Global outsourcing industry was the strongest in 1Q'06 with $22.7 billion contracts
Quarterly report on the state of the global outsourcing industry reveals a strong first quarter performance of $22.7 billion in total contract value (TCV) for contracts valued at $50 million or more was up 173 percent year-over-year, comprising a record number of 83 outsourcing transactions, according to TPI, a sourcing advisory firm. This quarter’s performance was buoyed by the best January ever in the history of outsourcing.
“Restructurings of first-generation agreements have yielded an increased impact on both the volume and the value of contracts in the broader market this quarter, with restructurings representing 33 percent of the TCV signed,” said Peter Allen, Partner & Managing Director, Market Development, TPI, Inc. “This compares to 24 percent of TCV during all of 2005, which was a record year for restructurings.”
Restructurings include renegotiations, extensions and renewals to existing agreements. The 19 contracts restructured this quarter were worth $7.5 billion. Contract restructurings tended to increase the average TCV for outsourcing contracts this quarter.
Business Process Outsourcing (BPO) also experienced a distinct increase this quarter. The number of BPO transactions was up 63 percent year-on-year, totaling 49, which marks an all-time high for BPO contracts signed in a single quarter. In terms of TCV, this quarter was also strong with $7.3 billion in total BPO value, significantly higher than this time a year ago.
American firms signed approximately two-thirds of all BPO contracts in the marketplace this quarter, led predominantly by the Financial Services industry. Financial Services accounts for more than 30 percent of total BPO contracts, and 46 percent of the total value signed.
TPI’s pipeline has expanded to a record high number of 79 transactions, valued at more than $22 billion in anticipated awards, an indicator of strong potential market activity in the coming months.