The tenth annual IDC study of the top 100 worldwide outsourcing deals reveals fundamental changes in the outsourcing marketplace, including an increase in deals with more global reach, an increase in the number of serious competitors, a dramatic rise in network and desktop outsourcing, and a reduction in combined deal value.

IDC says these developments demonstrate increased competition and customer demand for greater provider capabilities. These developments also create pressure for outsourcers to alter their business models in order to successfully compete and expand in the coming years.

The total contract value (TCV) of the 100 worldwide outsourcing deals decreased by 3.1% from $70.1 billion in 2004 to $67.9 billion in 2005. The study finds a reduction in the number of both megadeals and deals ranging from $500 million to less than $1 billion TCV. However, the number of deals with less than $250 million TCV has seen a dramatic increase from eight in 2004 to 23 in 2005. The study also finds that the number and value of business outsourcing deals declined in 2005, while the value and number of IT outsourcing deals increased. Within IT outsourcing, the share of network and desktop outsourcing deals climbed substantially from 14.6% of total IT outsourcing deal value in 2004 to 32.4% in 2005.

"The world of deal making for large outsourcing contracts in 2005 saw a slight decline in signings by total deal value, a reduced number of megadeals valued at $1 billion and higher, and an increase in the number of players competing in this segment," said David Tapper, director of Outsourcing, Utility, and Offshore Services research at IDC. "These shifts, along with other key trends in the market, such as customer need to lower costs and drive increased productivity, are creating fundamental changes in the outsourcing marketplace that will require players to radically alter their delivery models."

Tapper says that outsourcing providers will now need to:

• Include more flexible and newer service capabilities along with globally based delivery
• Develop dynamically different ecosystems of partnerships
• Pursue 'non-IT' opportunities
• Seek new customers in the SMB, consumer and emerging markets with entirely new business models

The study found that while six players captured 54% of the top 100 contract value in 2004, it took just five players to capture nearly the same amount (53.5%) in 2005, with IBM Global Services leading the way, followed by EDS, BT Group, CSC, and T-Systems.

About the market research study

The 260-page IDC study, "Top 100 Worldwide Outsourcing Deals of 2005" (IDC #203144; September 2006), provides IDC's tenth annual analysis of the top 100 worldwide outsourcing deals. The study provides detailed information on how these contracts evolved in 2005 as associated with size of deals, length of deals, industries, service markets (e.g., BPO, IT outsourcing), geographic coverage, and vendors. Additionally, this study provides detailed analysis on trends impacting the outsourcing market and contract opportunities, future outlooks, as well as essential guidance for players to compete most effectively. The study draws directly from IDC's Worldwide Services Contracts Analysis program, which includes more than 11,000 services contracts and represents the largest and richest information repository of services deals in the world.

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