| Outsourcing contracts Q2 2009 - Slump today, growth tomorrow |
| Wednesday, 16 September 2009 | ||||||||||||||||||||||||||
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Outsourcing activity fell by 24% in the second quarter with just 51 BPO/KPO contracts recorded during the period, compared to 63 in Q1 2009.
Average contract value and tenure (declared) for Q2 2009
The total value of contracts (publicly declared) in Q2 2009 was $1 billion as compared to $19.6 billion in the previous quarter. (The sharp rise in Q1 was due to a $17.5 billion deal signed in February 2009 by the U.S. Army with CIBER to provide e-learning based training services. If this deal was not included, the total value in Q1 would have been $2.1 billion.) The average deal size for Q2 2009 was $111 million. The largest contract signed was the $857 million outsourcing contract awarded by Axa Sun Life to Capita Group in June 2009. CRM outsourcing contracts on the rise The number of F&A contracts decreased from 26% in Q1 2009 to 14% in Q2 2009. We believe that a likely reason for this drop is the banks and financial institutions divesting their captives and signing contracts with the acquirer. CRM outsourcing contracts increased by 12% over the previous quarter. In a challenging business environment companies are apparently focusing on providing better customer service via outsourcing. “Other services”, which include specialist services like claims management, transaction processing and supply chain management services, saw a 2% drop over the previous quarter. Knowledge services, mainly consisting of publishing, legal, engineering and analytics, showed an increase -contributing to 10% of the 51contracts (tracked by ValueNotes) in Q2 2009 as compared to 6% in Q1 2009. Most of the deals signed (and announced) in the knowledge services segment were from the publishing vertical. Contracts by Services  Public sector contracts lead Over the past few years, the US government has been a major buyer of outsourced services and continues to be a major contributor to the total number of deals. The public sector segment has taken a lead as compared to the number of outsourcing contracts recorded in other verticals in Q2 2009. Public sector outsourcing contracts contributed 19%, compared to 10% in the previous quarter. The second quarter saw a drop in the number of contracts signed in the healthcare, financial services, pharmaceutical and telecom verticals. While the number of outsourcing contracts in the insurance sector grew substantially - from 6% in Q1 2009 to 11% in the second quarter, the total BFSI outsourcing contracts only saw a slight increase - 21% in Q2 2009 compared to 19% in Q1 2009. Contracts by Vertical  At the end of the first quarter of 2009 we saw a significant drop in contracts being signed (15 & 9 contracts reported in March and April 09 respectively). Although, the overall outsourcing activity fell in Q2, 2009, the number of contracts signed in the last two months of the quarter (22 & 20 reported in May and June 2009 respectively) is a harbinger of better days ahead for the outsourcing industry. |
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