Outsourcing 'mega-deals' on the wane

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The number of 'mega-deal' outsourcing contracts awarded to a single supplier is declining as more companies opt for multiple outsourcing deals, according to new research from Gartner..

The analyst firm classes mega-deals as having a value of more than $1bn. Ten such deals were signed in 2007, down from 12 in 2006.

"The decline in reported outsourcing contracts can be partially explained by the fact that outsourcing is now 'business as usual' for many enterprises," said Kurt Potter, research director at Gartner.

"There is more outsourcing activity, but fewer deals on average are reported and this creates the false impression that outsourcing is decreasing."

In all other measures, the overall size of single outsourcing deals is also declining. The total contact value for the 10 mega-deals in 2007 was US$12bn, the lowest level during the past eight years. The closest level was US$20.3bn in 2001.

The average contract value of mega-deals also continued to decrease, from an average of US$2.6bn in 2006 to US$1.2bn in 2007.

Of the total contact value of all outsourcing deals reported in 2007, Gartner said that mega-deals represented 39.4 per cent of the contract value and represented only 6.8 per cent of the number of total contracts in 2007, down from 7.4 per cent in 2006.

Although deals with less than $50m in total contact value continued to increase, and reached 39.5 per cent of the total number of contracts, they only represented 3.3 per cent of the total contact value for 2007.
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