According to an analysis by TPI, the worldwide outsourcing market is experiencing a slowdown, with the total value of contracts awarded in 2006 down 9% compared to previous year.

The annual figures show the total value of outsourcing deals signed in 2006 was $77.9B, compared to $85.0B in 2005.
The number of industry-wide contracts with TCV (total contract value) > $50 M awarded in 2006 is 148 in America (down 9.2% from 2005), 157 in Europe (up 10.5%), and 45% in Asia/Pacific (up 25%).

However, the trend is different when analyzing the TCV of contracts awarded: TCV is down just 2.56% in America, but down a whopping 25% in Europe, while it’s up 66.6% in Asia.

”The 2006 numbers were down due in part to shorter contracts as well as those with smaller dollar values,” said Peter Allen, partner and managing director for Market Development at TPI. “However, the market is growing. The annualized contract value, or ACV (an estimate of the average yearly revenue potential that may be derived from the 2006 contract awards) signed for 2006 was the second strongest year ever for annual value coming online, and the industry also had a record year in contracts with average annual spending of $100 million. The year-over-year comparisons are down due to an exceptionally strong 2005, rather than a weak 2006.”

The Russian IT outsourcing market also demonstrated strong growth, with Russian software developer Reksoft reporting software export increases of 54%, to $1.6 billion, in 2006. The dollar value places Russia third among offshoring locations after India and China. The article also notes that Russian outsourcing providers are not only looking overseas for new contracts, but also attracting more clients within the Russian market.

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.