IT outsourcing moving towards more but smaller contracts
1 min read
The number of so called megadeals in the IT outsourcing world – those worth more than $1 billion to a single service provider – was 12 in 2008, an increase from 10 in 2007.
However, contract values at this level are still down on those prior to 2007, according to analyst Gartner, whose latest report shows that between 2000 and 2006 the average annual value was $28 billion.
"With the increasing popularity of selective sourcing and the trend toward greater control of the buyer, we continue to see both the average value of a deal, and the average duration of a deal, decline," comments Dean Blackmore, senior research analyst for Gartner.
He also suggests that in all outsourcing deals – not just megadeals – there is a clear trend towards a greater number of deals, with smaller contract values. Gartner's report shows that in 2008, deals below $50 million saw a clear increase over 2006 and 2007, but deals over $50 million saw a collective decline.
"In economic downturns, we closely watch contract reporting as an indicator of the health of the outsourcing market," says Allie Young, vice president and analyst at Gartner. "We have seen some softness in large deal signings, but no catastrophic decline. While economic forces can change priorities, the basic drivers of outsourcing remain intact."
