Outsourcing slumps in the second quarter

TPI however reported growth in outsourcing in some markets like Asia-Pacific

Outsourcing declined worldwide by 18 percent to US$16.4 billion in the second quarter because of weak demand in the Americas and an overall drop in the number of large contracts awarded, sourcing data and advisory firm TPI said on Wednesday.

Total contract value (TCV) in the Americas was down 51 percent in comparison to the same quarter last year, said John Keppel, partner, president for information services, and chief marketing officer at TPI.

The decline of large contracts with a TCV of about $500 million had its biggest impact on the Americas, Keppel said in a conference call.

Even as there was a big drop in the number of large contracts awarded, the total number of contracts awarded fell just 1 percent, TPI said.

But the Asia-Pacific market saw TCV grow by 55 percent over the same quarter last year, according to the Global TPI Index which measures commercial outsourcing contracts with a minimum value of $25 million. Europe, the Middle East and Africa (EMEA) saw a growth of 13 percent in TCV in the quarter.

Restructurings, which are defined as contracts that are renewed, restructured or renegotiated, had a growth in TCV of 30 percent over the same quarter a year ago.

Despite the global decline in outsourcing, Indian service providers like Tata Consultancy Services (TCS) and Infosys have reported strong revenue and profit growth for the second quarter, as they are seeing a surge in demand for their services.

TCS, India's largest outsourcer, said last week that its revenue for the quarter was $2.4 billion, up by 34.4 percent from the same quarter last year, according to international reporting standards. Infosys, the country's second largest outsourcer, reported that its revenue for the quarter was $1.7 billion, up by 23 percent from the same quarter last year.

Even as the overall market shrank in the second quarter, Indian service providers have been increasing their share of the market, said Siddharth Pai, partner and managing director of TPI India, in a phone interview on Thursday. A large number of the contracts that go to Indian providers are of a value lower than $25 million, which is a market that TPI does not cover, he added.

Indian service providers will however not go back to the high growth rates they used to report before the global recession, according to Pai. The market has not fully recovered, and it will be difficult for Indian service providers to continue growing at those rates from a larger revenue base, he added.

A stepping up of global outsourcing business is expected in the second half of the year, as current contract pipelines suggest an improvement in global TCV for the remainder of the year, Keppel said.

But there is no indication that the Americas will return to the "glory days" of outsourcing, TPI said. In contrast, growth in EMEA and Asia-Pacific will continue, though there could be some blips in China and Europe, it added.

This is likely to hit Indian providers who are still dependent on the Americas for about 60 percent of their revenue. Many of them are trying to expand their operations in Asia Pacific, particularly China, and in Europe.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags outsourcingservicesinfosysTPITata Consultancy Services

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?