News @ TPI
TPI Index Cites Record Number of Global Outsourcing Contracts in 2005
December surge in mega deals not enough to reach 2004’s TCV for broader market; total outsourcing value dips five percent year-over-year
HOUSTON, January 11, 2006 — TPI, Inc., the world’s leading sourcing advisory firm, today announced its year-end market observations in the TPI Index, a quarterly report on the state of the global outsourcing industry. Fourth-quarter results lifted 2005 to the highest number of outsourcing transactions ever awarded in the broader market, for contracts equal to or greater than US$50 million. A total of 293 contracts were awarded, up from 269 contracts last year.
Total contract value for this quarter’s mega deals -- transactions valued at US$1 billion or greater -- was the highest since third quarter 2004. Six mega deals were awarded this past quarter, with five in December alone. Total mega-deal value for the quarter was US$11.2B, representing 40% of the full year’s mega-deal value. With less than US$27 billion of mega-deal TCV, 2005 produced the lowest TCV in this large-transaction category since 1996.
“The December surge in industry-wide mega deals produced a nice finishing surge for 2005 but was not enough to meet 2004 TCV levels,” commented Peter Allen, Partner and Managing Director, Global Practices, TPI. In 2005, the total value of global commercial outsourcing contracts declined by five percent to $75 billion from $78 billion in 2004.
On an annualized revenues basis, TPI sees the overall commercial outsourcing market as flat driven by continued declining growth in IT Outsourcing (ITO) value. ITO market value has been marked by steadily declining, single-digit growth rates in the past few years. If such trends continue, TPI predicts that 2006 and 2007 will witness the first years for absolute decline in overall revenue derived from commercial IT outsourcing. However, a healthy growth rate for annualized revenue is projected for BPO at between 10 and 15 percent in 2006.
This year was also remarkable for an unprecedented concentration of contract restructurings, which represented 24 percent of TCV in the broader market compared to a historical average of 15 percent each year. A significant number of mega deals involved restructuring.
To view past and current TPI Index presentations, and to order the Q3 2006 TPI Index Insider, please visit http://www.tpi.net/knowledgecenter/tpiindex/.
About TPI
TPI is the sourcing advisory industry founder, and the largest advisory firm in the world focused on a broad range of business support functions and related research methodologies. Applying deep functional domain expertise of accomplished industry experts who possess extensive practical experience, TPI collaboratively works with organizations to help them optimize their business operations through the best combination of insourcing, offshoring, shared services and outsourcing.