Western Europe’s top 100 outsourcing deals top $40 billion in 2005, says IDC
MILAN, ITALY – JUNE 26, 2006 – The total value of the top 100 Western European outsourcing deals reached $40.5 billion in 2005, according to a new study by IDC. This compares with $42.1 billion in 2004. In 2005, however, the largest deals got bigger, with nine megadeals signed for a total of $20.5 billion.
"The largest deals in 2005 got bigger, dispelling the myth of the falling out of favor of the megadeal, and confirming the emergence of large-scale multisourcing, with five out of nine megadeals awarded by two government agencies," said Jennifer Thomson, research manager, IDC European Services.
"While deals got larger in value, they got shorter in length, as customers are less willing to be tied into contracts for long periods. Without the long contract lengths vendors must engineer cost savings in a much shorter time period, while at the same time developing collaborative go-to-market strategies to win in large-scale multisourcing."
The challenges facing IT service providers are certainly not getting any easier, the study says, with Western European clients benefiting from more than a decade of outsourcing experience and the most advanced honing their skills in defining sourcing strategies, vendor selection, contract negotiation, and governance. In addition, the competitive nature and structure of the market is continuously altering as new models, attitudes, and dynamics are introduced.
The study highlights the following trends in the Western European outsourcing market:
— IS outsourcing and network and desktop outsourcing (NDOS) account for the lion's share of the aggregate value of the top 100 deals, at a combined $32.7 billion.
— BPO adoption continues to provide encouraging signs, but adoption has not met expectations. Growth rates in BPO across Western Europe still make this one of the most attractive markets in pure growth terms, but outside of the U.K. the net value of the market is very small.
— IBM has lost pole position in the Western European top 100
outsourcing deals regarding aggregate value of deals. While IBM signed 14 deals in 2005, more than any other vendor, the aggregate value was not enough to offset larger-scale wins by BT Global Services and EDS.
— The government, manufacturing, and financial services sectors
dominate the top 100 outsourcing contracts in 2005, accounting for close to 90% of the total aggregate value. Vertical sectors that offer good opportunities in the near term include retail and telecommunications (including media).
IDC's Top 100 European Outsourcing Deals in 2005 (Doc #RI06N, June 2006) provides in-depth analysis of the 100 largest outsourcing deals signed in, or covering, Western Europe during 2005. It ranks these contracts in terms of total contract value, with analysis conducted on a range of variables such as lead vendor, vertical market, aggregate contract value, run rate, and country of signing. It is the perfect source for readers keen to understand how the Western European outsourcing market developed during 2005 and where it is going in 2006, particularly for IT professionals, outsourcers and other service providers, large end users, and the investor community.
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