The number of billion-dollar outsourcing deals doubled from 1997 to 1998, according to IDC

In 1998, 12 outsourcing deals worth $1 billion or more were signed worldwide. That`s twice as many billion-dollar deals as signed in 1997. A new report from International Data Corporation (IDC) examines the top 100 outsourcing deals and megadeals of 1998.

"In 1998, some of the largest-scale outsourcing deals ever were made," said Samantha Ker, research analyst with IDC`s IS Outsourcing, BPO, and Processing Services program. "Many factors, including increased confidence in the maturing industry, government mandates, and the rise of consortia, contributed to the advent of these megadeals."

According to IDC, the top 100 outsourcing contracts ranged in value from $14 million to $10 billion. The largest number of deals were worth under $100 million. Most of the contracts were for a mix of information systems outsourcing, processing services, and business process outsourcing.

Almost two-thirds of the outsourcing contracts were signed with companies outside the United States. However, the United States still superseded all other regions in terms of expenditure, accounting for $36 billion, or 63%, of outsourcing spending. In addition to spending more than any other country on outsourcing, the United States also won more of the top deals than any other region, with 37%. "The huge mulitbillion-dollar government contracts that were passed out in the United States greatly increased the value of the overall market and the U.S. share of it," Ker said.

Leading outsourcing vendors in 1998 were IBM Global Services with 25 of the top 100 deals, CSC with 18, and Electronic Data Systems with 8. The longest outsourcing contract signed was for 15 years, but the average length of a deal was 7 years.

Twenty-two different industries participated in 1998`s top 100 outsourcing deals. IDC reports the most active sector was government, which was involved in 29 deals. "As governments hoped to phase out antiquated IT systems and automate more processes, they increasingly sought outsourcers` help," Ker said. "Additionally, the transformation to a new millennium and a single European currency propelled governments to seek outside assistance for their IT needs." Other industries highly active in outsourcing deals were banking and financial services, manufacturing, and telecommunications.

"Outsourcing patterns often reflect trends in the local and global economies. The waves of privatization and deregulation that swept across the United States, Canada, Australia, and the United Kingdom have been a boon for outsourcers. North American and European governments, banks, manufacturers, and telecommunication carriers are turning over bigger chunks of their IT infrastructures in larger and more ambitious contracts," Ker explained.

IDC`s Top 100 Worldwide Outsourcing Deals of 1998 (IDC #B18807) analyzes the top 100 outsourcing deals of 1998 by value, industry, contract length, geography, and time of year. Additionally, the report summarizes how many of the top 100 deals each outsourcer around the world won. To order a copy, contact Cheryl Toffel at 1-800-343-4952, ext. 4389 or at ctoffel@idc.com.