Outsourcing deals at lowest level for six years

The take up of IT outsourcing...

The take up of IT outsourcing services by businesses has slowed over the past three months, reaching its lowest level for six years.

Research from outsourcing specialist TPI shows that the value of outsourcing contracts signed across Europe, the Middle East and Africa fell from £11.6bn to £3.5bn between the second and third quarters. The number of contracts dropped from 75 to 56.

But the number of outsourcing deals is expected to surge before the end of the year, pushing total value of contracts up beyond 2007 levels, TPI predicts.

Duncan Aitchison, president at TPI EMEA, said, "It seems likely that the sharp decline in outsourcing in the past quarter is a temporary pause following the most intensive nine months of outsourcing activity in the region's history."

"We are aware of several large transactions already underway in Europe and therefore expect to see a stronger performance in the fourth quarter."

Phil Morris, European managing director at sourcing consultancy Equaterra, said the imminent recession has forced CIOs to put outsourcing plans on hold until they have a clearer picture of the future. "The summer has been softer from what we have seen, but it is picking up."

He said recession is changing the rationale for outsourcing. "In the UK there is an expectation of recession, and outsourcing is being seen as a way of cutting costs."

Robert Morgan, director at consultancy Hamilton Bailey, said because of the market uncertainty CIOs must ensure they choose the right suppliers to work with. "They must understand the culture of the supplier, whether it is an innovator and where they fit into the supplier's ecosystem of customers."

He said this will ensure the customer gets flexibility, which is important while the future is uncertain.

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