IT outsourcing market slumps to 10-year low

Contract values are down 34 per cent on the same period last year

Last year was the worst for the IT services contract market since 2002, according to research from analyst Ovum.

Activity in the last three months of the year, said Ovum, fell well below the levels seen in the same period of 2011, ensuring that annual IT services contract activity fell to its lowest level for 10 years, both in terms of total contract value and deal volumes.

Ovum said total contract values in the fourth quarter of 2012 added up to $US20.8 billion, down 34 per cent on the same period of the previous year. The number of deals fell 17 per cent in the same period and there was a notable lack of "megadeals" (contracts valued at $US1 billion or more).

While the level of activity in the fourth quarter represented a slight improvement on the previous three months of the year - with total contract value (TCV) up 10 per cent from the third quarter of 2012 - annual TCV was down on the previous 12 months across both the public and private sector, with the private sector enduring its worst year since 1998 in TCV terms.

"The ongoing economic uncertainty afflicting key markets for IT services such as the US and Europe was a major factor behind the weak performance of the industry in 2012," said Ovum analyst Ed Thomas.

Thomas added: "Our research suggests that many enterprises remain wary of committing to major projects, with issues such as the Eurozone crisis having a particularly significant impact.

"In addition, public sector activity has reduced as many governments come under pressure to cut public spending in the face of high debt levels, leading to a general reluctance to get involved in large-scale IT services deals."

The sharpest fall in activity came in the services sector, where the number of deals announced fell by 50 per cent. In healthcare and financial services contract volumes were down 39 per cent and 18 per cent respectively. The only industries in which contract activity was up on the previous year were telecommunications and technology.

Regionally, Europe was the leading market for private sector contract activity in 2012, with 45 per cent of annual TCV. However, TCV generated by European enterprises actually declined sharply during the year, falling 31 per cent to $US16.7 billion.

Private sector TCV in North America, having slumped dramatically in 2011, rebounded in 2012, finishing the year up 48 per cent at $US10.5 billion.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags servicesovumoutsourcingIT Business

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Antony Savvas

Computerworld UK
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?