December 7, 2011 – The IT outsourcing market recovered from a sluggish second quarter, but needs a rally at the end of 2011 to break a recent low in terms of contracts, according to independent research firm Ovum.
The total contract value (TCV) from deals announced in the three months to end September 2011 was $27.3 billion, up 43 percent on the “dismal” second quarter that hit its lowest level since 2000, according to Ovum. But third-quarter TCV was still down 9 percent compared with the third quarter of last year.
Ed Thomas, Ovum analyst and report author, wrote on his blog that there is the “very real possibility that annual TCV for 2011 will be the lowest in eight years. Vendors will now be looking to see if there will be a repeat of last year’s dramatic fourth quarter, when a bumper crop of mega-deals propelled TCV for the three months to the end of December close to the $50 billion mark.”
Along with the value, the number of contracts was down from 2010, according to Ovum. There were 416 outsourcing, or IT services, contracts in the third quarter of 2011, up from 384 in the second quarter, though still down 12 percent from the number during the third quarter of 2010.
North American activity notched $3.1 billion from the private sector, which was higher than the total generated from that sector in the first entire half of the year, Ovum reported. The European private sector TCV registered about $3 billion (U.S. dollars) in the third quarter of 2011, with more than one-third of that coming from the U.K. Demand in IT services in the last year has been most apparent in the U.S., largely due to the region’s outsourcing market maturity, Thomas said.