TechTarget

Outsourcing big fish nibbled by minnows

“The increasing level and diversity of competition, coupled with a trend towards selective or single process outsourcing all mean that providers cannot rest on their laurels,” says Duncan Aitchison, managing director of TPI.

Outsourcing’s big six providers risk losing their market supremacy as an estimated £55 billion worth of contracts come for renewal in the next two years.

The six - Accenture, ACS, CSC, EDS, Hewlett-Packard and IBM – currently own 72% of the contracts coming up for renewal, according to research from sourcing advisory firm TPI. EDS and IBM alone carve up £30bn of the market between them.

However, smaller offshore firms will put the six under unprecedented pressure as less customers are automatically renewing contracts without getting competitive bids first. TPI estimates that 70% of contracts were competitive last year – up a third on 2004.

“The increasing level and diversity of competition, coupled with a trend towards selective or single process outsourcing all mean that providers cannot rest on their laurels,” says Duncan Aitchison, managing director of TPI.

Increased competition will benefit customers. “This could mean significant changes in price and scope from the original contract,” adds Aitchison.

More deals were signed in 2005 than ever before, but 70% were small to medium-sized contracts, valued at £30m to £115m, which favour offshore players.

Indian companies rarely win contracts above £115m, but of the 30% of contracts they were invited to pitch for, they won 70% in this lower bracket.

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