Outsourcing: New deals are in decline

Value of new contracts shrinking - but BPO still shines...

Value of new contracts shrinking - but BPO still shines...

Cash-strapped companies are holding off on signing new outsourcing contracts, according to research released this week.

Figures from outsourcing advisory firm TPI showed a global fall in the value of new or restructured outsourcing deals signed during the second quarter of 2010.

The value of new or restructured outsourcing deals signed during the second quarter of 2010 was $18.1bn, a drop of about 13 per cent compared to the value of deals agreed during the first quarter of the year.

outsourcing

Companies are holding off signing new outsourcing deals
(Photo credit: Shutterstock)

Demand for IT outsourcing (ITO) fell particularly sharply during the second quarter, with the value of ITO deals dropping by almost 30 per cent compared to the first quarter of 2010.

The value of new or restructured deals for business process outsourcing (BPO) - where a third party takes charge of an entire division of an organisation such as HR or finance - rose by 60 per cent in Q2 compared to Q1, however.

However BPO growth remained weak by historical standards, according to TPI.

When divided by sector, the figures showed a fall in the value of new outsourcing contracts in the financial services, manufacturing and telecom and media industries, with growth in the travel, transport, hospitality and retail sectors.

Looking ahead, Mark Mayo, partner and president with TPI Global Operations, said in a statement that the global outsourcing market will continue the "slow and uneven recovery that it began last year".

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