Outsourcing market shows healthy growth

data showing healthy growth in the global outsourcing market during the fourth quarter amid record contracting activity for the full year, Market Watch reports.

The 4Q11 Global TPI Index, which covers commercial outsourcing contracts valued at $25 million or more, found total contract value (TCV) of $26.4 billion in the fourth quarter of 2011, an increase of 7% over the same period a year ago. Growth was led by mega-deals - those contracts with TCV of $1 billion or more - business process outsourcing (BPO), and Europe, the Middle East and Africa (EMEA).

Interestingly, an analysis of TPI Index data shows that the intensified contracting activity is the result of a decade-long rise in the smallest awards, Deccan Herald notes.

While the numbers of mega-deals and mid-range contracts awarded each year has remained relatively stable since 2002, those valued at $100 million or less have more than tripled. In fact, the TPI data shows that in the deal size between $25 million and $99 million (smaller size contracts), the number of annual deals has risen from 212 in 2002 to 663 in 2011, accounting for 76% of the total 870 deals in 2011.

In this period, the large deals, with deal size between $100 million and $999 million, has risen from 149 to 197 and mega-deals ($1 billion and above) have actually gone down from 16 in 2002 to 10 in 2011.

According to CFO, the trend towards smaller contracts will likely continue, particularly in the US, where businesses have long been accustomed to using outside service provides. The ISG believes the shift is a sign of a mature market, while other regions newer to outsourcing are still making larger deals. The volume of smaller contracts has been high enough to keep their total worth relatively high.