TPI Index forecasts 10 to 15 percent decline in global outsourcing total dollar value awarded this year

Filed in archive Outsourcing News on October 19, 2005

TPI Inc. reported that despite record-high numbers of outsourcing contracts, transactions are smaller in total value largely because of increased offshore solutions. Results from the TPI Index showed that an expected decrease of 10 to 15 percent in total dollar value would be seen in outsourcing contracts for 2005.

Peter Allen, director at TPI Inc. said, "The decline in outsourcing transaction value is due to several factors. With the exception of HRO, BPO has not grown as quickly as some had expected. Firms are increasingly taking advantage of offshore service delivery, reducing the total contract value (TCV) of contracts. TCV is also sluggish because of reduced capital intensity and shorter terms in ITO contracts."

While a record gain of 11 percent in the total number of outsourcing contracts was seen in this year's third quarter, average TCV has declined considerably. The quarter's 57 contracts with a value of $13.5 billion fell below last year's third quarter results of 54 contracts worth $15 billion.

Allen added, "Clearly, outsourcing is not falling out of favor. In fact, this year it is more prevalent than ever. But the value of the outsourcing pie has shrunk in size compared to 2004 as the value of individual transactions is generally getting smaller. With the number of transactions growing and overall values declining, the effect of global service delivery alternatives for outsourcing is ever more apparent but certainly not a new phenomenon."