Firms have begun to shun IT outsourcing "mega deals",
preferring to sign a series of smaller deals with different
suppliers, according to one outsourcing expert.
The number of outsourcing deals valued at more than £500m increased
by 25% worldwide in 2003 compared with the previous year, excluding
public sector contracts. However, the total value of mega deals was
worth 10% less in 2003 than in 2002, said Duncan Aitchison,
managing director, international at outsourcing advisory firm
TPI.
One reason for the decline of the mega deal is the growing
popularity of business process outsourcing, which often includes
parts of a service that would have previously fallen under an IT
outsourcing contract.
The UK is the leading European nation in the adoption of business
process outsourcing and offshore outsourcing, said Aitchison. Only
20% of European outsourcing agreements have work that goes
offshore, compared to about 50% of US deals, he said.
However, the relatively untapped market for outsourcing services
among European organisations means the region will be suppliers'
prime target in the medium-term, Aitchison said.
Aitchison also rejected a claim by the head of one of the UK's
largest IT users that companies had used outsourcing as an easy
option. "Outsourcing is not an easy option. It is bloody hard work
to get value out of it and to develop the right skills," he said.