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ITO Contracts Worth Over US$85B to End in 12-18 Months

by: Sarah Joson

Wednesday, June 13, 2012 | Outsourcing News |

In the next 12 to 18 months, the information technology outsourcing (ITO) sector will see an end to a significant number of contracts, with a total contract value (TCV) of more than US$85 billion. Moreover, IT contracts that are up for renewal are smaller compared to deals in the previous year. This is according to global services advisory and research firm Everest Group in its study “Impending Contract Renewals: Back to the Future” in a press release published at Virtual-Strategy.com.

Everest Group’s Senior Vice-president Ross Tisnovsky said a large part of ITO deals come from infrastructure outsourcing, data center, and network tower segments. Meanwhile, cost reduction is not the only reason for outsourcing- overall service quality is seen to affect the purchasing habit of clients. The rapid adoption of the cloud is likewise seen as a factor in IT outsourcing.

Everest Group study highlights

The study also covers the following highlights:

• Cloud computing will be a game changer for data center and applications projects.
• The number of remote infrastructure management outsourcing (RIMO) deals is rapidly increasing and gaining foothold.
• The gradual increase of mobile technology and data issues will affect the decision-making process of providers.
• Multi-sourcing and more focus on pricing models are seen in new deals.
• The banking and manufacturing sectors get the lion’s share of IT contracts which are coming to an end while manufacturing and healthcare lead the TCV of BPO deals.
• Majority of the TCV of IT and BPO deals that are up for contract renewal in the next 12 months are from North America, with Europe closely lagging behind and is set to follow suit in the next six months.
• Other sectors that are involved in single-tower operations and have contracts that are due to expire in the next 12 months are human resource outsourcing and contact centers.
• The defense and public sector valued at US$20 billion will be up for renewal in the next 12 months.

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