BILLION DOLLAR IT OUTSOURCING DEALS ON DOWNSWING
The Economic Times
The large IT outsourcing deals, running into billions of dollars, have been on a decline since last two years and it’s quite unlikely that there could be any reversal this year.
According to Everest Research Institute, fewer IT outsourcing (ITO) mega deals will occur in 2008. A decline in the number and size of mega deals, defined as contracts of $1 billion or more in total contract value, will instead result in a focus on existing mega deal renewals and an increase in price competition by suppliers, according to a study by the institute.
At the same time, multi-sourcing engagements are increasingly becoming the preferred route for outsourcing. Analysts said that this model has evolved over time and a single buyer is increasingly comfortable in working with multiple suppliers of IT services.
It has been a trend in the market place for quite sometime now with large IT deals being split into a multi-sourcing contracts with more number of IT services providers being part of it. “A decline in mega-deals is likely irreversible any time soon as few Fortune 100 companies remain that could sign new mega contracts,” says IT outsourcing research firm Everest Ross vice-president Tisnovsky.
In the recent past, there have been very few mega outsourcing deals which have come in the way of Indian players. TCS recently signed up a $1.2 billion outsourcing deal with Nielsen spread over 10 years. ABN AMRO awarded its $2.2 billion IT outsourcing deal in 2005, which saw three Indian players being part of the business, Infosys, TCS and Patni Computer.
Tholons CEO Avinash Vashistha felt that mega deals will continue to decrease even in the current year as there are lot of issues with managing such large deals. From a buyer’s point of view, it becomes a truly difficult task to globalise such outsourcing agreements while the suppliers are constrained in providing services from diverse locations.
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