Outsourcing megadeals dry up

Although 2006 has been a record year for outsourcing contracts, a study by advisory firm TPI has reported a fall in contract values.

The company found that the contracts awarded in 2006 represented the single greatest number of such agreements in any year, up 3% from 2005’s previous high. But total contract value amounted to $78bn – an 8%decline on the year before.

Peter Allen, partner and managing director for Market Development at TPI, said the decline was due in part to IT directors opting for shorter, cheaper contracts.

“This decline was the result of fewer multi-process business process outsourcing contracts, or those arrangements in which an organisation opts to source out more than one support process at a time. Instead, companies sought more single-function solutions. In fact, fewer multi-process contracts were signed in 2006 than in each of the previous four years.”

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