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Outsourcing Megadeals are bigger, but shorter
Outsourcing deals across Western Europe were bigger but decreased in length last year, according to the latest analysis which shows that organisations are less likely to agree to be tied into contracts for long periods.
The report’s authors, business analysts IDC, found that the total value of the top 100 Western European outsourcing deals reached $40.5 billion in 2005, slightly down on $42.2 in 2004.
Business Process Outsourcing continues to grow across Western Europe,
IDC says, although the value of the market outside the UK remains minimal. The government, manufacturing and financial services sectors dominated the top 100 outsourcing contracts in 2005, accounting for nearly 90 per cent of the total value.
Jennifer Thomson, research manager of IDC European Services, said: “The biggest deals in 2005 got bigger, dispelling the myth of the falling out of
favour of the megadeal, and confirming the emergence of large-scale multisourcing, with five out of nine megadeals awarded by two government agencies.
“While megadeals get larger in value they are shorter in length, as customers are less willing to be tied into long contracts and to outsource everything to one single vendor – although it seems they are willing to outsource more.
“Without the long contract lengths vendors must engineer cost savings
in a much shorter time period, while at the same time developing collaborative go-to-market strategies.”
Meanwhile, IBM is no longer the leader in Western European top 100 outsourcing deals regarding aggregate value – it signed 14 deals in 2005, more than any other vendor, but BT Global Services and EDS won higher value deals.
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