While numerous studies have been pointing to a possible softness in IT budgets next year, the closely watched TPI Index of global contracts shows a definite slowdown in outsourcing. The Houston, Texas based TPI, the worlds largest sourcing data and advisory firm, released the quarterly numbers of global outsourcing deals on Thursday. About 128 outsourcing contracts worth only USD14.4 billion in TCV total contract value were signed in July September, the third quarter of calendar 2008.
Compared to the previous quarter, contracts dropped 22 per cent, and both TCV and ACV dropped 50 per cent quarter on quarter.
Though the third quarter is typically the weakest quarter of the year, this year it was lower than the historical average by almost 20 per cent, TPI said.
What is more disconcerting is that, according to the TPI numbers, there was only one mega deal valued at just over USD1 billion compared to the reported deals of more than USD9 billion in value in each of the past three consecutive quarters. The last time the industry had one or fewer mega deals in a quarter was in 1996. The softness in outsourcing in the financial services industry continued in Q3.
The silver lining is that despite the softness in the Q3 numbers, the full year for 2008 looks to be on course for a strong overall result as transactions involving the transfer of certain backoffice operations as part of an outsourcing arrangement are expected to increase in the coming quarters.
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