2004: Year of the outsourcing 'megadeal'

IT outsourcing 'megadeals' – those worth over €800m – are back on the CIO agenda with 25 per cent of all deals now in this bracket, according to the latest quarterly market tracking statistics

The figures, compiled from the pipeline of deals advised on by consultancy TPI, show that megadeals make up a larger proportion of the IT outsourcing market than at any time since 2000. According to TPI's prediction, 2004 as a whole also promises to be the biggest year for outsourcing deals since 2000.

The stats go against most market predictions that outsourcing deals are getting smaller.

There were eight contracts worth a total of €13.5bn in the third quarter of 2004, with four of them signed in Europe, which now is within two percentage points of matching the US share of the outsourcing market.

TPI claims this is evidence of a fresh wave of outsourcing rather than just existing contracts being re-negotiated. Seven out of the eight megadeals signed were brand new deals.

Business process outsourcing (BPO) also continues to gain momentum and a third of all megadeals globally to date in 2004 have been BPO and multi-process contracts covering HR, finance and accounting, CRM and procurement. Based on deals TPI has advised on IBM is the leading BPO vendor, active on 33 per cent of contracts, closely followed by Accenture and ACS.

In the IT outsourcing market IBM also continues to lead the field, active on 42 per cent of deals, followed by EDS, ACS, Accenture and then CSC.

But the TPI figures show there is increasing competition with non "big six" vendors winning more of the smaller deals.