Outsourcing deals slump in third quarter

The number of mega outsourcing deals fell to just one in the third quarter, as demand from the financial-services sector remains flat

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 (£10.6bn) to $5.5bn, according to business advisory company TPI.

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

TPI found that while the third quarter is typically the weakest quarter of a year, the third quarter of 2008 was lower than the historical average by almost 20 percent.

The third quarter has also seen the number of mega outsourcing deals (worth more than $1bn) worldwide fall to just one — the 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 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 percent, total contract value has grown nearly 19 percent and actual contract value has climbed 27 percent.

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