Mega-deal outsourcing deals - those contracts with a value of $1 billion or more - picked up in the second quarter of 2012, according to the quarterly Global TPI Index.
Five mega-deals were signed during the quarter compared with just one each in the second quarter of 2011 and the first quarter of 2012. All five were awarded outside of the mature U.S. and Western European markets-three of them in India and Brazil.
Mega-deal activity is always fairly uneven quarter to quarter, said John Keppel, partner and president of research and managed services for outsourcing consultancy ISG, which produces the index. But the location of the awards is worth noting.
"In the future we expect most new scope growth to come from emerging markets," said Keppel, "while the U.S. and Western Europe will generate the bulk of restructuring activity."
The mega-deals awarded by companies in the telecom, banking and consumer goods industries with a combined value of $6.3 billion, accounted for nearly 30% of global contract value signed during the second quarter. Four of them were entirely new deals, while one was a restructuring.
Additionally, 11 mega-relationships-those with an annual contract value of $100 million or more--were initiated in the quarter, the most since 2009 and an increase of four signed the year prior and seven in the previous quarter.
Keppel doesn't expect the mega-deal activity to return to decade-ago levels of robustness. "Some mega deals in the past year, especially those that are restructuring-related, are being broken up and returning to the market in the form of multiple smaller contracts with shorter durations," said Keppel. And the bellwether for large outsourcing deal affairs is likely to be the mega-relationship category of deals as contract durations continue to get shorter. The average deal length so far this year is 4.85 years, compared to 6.48 back in 2000.
"We expect mega-deals and mega-relationships will continue to make up an important part of the market," said Keppel. "We also expect more mega-deals to be awarded in less mature regions but mega-relationships to continue in mature and less mature regions."
Taking into account all outsourcing contracts worth $25 million or more, $13.1 billion in IT outsourcing business took place in the second quarter, up six percent year over year but down five percent over last quarter due to light contracting activity.
TPI is predicting a softer outsourcing market in the third quarter. "Historically, third quarters have been softer than other quarters, and current industry pipelines suggest this will hold true in 2012," Keppel said. "The fourth quarter will likely pick up, with some help from larger deals in the pipeline ready to go to award."
Meanwhile global outsourcing vendors continue to battle it out for business. American multi-national service providers have held 53% of total market share since 2010, down 10% from the 2007 to 2009 period.
European, Middle Eastern and Asian (non-Indian) vendors held 25% of the market since 2010, up three percent from the 2007-2009 period. While the Indian-heritage firms gained seven percent in market share, from 15% in the 2007 to 2009 period to 22% today.
Source: IT World
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BANGALORE: India continues to lead the global outsourcing market with the overall share increasing from 51%in 2009 to 55% in 2010. As a proportion of national GDP, the sector revenues are estimated at 6.4% for the current fiscal.
The software industry apex body National Association of Software & Services Companies (Nasscom) forecasts the IT-BPO industry (excluding hardware) revenues to grow 19% to $76 billion. Som Mittal, president, Nasscom, said on Wednesday the pent-up demand for IT-BPO services, return of discretionary spending, new business models that encouraged first-time buyers and re-invented value proposition for existing ones were the key drivers for the industry performance.
The banking, financial services and insurance ( BFSI) vertical and US region accounted for the largest revenue growth. While the growth rate for emerging verticals and new geographies will also be robust at 1.3 to 1.5 times of core segments. Exports remain the mainstay of the industry contributing $59 billion at a growth rate of 18.7%. The IT services will grow the fastest at 22.7%. On the other hand, the domestic markets grew 16% to touch Rs 787 billion. Increased technology adoption across government, corporates and SMBs led to an increase in outsourcing within the domestic markets. The BPO export segment will grow by 14% to reach $14.1 billion. The BPO sector was impacted by delayed decision making and deal restructuring in the first half of the year, but picked momentum in the second half.
Nasscom said the engineering services landscape in India now reflects maturity and diversification to partner with global corporations. The engineering design and products development segment is expected to generate revenues of $11.3 billion growing 13.4% this fiscal. This is driven by the increasing use of electronics, technology convergence and need for localized products.
For the next fiscal, the software and services growth is expected to grow at 16%-18% with aggregate revenues of $68-70 billion. The domestic market is estimated to grow by 15% to 17% with revenues of Rs 90,000 crore.
As we step further, this decade heralds a new transformation for the industry. Transformative service delivery is always business focused, delivers confidence and manages risks, using modern business re-alignment; at the same time enabling sustained savings and value, said Mittal.
Source: Times of India
NEW DELHI: Against the backdrop of increased focus on the country's IT by enterprises is expected to grow at a substantial pace to touch USD 40 billion in three years, according to Gartner.
Global Gartner has projected that enterprise spending on information technology in the country, would see an average compound annual growth of 11 per cent.
"Enterprise IT spending is expected to see good growth in the coming years. Going by estimates, the expenditure is likely to reach around USD 40 billion by 2013," Gartner's Vice President Rakesh L Kumar told PTI.
Currently, the domestic market is estimated to be worth about USD 23 billion.
He noted that India's good economic growth coupled with government-led core infrastructure projects, would provide increased opportunities for information and communication technology (ICT) companies.
"Target financial services, government, communications and manufacturing as the fastest-growing sectors for enterprise IT investment," Kumar said.
He pointed out that enterprise IT spending across the Asia-Pacific region is anticipated to surpass USD 300 billion by 2013.
According to Gartner, infrastructure improvements would help raise annual enterprise IT spending growth in the coming months.