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Contract Renewals to ‘Affect The Big Six of Outsourcing’ – TPI

(January 14, 2006 - GlobalSourcingNow) - According to the 'Quarterly Index' published by TPI, about USD 100 billion worth of outsourcing contracts from all across the world are due for renewal in the next two years. Around 72 percent of these contracts are held by six major outsourcing providers - Accenture, ACS, CSC, EDS, HP, and IBM. The report further predicts the significant changes in the dynamics of the outsourcing market to make it difficult for these companies to retain their dominance over the market.

The Index reveals that about 325 outsourcing deals are due for renewal during 2006 and 2007, accounting for 20 percent of the active contracts. Of these, approximately USD 50 billion worth of contracts are held by IBM and EDS.

The effect of increasing competition has already been witnessed over contract renewal awards. Around 53 percent of contracts in 2004 and around 70 percent in 2005 were competitive. Of these competitively bid contracts, around 80 percent in 2004 and 83 percent in 2005 have been bagged by offshore outsourcing services providers. The overall market share, for the contracts valued over USD 50 million, of the six major outsourcing providers also declined from 70 percent in 2003 to 49 percent in 2004 and further to 43 percent in 2005.

TPI also observed that outsourcing deals are increasing in number and decreasing in size, simultaneously, over the past few years. Of the 293 contracts signed in 2005, about 70 percent were within the range of USD 50 million to USD 200 million, whereas this figure was only 65 percent in 2004.

(Comment from O2P: At least three of the majors have large operations in the country - Accenture, HP, and IBM. The news blurb suggests that the big guys will be subject to more competition from smaller players in the coming 2 years. That may be, but I doubt that it will have much impact. The market continues to grow, the big players have the processes and personnel in place to offer techincally relevant and cost effective solutions to their increasingly sophisticated clients. The issue for us is how much of this business will be coming to the Philippines. What must we do (e.g., English skills, infrastructure) to ensure that the business comes our way?)