Outsourcing Restructurings Return to Historical Norms, While New Scope Awards Hold Steady

Global TPI Index points to industry upswing as outlook suggests healthy contracting activity for remainder of 2011

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Stamford, CT — April 20, 2011 — The global outsourcing market saw a return of restructuring activity to historical norms in the first quarter of 2011 following last year's record spike, but the value of new scope awarded in the market remained steady, according to a report from sourcing data and advisory firm TPI.

The Global TPI Index, which measures commercial outsourcing contracts valued at $25 million or more, recorded total contract value (TCV) of $17.5 billion during the first quarter. TCV dropped 28 percent from the first quarter of 2010 and 25 percent over the fourth quarter of 2010.

However, restructurings, defined as contracts that are renewed, renegotiated or restructured, accounted for nearly all the decline. New scope TCV of $14.9 billion was unchanged year-over-year and declined just 7 percent sequentially.

"In recent quarters, unprecedented shares of global TCV involved restructurings," said John Keppel, president for information services and chief marketing officer with TPI. "That trend reversed itself in the first quarter, as we forecasted it would, but new scope values were right in line with previous periods."

Now in its 34th consecutive quarter, the TPI Index provides a quarterly snapshot of the sourcing industry, offering marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.

Among the highlights of the 1Q11 Global TPI Index was business process outsourcing (BPO), which recorded its second-best quarterly performance in the last two years. Clients awarded BPO contracts with a TCV of $6.6 billion, up 66 percent over the same period a year ago and more than twice the prior quarter's tally. The number of contracts awarded also reached its second-highest level since the first quarter of 2009.

By contrast, IT outsourcing (ITO) contract values dropped significantly, driven by the decline in restructurings. However, as with the broader market, new scope of nearly $10 billion in the segment was well within range of first quarters historically.

Among the regions of the world, Europe, the Middle East and Africa, and Asia-Pacific turned in steady performances. Meanwhile, the Americas suffered its third straight quarterly decline, with TCV falling 56 percent year-over-year but up 17 percent sequentially.

"The outlook for the rest of 2011 suggests an industry upswing based on healthy contracting activity and a modest amount of restructuring in the mix," Keppel said. "Overall, we are cautiously optimistic about next quarter and more bullish about the second half of 2011."

TPI is an Information Services Group company.

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