Archive for the ‘TPI’ Category
| TPI, the sourcing data and advisory firm, today released global outsourcing market data for the first quarter of 2011 showing that restructuring activity returned to historical norms following last year’s record spike, but the value of new scope awarded in the market remained steady.
The Global TPI Index, which measures commercial outsourcing contracts valued at $25 million or more, recorded total contract value (TCV) of $17.5 billion during the first quarter of 2011. TCV dropped 28 percent from the first quarter of 2010 and 25 percent over the fourth quarter of 2010. However, restructurings, defined as contracts that are renewed, renegotiated or restructured, accounted for nearly all of the decline. New scope TCV of $14.9 billion was unchanged year-over-year and declined just 7 percent sequentially. “In recent quarters, unprecedented shares of global TCV involved restructurings,” said John Keppel, Partner & President-Information Services and Chief Marketing Officer, TPI. “That trend reversed itself in the first quarter, as we forecasted it would, but new scope values were right in line with previous periods.” Now in its 34th consecutive quarter, the TPI Index provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media. It is the industry’s authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics. Among the highlights of the 1Q11 Global TPI Index was business process outsourcing (BPO), which recorded its second-best quarterly performance in the last two years. Clients awarded BPO contracts with a TCV of $6.6 billion, up 66 percent over the same period a year ago and more than twice the prior quarter’s tally. The number of contracts awarded also reached its second-highest level since the first quarter of 2009. By contrast, IT outsourcing (ITO) contract values dropped significantly, driven by the decline in restructurings. However, as with the broader market, new scope of nearly $10 billion in the segment was well within range of first quarters historically. Among the regions of the world, Europe, the Middle East and Africa and Asia Pacific turned in steady performances. Meanwhile, the Americas suffered its third straight quarterly decline, with TCV falling 56 percent year-over-year but up 17 percent sequentially. “The outlook for the rest of 2011 suggests an industry upswing based on healthy contracting activity and a modest amount of restructuring in the mix,” Keppel said. “Overall, we are cautiously optimistic about next quarter and more bullish about the second half of 2011.” |
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Source: Top-Consultant
TPI, the sourcing data and advisory firm, released data showing a sharp increase in outsourcing contract restructurings but a delay in the overall outsourcing market’s gradual recovery due to continued weakness and uncertainty in the global economy.
The 3Q10 Global TPI Index, which measures commercial outsourcing contracts valued at $25 million or more, recorded total contract value (TCV) of about $14 billion, down more than 20 percent from both the previous quarter and the same period last year. While market activity typically slows in the third quarter, this year saw the lowest third-quarter TCV in five years.
Restructuring activity, which includes renegotiations, renewals and extensions of existing outsourcing contracts, totaled $6.8 billion during the third quarter, or 48 percent of the global market. Year to date, restructurings have accounted for 34 percent of overall TCV, compared with typically about 20 percent over the past three years, and have increased 56 percent over 2009, influencing results throughout the outsourcing market.
The uptick in restructuring activity can be attributed to three factors in the market:
• Economic conditions have caused many companies to be tentative about new outsourcing adoption.
• Existing outsourcers are increasingly attracted to the quicker returns and lower risk promised by restructurings.
• Longer-term contracts – the 7- to 10-year agreements awarded in the early 2000s as well as the 3- to 5-year contracts typically awarded more recently – are now coming up for renewal at the same time.
“As we predicted earlier this year, 2010 is shaping up to be a year driven by restructuring of contracts as organizations look to identify opportunities for cost reduction and greater efficiency,” said John Keppel, Partner and Managing Director, TPI Research, Analytics and Intelligence. “We expect to see restructurings continue to be a significant organic force in the outsourcing market in the future.”
Third-quarter outsourcing market performance varied substantially by scope, region and industry sector, the TPI Index found.
By scope, contract awards in both IT outsourcing (ITO) and business process outsourcing (BPO) declined in the third quarter. ITO values have dropped off since a strong first quarter, resulting in flat TCV year-to-date. BPO contracts also fell from the previous quarter, and year-to-date TCV awarded in that scope is down 15 percent. About one-third of the BPO TCV awarded so far in 2010 has been restructuring-related, an indication that this younger segment of the market is now maturing.
By region, differing outsourcing market maturity and economic climates are playing a major role in whether companies decide to enter into new contracts or choose instead to restructure existing agreements. Contract values declined in both the Americas and Europe, the Middle East and Africa (EMEA) during the third quarter, though the data indicate some stabilization in EMEA.
Among the industry sectors that historically have driven overall outsourcing market performance, Financial Services saw substantial contract award activity in the third quarter, largely due to the restructuring of some EMEA-based contracts with TCV of more than $1 billion. However, Manufacturing and Telecom & Media continue to recover at a slower pace.
“After some growth in the early part of the year, global outsourcing market activity in the third quarter slowed considerably,” said Keppel. “However, we do anticipate a significant improvement in performance in the fourth quarter even with the sluggish economy.”
Source: Top-Consultant
TPI, the advisory firm, has released data showing that the commercial outsourcing market in Europe, the Middle East and Africa (EMEA) has yet to exhibit signs of recovery following the sharp downturn in demand in mid-2008, with lacklustre outsourcing activity in the United Kingdom and Germany in the first half of 2010 causing an overall decline from the same period last year.
The 2Q EMEA TPI Index, which measures commercial outsourcing contracts valued at €20 million or more, showed that total contract value (TCV) of €13.3B was awarded in the region in the first six months of the year, down 6 percent from the first half of 2009. TCV fell by more than 50 percent in both the U.K. and Germany.
The impact of the decline in these traditionally strong markets was offset somewhat by a number of large contract signings in the Nordic region and France. In the first half of 2010, the Nordics accounted for almost 17 percent of global TCV, making it the second-largest outsourcing market in the world behind the United States.
Globally, the TPI Index measured TCV of almost €32 billion during the first half of 2010, essentially flat with the same period in 2009. The Americas showed particular strength, with TCV up nearly 30 percent, spurred mainly by growth in the U.S. Asia Pacific suffered a drop of almost 60 percent during the same period.
Said Duncan Aitchison, Partner and President of TPI, EMEA: “The market appears to be following a first-in, first-out pattern, with the U.S. now showing some signs of sustained recovery while Europe has yet to see an upturn. Historically, the U.K. has lagged the U.S. by 18 to 24 months. We will watch with interest to see if signs of improvement in EMEA occur more quickly.”
By scope, ITO TCV in EMEA during the first half of 2010 totalled €11 billion, down only very slightly on the year before. Total contract value for business process outsourcing (BPO) in the first half of 2010 declined by 14 percent to €2.4 billion.
By industry sector, in the first half of 2010, the Travel, Transportation & Hospitality sector and the Business Services vertical each increased their share of EMEA TCV as the result of a few large contract awards. Total contract value in the Financial Services sector was flat compared to the first half of 2009 while the Manufacturing sector recorded a year-on-year decline in TCV.
For the first time, the EMEA TPI Index reported on Public Sector outsourcing trends in the region. Public Sector contracts awarded in EMEA in the first half of 2010 stood at over €9 billion, with the UK Public Sector accounting for 86 percent of EMEA Public Sector spend.
Between 2005 and 2009, the Public Sector accounted for 57 percent of outsourcing TCV in the U.K. compared to the Commercial Sector’s 43 percent share. In the first half of 2010, there was a notable shift as the Commercial Sector share fell to just 25 percent of the UK market. With a 75 percent share of U.K. outsourcing spending and an increased appetite to explore outsourcing options, the Public Sector has become an increasingly important target for service providers to help balance the reduced opportunities in the Commercial Sector.
Said Aitchison: “Looking forward, the increased momentum in the U.S. market is encouraging. But whether that momentum will be sustained and spread to EMEA is still too early to call. Our outlook for the remainder of the year remains cautious.”
Source: Top-Consultant News
TPI, the sourcing data and advisory firm, released data today showing that contract restructurings, in which clients renewed, renegotiated or expanded existing contracts, lifted the global outsourcing market during the first quarter of 2010.
The 1Q10 Global TPI Index, which measures commercial outsourcing contracts valued at $25 million or more, recorded total contract value (TCV) of $19.5 billion, up 25 percent from the first quarter of 2009. Contract restructurings accounted for 42 percent of TCV, far surpassing the previous record of 29 percent set in 2006.
While restructurings fueled the growth in two of the three regions of the world and IT outsourcing (ITO) and also accounted for three of the four mega-deals awarded in the quarter, an analysis of TPI Index data indicates that the market is continuing to recover at the slower pace it began in the middle of last year. TPI anticipates restructuring activity will continue at an above-average level for the rest of 2010 but is unlikely to account for as high a percentage of TCV as more new-scope contracts are added to the pipeline.
“The real story in the first quarter of 2010 was the large amount of restructuring activity, which greatly impacted a variety of key outsourcing metrics,” said Mark Mayo, Partner and President, Global Operations, TPI. “The underlying market is recovering at a much slower and more uneven pace than those heady growth rates would suggest.”
The TPI Index provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media. Now in its 30th consecutive quarter, it is the industry’s authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.
While the TPI Index finds clients renewing, renegotiating and expanding existing contracts every quarter, large restructurings, especially the three mega-deals, had a very significant impact in the first quarter of 2010. The result was robust growth in a number of market metrics. For example, the quarter’s four mega-deals, those contracts valued at $1 billion or more, bested the two during the first quarter of 2009, and overall mega-deal TCV more than tripled year-on-year to $7.1 billion.
In all, 109 contracts were awarded in the quarter, down 21% year-over-year, and there were fewer awards valued at greater than $200 million. This represents a break in the pattern of a greater number of smaller contracts seen over the last four or five years.
Regionally, restructurings fueled TCV growth of 7 percent year-over-year in Europe, the Middle East and Africa, and 47 percent in the Americas, which had its best first quarter since 2006. Asia Pacific, which did not see significant restructuring activity, increased its TCV 35 percent over a relatively weak first quarter of 2009.
Restructuring activity also gave a significant boost to TCV in the ITO segment, which expanded 46 percent, with particular strength in Application Development & Maintenance (ADM) and ADM-plus-Infrastructure contracts.
Business process outsourcing (BPO), which saw minimal restructuring activity, remained slow as clients postponed transformational projects and other initiatives requiring large investments. However, there are some encouraging signs in the market. For example, while still significantly weaker than a few years ago, Human Resources turned in its second relatively solid quarter in a row.
Among vertical industries that have historically been critical to overall outsourcing market success, Manufacturing increased its TCV by 69 percent, while Financial Services TCV slipped 18 percent. Surprisingly, the Travel, Transportation & Hospitality vertical led all industry sectors with its best-ever TCV of $5 billion, more than quadrupling results from a year ago. Leading the charge were contracts awarded by a U.S.-based airline, a European logistics company and the French railway SNCF.
Looking ahead, TPI anticipates that contract restructurings will continue to have an impact on the outsourcing market. Between $10 billion and $12 billion in annual contract value due to expire in 2010 will be renegotiated, up 20% to 25% from where the industry stood last year. Furthermore, service providers closed a number of contracts that had been “pushed out” at the end of 2009, and it does not appear there are as many larger contracts coming to market soon.
Said Mayo: “We don’t expect a huge rush of new-scope contracting. Instead, we foresee a steady flow of new opportunities as the recovery continues at a slow pace.”
Source: Top-Consultant