Thursday, August 5, 2010 |
It seems that Asia-Pacific will need to acquire contracts that are worth at least USD 8.7 billion in outsourcing deals in the second half of this year in order to eclipse last year’s performance. Asia-Pacific recorded just USD 2.3 billion at the end of the first half according to a recent report. The lack of outsourcing and offshoring deals known as mega deals that are worth over USD 200 million has resulted in a reduced TCV (total contract value) for the region for 2010.
TPI Index Asia-Pacific reports that the $2.3 billion worth of contracts in 2010 thus far is down from the $3.1 billion reported at the same point in 2008, and the $5.5 billion reported in 2009. The total is also below the average of $3.79 billion during the last 10 years.
According to the report, the cause of the decline can be traced to the unusually sluggish performances of vertical markets in financial services, manufacturing, telecom, and media. Only one deal valued over $200 million was signed in the region during the period.
TPI predicts that the region faces a steep climb in order to make it to $11 billion and be at par with last year’s performance. This will require attaining contracts worth more than $200 million. According to partner and director of TPI North Asia, Michael Rehkopf, its offshoring industry needs to produce a record US$8.7 billion TCV in the second half of 2010.
The report indicates that 83% of the contracts awarded during the period were valued at less than $100 million - up sharply from the 71% in 2009, 72% in 2008, and just 64% in 2007. IT outsourcing saw the biggest decline with a $6.6 billion deficit in TCV compared to levels in 2009.
TPI reports that 18 business process outsourcing (BPO) deals were inked throughout the first half of this year, which represents close to 80% of last year’s total. Despite the number of small contracts, the region is ten deals away from a record number of BPO contracts.
Telecommunications contracts have continued to contribute to the rapidly growing outsourcing and offshoring market in China and India.
Australia and India were reported as the top two in terms of TCV market share with India accounting for 32% of the overall TCV (excluding mega deals). Australia topped India having recorded a 42% market share. TPI’s study shows that businesses are looking to solutions such as cloud computing with 140 IT executives globally claiming they had plans to implement it in the future.