The new TPI Index, released this morning, show that contract restructurings have continued into the third quarter as the overall market gradually improves. Total contract value (TCV) for the market was about $14 billion, down more than 20 percent from both the previous quarter and the same period last year. Restructuring activity, which include renegotiations, renewals and extensions of outsourcing contracts, represented 48 percent of the global market for the quarter and have been a key factor influencing results across the industry year to date. This interest in restructuring can be attributed to three factors:
- Longer term contracts from the early 2000s and newer, short term contracts are coming up for renewal simultaneously
- Economic conditions have caused many companies to be tentative about entering into new outsourcing agreements
- Restructuring offers quicker returns and lower risk, which has been increasingly attractive to buyers
IT outsourcing and business process outsourcing also saw contract awards decline. However restructuring contract awards have indicated a maturing of the BPO segment and have increased the value of contracts with both Application Development & Management (ADM) and Infrastructure in scope. Regionally and across industry sectors, the market activity told a similar story. Despite the sluggish economy, we anticipate a significant improvement in the fourth quarter performance.
We will share specific insights on market activity in Europe, the Middle East and Africa (EMEA) with the release of the 3Q10 EMEA TPI Index on October 26th.
About the author
John is a proven executive leader with strategic, transaction and post-transaction experience. John has helped many large, global enterprises introduce and cultivate innovation as a part of the transformation process. Many of John’s projects have led to groundbreaking transactions, particularly in the UK Life and Pensions market, where John is a sought after C-suite advisor in the strategic sourcing of insurance operations. John has also conducted significant transactions in both IT infrastructure and applications environments. As a Partner and President, he sits on the ISG Executive Board and leads ISG EMEA and Asia.
