Fuente: www.consultant-news.com Fecha: 29.04.2009
Trend towards smaller-valued contracts drives softer European outsourcing market in Q1
TPI, the sourcing data and advisory firm, has released first-quarter market data showing that businesses based in Europe, Middle East and Africa (EMEA) are awarding smaller outsourcing contracts with a focus on IT in an effort to realign costs rapidly in the face of a deepening recession.
The latest TPI Index, which tracks commercial outsourcing contracts valued above €20 million, found that the total contract value (TCV) awarded in EMEA in the first quarter of 2009 value was just over €7 billion, down 14 percent from the fourth quarter of 2008 and 44 percent from a year ago.
The TPI Index also shows a sustained move to smaller contract awards across EMEA. While the number of awards in the region increased on both a sequential and annual basis, the average TCV of those awards declined 29 percent, from €148 million to €105 million, driven by the closing of fewer mega-deals and mega-relationships.
“We are seeing a growing tendency for companies to award more outsourcing contracts, though of smaller value,” said Duncan Aitchison, Partner and President, TPI EMEA. “This is primarily the result of tactical initiatives meant to address a specific challenge, typically around cost reduction. When the economic outlook improves, we anticipate some resurgence of bigger deals across EMEA, especially in the relatively less mature markets in Continental Europe.”
The TPI Index, a quarterly snapshot of the global sourcing industry, is the authoritative source for marketplace intelligence related to transaction structures and terms, industry adoption and provider metrics. Today’s release marks the 26th consecutive quarter of the TPI Index.
Globally, 141 contracts valued at €15.4 billion in TCV and €3 billion in average contract value (ACV) – TCV divided by contract duration – were awarded in the first quarter of 2009. Of these, 68 were awarded in EMEA with an ACV of €1.3 billion. In both cases this is consistent with the downward pattern identified during the third and fourth quarters of 2008. By number of contracts and TCV, EMEA accounted for nearly 50 percent of the global market in the first quarter of 2009.
EMEA accounted for 55 percent of total ITO contracts awarded in the quarter with 55. However, despite a quarter-on-quarter increase in the number of transactions, the region lacked the truly large contracts it saw in the first half of 2008. Conversely, the business process outsourcing (BPO) market in EMEA declined for the third successive quarter, showing a decrease in TCV of 54 percent over a year ago. This decline was fuelled primarily by a drop in the number of large Facilities Management and Financial Service Operations Outsourcing contracts in the region.
Overall, TPI Index data shows the pace of outsourcing over the most recent three quarters returned to more normal levels following a surge of EMEA-led activity in the first half of 2008, when a record number of contracts were awarded in the region.
In EMEA, total contract value (TCV) from the third quarter of 2008 through the first quarter of 2009 was nearly €22 billion, down significantly from €36.6 billion during the previous three-quarter period.
Sector Focus – Telecoms and Consumer Durables
The first quarter provided some telling industry sector trends. There has been a significant increase in outsourcing activity within the telecoms and consumer durables markets in EMEA in the midst of the current economic downturn. The TCV of telecoms contracts awarded in the last 12 months in EMEA was 30 percent higher than any other 12-month period since 2001.
The number of contracts awarded globally in the telecoms sector reached an all-time high in the past year of 99. EMEA accounted for 45 of these contracts, or 46 percent, and TCV of €7.8 billion. Just over half of the telecom contracts in the region were awarded by UK-based companies and 75 percent were for ITO. There was also significant activity in the less mature Continental European markets. Average contract sizes in the sector were relatively large, with 42 percent of awards valued at over €80 million.
In the Consumer Durables Sector, the 10 largest companies accounted for 56 percent of the awards in the past 12 months in EMEA. Of those, 43 percent were awarded by companies based in Germany. Outsourcing activity in the sector during that period reveals a strong ITO focus, as 88 percent of the contracts signed in the past 12 months were IT-related, and 81 percent had TCV in excess of €80 million.
“Although outsourcing service providers tell us that their pipelines are robust, more recent experience suggests that it is taking longer to convert the pipeline into contract awards,” Aitchison said. “Over the next few quarters we expect both the popularity of smaller contract sizes that we have identified to continue and the EMEA market demand to stabilize around the levels seen prior to the EMEA-led surge of a year ago.”