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 PC World newsletter!

Error: Please check your email address.

Tags servicesinfosysoutsourcingTPITata Consultancy Services

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

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

Essentials

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?