Record Number of Outsourcing Deals in 2006; $78B in Contracts: TPI Index 

The total number of outsourcing contracts awarded in 2006 hit a new record with an increase of 3% from an year earlier in 2005. However, the total contract value (TCV) signed declined 8% in 2006 to $78 billion, according to TPI Index report on global outsourcing industry.  

Annualized contract value (ACV) - an estimate of the average yearly revenue potential of contracts -  also declined 7% in 2006. The ACV signed for 2006 was the second strongest year ever for annual value coming online, and the industry also had a record year in contracts with annual average spend of $100 million. 

Other Highlights:

  • The number of mega deals - with contract values above $1 billion - was unchanged from 2005 but the dollar value (TCV) declined $5 billion from 2005 levels. 
  • Asia-Pacific experienced a five-year high in both volume and value of contracts signed. 
  • Europe recorded the greatest number of contracts ever, although most of the new contracts signed in Europe were smaller in contract value than in previous years.
  • The contract value of business process outsourcing (BPO) deals declined 15% in 2006 to $21.5 billion, following a double digit decline in 2005, as companies sought fewer multi-process BPO contracts. 
  • Financial Services Operations outsourcing (FSO) TCV nearly doubled in 2006, while there was a decline in new sourcing contracts for Customer Relationship Management (CRM) operations such as customer call centers. 
  • More service providers are competing for and winning market transactions, as 90 providers won some new business in the year. 

India-based providers are consistently gaining relative TCV market share. They are especially strong in Applications Development and Maintenance (ADM) deals, for which their 2006 share almost matched that of the Big Six providers.

TPI Index presentations available at: http://www.tpi.net/knowledgecenter/tpiindex/

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