Outsourcing keeps its shine

Global outsourcing dropped in the last quarter

Europe seems to be following a different trajectory to the US when it comes to IT outsourcing.

According to the latest figures from TPI, global outsourcing is down by as much as a third and, in value, has had the slowest first quarter for five years.

In the US, the 27 major contract awards since January are the lowest by volume since 2001, their €4bn value less than half that of the same period in 2006.

On the other side of the Atlantic, the story is quite different.

Two-thirds of global IT outsourcing demand is coming from Europe, with contracts in the pipeline worth €684m, more than four times the €157m-worth on the stocks in the US.

And though slightly fewer deals have been signed, the ¤8bn-worth of contracts in the past three months is both a massive 67 per cent rise on last year, and a fourth consecutive quarter of growth.

Globally, there has been a decline in the number of ‘megadeals’ as increasingly savvy customers look for more flexible multi-sourcing arrangements. But three of these old-fashioned mega-deals were signed this quarter in Europe, out of only four worldwide.

The easy gloss that Europe is lumbering along in the wake of the US, following the same curve, just a few years later, may be neat but is not particularly useful.

All three mega-deals were for network services, driven by clear technological developments such as voice over IP. And the overall global decline in business processing outsourcing is as steep in Europe as anywhere.

In spite of this week’s report from Compass Management Consultancy that the majority of customers would have saved money by keeping their IT in-house,

outsourcing is still a valuable option. The benefit is not always financial. Often it is having access to and support for the newest technologies.

If European businesses are clear about what their goals are, there should be no cause for concern.