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Our Bureau

New Delhi, Oct. 21 The global outsourcing market reported a strong third quarter with total contract value (TCV) of $24.7 billion, but only on the strength of select network operations outsourcing contracts handed out by telecom carriers.

Overall, this was the highest quarterly TCV that the market saw since the fourth quarter of 2008 and represented a rise of 21 per cent sequentially and 40 per cent year-on-year, according to sourcing data and advisory firm TPI. Excluding the network operations outsourcing deals, the global market trudged at a slower pace reminiscent of the past four quarters.

TPI noted that going forward there could be a pent-up demand underlying a market that deferred decisions in economic downturn. The market is expected to begin turning upward in 6-9 months, it said.

During the quarter ended September 2009, as many as 139 transactions were recorded. The Global TPI Index — which provides a quarterly snapshot of the sourcing industry — tracks commercial contracts valued at over $25 million. “However, excluding the five transactions in which telecom carriers outsourced network operations to telecom service providers, TCV reached only $17.2 billion,” it said.

The year-to-date (January-September) TCV stood at $62.6 billion, 10 per cent lower than the year-ago period with telco-to-telco contracts; and 23 per cent lower without them. Telecom, diversified financials, transportation and utilities are among verticals that are have been demonstrating momentum.

The mega deals (contracts worth over $1 billion) fared better. The mega-deal TCV touched $13.7 billion in the third quarter, the highest since the last quarter of 2002. Excluding the telco-to-telco contracts, four mega deals were signed, the same amount in the last three quarters combined.

In the third quarter, network operations outsourcing accounted for $7.5 billion of TCV — over 30 per cent of the broader market’s value. The TCV of the 94 IT outsourcing contracts awarded in Q3 touched $20.1 billion, 14 per cent higher than previous quarter and the highest total since the last quarter of 2003.

BPO demand remained tepid as companies found it easier to pursue IT outsourcing contracts in the current environment rather than large transformations of their finance and accounting, HR functions, or facilities management and financial services outsourcing that were popular last year. Year-to-date, BPO TCV was down 45 per cent from a year-ago period, and the number of contracts was off 25 per cent.

Solidifying its position in the global market, Asia-Pacific awarded 24 contracts worth at $6.4 billion. In the Americas, 47 contracts valued at almost $12 billion were awarded in Q3, up over 100 per cent sequentially on the strength of telco-to-telco activity. In Europe, West Asia and Africa, 68 contracts valued at $6.5 billion were inked in the just-concluded quarter.

More Stories on : Outsourcing | Marketing Research

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