by: Sarah Joson
Friday, July 18, 2014 | Outsourcing News |
In ISG’s Outsourcing Index, commercial outsourcing contracts with annual contract value (ACV) of $5 million or more were recently analyzed. It was found that 340 contracts were signed during the second quarter. Most of the activity was detected from deals not exceeding $40 million annually.
Compared to last year’s second quarter, ACV is up by 72 percent, generating $6.4 billion. All of this happened even as the volume of mega deals - which are valued $100 million or more - dropped.
In addition to that, the strong figures posted during this year’s first quarter boosted the overall standing of this year’s first half with an impressive 30 percent increase in the total number of contracts (663). The total ACV for the period is $12.4 billion - the third best ACV ever recorded and is 34 percent higher than last year.
According to ISG President and Partner John Keppel, growth can be seen almost everywhere in outsourcing. He said the number of deals is growing incessantly, momentum in three key regions - Americas, Europe, and Asia-Pacific - continue to rise, ACVs all over the world are surging, and high-valued information technology outsourcing (ITO) gains traction.
The rising number of smaller-sized deals is believed to be sustaining the market. This is because large companies are closing smaller contracts with shorter duration to several providers instead of sticking with just one. Mega deals, on the other hand, dropped from this year’s first quarter when 11 deals were signed, to just seven $100 million-plus deals signed during the second quarter. Still, the low volume of mega deals will equate to positive projections for the rest of the year.
The growing market also signifies growth in restructured contracts and even flow of new scope awards. In addition to that, restructured contracts with a combined value of $4.5 billion broke records in the first half, while new-scope ACV with $7.9 billion is in line with the usual levels over the past few years.