The performance of the global outsourcing industry seems to be looking up, but when it comes to IT outsourcing, it’s quite a different matter. According to the most recent study by Everest Research, IT outsourcing contracts for the second quarter of this year fell to 46 per cent. The total value of contracts fell to $1.5 billion for June 2010 from $2.8 billion in March 2010.
Amneet Singh, Everest Group vice president, says, “IT outsourcing is more dependent on discretionary spending by companies; for example, to expand their operations. But BPO tends to be more basic. The growth in BPO outsourcing can be linked directly to the needs of companies to cut costs during the economic turmoil of the last two years. If you want to show an immediate reduction in costs, in two quarters or so, it is easier to do it by outsourcing business processes.”
New contracts in a quarter are used to predict revenue growth in the following quarters. According to the report, while the number of IT outsourcing contracts dropped in June quarter, the value of contracts for marketing-related BPO and HRO grew steadily.
The report identifies the drop of European contracts as a major cause for the declining revenue of the IT outsourcing industry. Many European countries are in serious economic trouble and this is being reflected in many markets not just IT Outsourcing. Compared to the second quarter of 2009, 41 per cent of European deals for both IT outsourcing and BPO dropped in the second quarter of this year.
