time with nitpicking customers demanding more and paying less for their services. The numbers of deals are increasing, but they are worth less than before, and they don't last so long.

That's according to separate reports from IDC and Technology Partners International (TPI), an outsourcing consultant. Deals with a total contract value (TCV) of $1bn-plus are at their lowest point in four years, according to TPI. And deals over $50m are at their lowest point since the third quarter of 2002.

"There have been an increasing number of smaller, single process contracts compared with larger, multi-process contracts in recent years," Peter Allen, TPI partner, said. Its numbers are taken from its work with outsourcers and from publicly available information.

IDC has picked up on the same trend, recording a 3.1 per cent drop in TCV of the 100 biggest worldwide deals in 2005 to $67.9bn. Mega-deals, with $1bn plus TCV, and deals ranging from $500m to $1bn were both down. Contracts worth less than $250m more than doubled - 23 up from eight.

Deals are changing as the number of service suppliers increases, giving customers greater choice and so creating price pressure. That's becoming important as many early adopters of outsourcing renew their initial contracts, and are unwilling to become locked in again for long periods. Also, having shifted over people or assets, the need for an expensive contract lasting seven-to-10 years is gone. Companies are moving toward five-year deals.

According to Allen, service suppliers are now under pressure to demonstrate their value at an early stage. "They have to be clear in their service offering because contracts are not as open ended as they were in past. They need to demonstrate value early. After three years, businesses are in position to go another way," he told The Register.

The changes appear to favor India's suppliers, who are smaller, nimbler and more competitive on price than the big US and European rivals. Indian companies won eight per cent of contracts awarded in the quarter to September 30, up from two per cent last year. They also have 25 per cent of the TCV in application development and maintenance and are beginning to sign contracts in infrastructure.

IDC noted networking and desktop deals climbed substantially during 2005 from 14.6 per cent of total IT outsourcing deal value in 2004 to 32.4 per cent.®

Choosing a cloud hosting partner with confidence

More from The Register

next story
I'll be back (and forward): Hollywood's time travel tribulations
Quick, call the Time Cops to sort out this paradox!
Musicians sue UK.gov over 'zero pay' copyright fix
Everyone else in Europe compensates us - why can't you?
Megaupload overlord Kim Dotcom: The US HAS RADICALISED ME!
Now my lawyers have bailed 'cos I'm 'OFFICIALLY' BROKE
MI6 oversight report on Lee Rigby murder: US web giants offer 'safe haven for TERRORISM'
PM urged to 'prioritise issue' after Facebook hindsight find
BT said to have pulled patent-infringing boxes from DSL network
Take your license demand and stick it in your ASSIA
Right to be forgotten should apply to Google.com too: EU
And hey - no need to tell the website you've de-listed. That'll make it easier ...
prev story

Whitepapers

Seattle children’s accelerates Citrix login times by 500% with cross-tier insight
Seattle Children’s is a leading research hospital with a large and growing Citrix XenDesktop deployment. See how they used ExtraHop to accelerate launch times.
5 critical considerations for enterprise cloud backup
Key considerations when evaluating cloud backup solutions to ensure adequate protection security and availability of enterprise data.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.