by: Sarah Joson
Tuesday, April 28, 2015 | Outsourcing News |
A 25-percent decline in European mega outsourcing deals was spotted during the first quarter of this year by outsourcing consultancy agency Information Services Group (ISG). Only 128 contracts valued at €1.9 billion (£1.4 billion) were posted during the period. Deals that have an annual contract value of €4m (£3m) or higher are classified as large deals by ISG.
According to David Howie, a partner at ISG, outsourcing activity is still positive, but the buyers’ preference is now leaning more towards smaller deals. He also noted that based on historical trends, the changes in the market could be caused by the upcoming general election.
The report also pointed out that this is the weakest first quarter for the UK since 2010 when the annual contract value (ACV) was only €600 million (£430 million). As for last year, deals during the first quarter reached €1 billion.
In another study on business process outsourcing (BPO) deals, the UK public sector posted the highest volume of contracts awarded globally with a total of €1.9 billion (£1.36 billion). On the other hand, the financial services sector posted the highest increase in contract value with 120 percent to €1 billion (£700 million).
John Keppel, also a partner at ISG, said the outsourcing market in Europe posted a slow start, but there are several regions that posted positive results particularly Germany, Austria, and Switzerland. The financial services sector also showed positive results, but are not enough to offset the decline in other developed markets such as the Nordics, France, and the UK.
Amidst the decline, outsourcing providers still closed a decent amount of big wins in the first quarter of this year. A great example of a huge win is the 10-year, multi-billion dollar global deal of HP with Deutsche Bank which was closed last February.